ADVANCE RECEIVED IN GST – IS GST PAYABLE IMMEDIATELY?
A SMALL MISTAKE CAN COST INTEREST!
One of the most common questions I receive from clients is:
“We have received an advance from the customer,
but the invoice has not yet been raised. Do we have to pay GST?” ❓ The answer depends on whether you are supplying Goods or Services.
1. ADVANCE RECEIVED FOR GOODS
Good news for businesses dealing in goods.
As per Notification No. 66/2017 – Central Tax dated 15.11.2017, registered persons supplying goods are not required to pay GST on advances received.
GST becomes payable only when the tax invoice is issued.
EXAMPLE
• ABC Traders receives an advance of ₹5,00,000 on 5th August for the supply of machinery.
• The machinery is supplied and the invoice is issued on 25th August.
GST will be payable in August when the invoice is issued, not when the advance was received.
2. ADVANCE RECEIVED FOR SERVICES
The position is completely different for services.
As per Section 13 of the CGST Act, 2017 (Time of Supply of Services), GST becomes payable at the earlier of:
• Date of issue of invoice, or
• Date of receipt of payment.
Therefore, GST is payable as soon as the advance is received, even if the service is provided later.
EXAMPLE
• A Chartered Accountant receives ₹2,00,000 as an advance on 10th August for an audit to be completed in September.
GST becomes payable in August itself, even though the audit will be completed later.
PRACTICAL TIP
Many businesses assume that GST is always payable only after raising the invoice. This is correct for goods (subject to Notification No. 66/2017) but not for services, where receipt of advance itself can trigger GST liability.
Ignoring this distinction may result in interest liability under Section 50 of the CGST Act.
FINAL THOUGHT
Before deciding the month in which GST is payable, ask yourself just one question:
“Am I supplying Goods or Services?”
The answer to this simple question can determine whether GST is payable today or next month.
Understanding the Time of Supply provisions under Sections 12 and 13 of the CGST Act helps businesses avoid unnecessary interest and ensures timely compliance.
Radhika Goyal is Author of Taxconcept Gurugram head office, for deeply reported tax, gst and income tax articles on issues that matter. He splits her time between New Delhi and Bengaluru, and has worked as a reporter, a podcaster and an editor for publications across India.