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Former Member

GST INDIA : GST TAX on Advance Receipt From Customer

Dear Sir,

As per GST India law, at the time of advance receipt now recipient is required to pay GST . In milestone based scenario , the advance may be received from customer in multiple phases against a customer order .

Subsequently at the time of partial/full billing , the advances received need to be adjusted on proportionate basis .

Regarding the GST Tax applicability , I am confused on following points and seek help from the expert members :

  • What steps need to be followed for Advance realization ?
  • Will the customer pay advance only for basic amount only or including GST ?
  • If GST is also to be accounted at the time of advance receipt , then what steps need to be followed in SAP ?
  • How the advance adjustment against the Invoice will take place ? . Pl guide with steps.

Kindly guide us pl.

With Regards

BV Mittal

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4 Answers

  • avatar image
    Former Member
    Jun 07, 2017 at 08:33 PM

    As per the clarification issued by the GST Council on 3rd June 2017, following refinements have emerged;

  • If invoice is raised in the same tax period in which advance received, it is clarified that there is no need to report the advance separately.
  • Rate wise details of advance received and invoice not issued to be disclosed
  • Advances received in the earlier period and adjusted against invoices issued in the current period to be disclosed
  • Now, this has reduced the complexity certainly since GST need not be reckoned at the time of advance receipt..

    The tracking of advances would be confined only to the following;

    - Advances received during the tax period and not billed during the same tax period

    - Advances received and knocked off in different tax periods

    Following are the tax compliances;

    1. Receipt vouchers have to be generated

    2. Payment of GST on the advances received based on the following options;

    - Option A: HSN based GST rates along with "Place of Supply"

    -Option B : Where HSN and place of supply is not determinable, IGST @ 18% <This might be relevant still where "PoS" is not known>

    3.Uploading of returns on the above logic for "outward supply"

    Commercial aspects on the Advance treatment:

    - Advance received can be treated as including GST or entity which is a supplier can bear the cash flow on account of GST by treating the amount as 100% Advance. But, such intention has to be documented unambiguously.

    Technical aspect on the Advance:

    - Order to invoice matching would be one of the ideal method of tracking. This would result in no carry forward or partial liability issues. However, this may require a discipline of Confirmed order and remitting the amount exactly required for billing.

    - Escrow kind of account where fund lying in such account is appropriated exactly a moment after the billing can be explored

    - Unique identify for each transaction of advance

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  • Former Member

    Dear Mr. Balachandar Natarajan, thanks for that clarification. Could you please point me to that clarification? A link or attachment would be very helpful. Thanks.

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    Former Member
    Jul 12, 2017 at 11:31 AM

    Hi Balachandar Natarajan,

    Thanks for reply , but how we can mapped in SAP. If you have any process document pls share with us.

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  • Jul 18, 2017 at 12:11 PM

    How this can be mapped into SAP

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    Former Member
    Apr 11, 2018 at 02:46 PM

    Dear All,

    Based on the representation of various industries in terms of difficulty in tracking advances and linking to invoice, GST lalw has made the following amendments during last 2 months;

    1. Provisions relating to GST liability on Advance for Goods withdrawn

    2. On Services, GST would be payable for services (This provision was applicable even under the earlier regime of Service tax)

    Hope, this would give a sigh of relief to the industry and also to the Software industry.


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    • Former Member

      Dear All,

      Regret for the inconvenience. Reg. Point no. 2 read as below;

      On Services, GST would be payable for advance received