No GST on Advances Received For Supply Of Goods
The term SUPPLY is the cornerstone of the GST Law prevailing in India. Goods and Service Tax is chargeable only if there is Supply of Goods or Services. However the liability to pay GST arises only when the taxable event i.e. SUPPLY occurs, which is determined by Time of Supply.
As per the provisions made under GST, the time of supply of goods shall taken to be the earlier of the following dates, namely:—
(a) the date of issue of invoice by the supplier or the last date on which he is required to issue the invoice with respect to the supply; or
(b) the date on which the supplier receives the payment with respect to the supply.
Thus GST on Supply of Goods was initially required to be paid at time of receipt of advance, if at all any amount is received in advance before issue of invoice. This provision was creating complications for Businesses in general and small enterprises in particular so to make the process simplified, GST council in its enduring efforts came forward to bring in immunity.
In a relief for industry, the GST Council dropped an earlier requirement of payments of Goods and Services Tax (GST) on advances received for supply of goods.
For it, The Central Government has issued Notification No. 40/2017 – Central Tax, giving relief to small businesses. As per this Notification, the registered persons whose aggregate turnover in the last financial year did not exceed Rs. 1.5 crores or the registered person whose aggregate turnover in the year in which such person has obtained registration is likely to be less than Rs. 1.5 crores and who did not opt for the composition levy are not required to pay GST on outward supply of goods, at time of receipt of advance. However GST on advance is payable if advance received during period 01/07/2017 to 12/10/2017.
Giving further relief the Central Government issued Notification No. 66/2017 – Central Tax, and extended the benefit to all taxable persons (other than Composition dealers). Now all taxable persons are required to pay GST on outward supply of Goods at time of issue of invoice or the last date on which they are required to issue the Invoice i.e. In case of Persons having turnover more than 1.50 crore during last FY, no GST is payable on advance if it is received on or after 15/11/2017.
Note 1: This relief is not available on outward supply of services. GST is payable on advance received in case of (Outward supply of services alone is exempted)
Note 2: This relief is not available if tax is payable on reverse charge. In case of reverse charge, GST will be payable at time of payment, if payment is made before receipt of goods. (But till 31st March 2018 all provisions relating to reverse charge are put on hold)