There are many queries regarding whether all types of advances are exempt from payment of GST. I wish to clarify this doubt by taking the help of various provisions of the law.

As per Sec 12 of the CGST Act, 2017 Time of supply of goods is earliest of:

1. Date of issue of invoice

2. Last date on which invoice should have been issued

3. Date of receipt of advance/ payment*.

As per the third point if the supplier received the payment before the issue of invoice then he has to pay tax on that advance also. Later on Notification No. 40/2017- Central Tax dated 13.10.2017 has been issued according to which the registered person shall pay the tax on the outward supply of goods at the time of supply as specified in Section 12(2)(a) of the CGST Act, 2017 if he satisfied the following conditions:

1. Aggregate turnover in the preceeding financial year did not exceed one crore and fifty lakh rupees or aggregate turnover in the year in which taxpayer has obtained registration is likely to be less than one crore and fifty lakh rupees, and

2. Taxpayer did not opt for the composition levy under section 10 of the said Act.

After that Notification No. 66/2017- Central Tax dated 15.11.2017 has been issued and which has exempt all the registered persons dealing in goods except the registered persons who opt for composition scheme.

* If the advance received for the supply of services then the supplier has to pay the tax because as per the notification advance received for only supply of goods is exempt.

Here I am concluding all the provisions related to advances and we all should kept in mind the different dates as these are really important:-

1. Advances are always taxable if these are taken for supply of services.

2. Advances taken for supply of Goods:

  • If advances has been taken between the period starting from 01.07.2017 to 13.10.2017 then the registered person has to pay the taxes on those advances.
  • If the advances has been taken between the period starting from 14.10.2017 to 15.11.2017 then only the registered persons whose aggregate turnover is above Rs. 1.5 Crore in the preceeding financial year or during the year in which he has taken the registration as the case may be need to pay tax.
  • If the advance has been taken after 15.11.2017 then there will be no tax at all. Taxpayer will be liable to pay tax only at the time of issuance of invoice.

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April 2021