Taxability of advances taken under GST regime

There are so many queries asked regarding whether all types of advances are exempt under Goods and Service Tax or not. Here the clarification regarding this doubt by taking the help of various provisions of the law.

The provisions for the time of supply under GST play an important role in ascertaining that whether a transaction is taxable or not.

According to the section 12 of the CGST Act, 2017 time of supply of goods is earliest of the following:

1. Date of issue of invoice
2. Date of receipt of payment/ advance
3. Date on which invoice should be issued.

In the above section the second point is of receipt of advance this means the taxpayer receiving advance must pay GST on the money received.

Note: for the supply of goods advance received is not subject to GST, the entire amount will be taxed on the issue of the invoice.

Later on Notification No. 40/2017- central tax dated 13.10.2017 has been issued according to which the registered person shall pay 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:

• Aggregate turnover in the preceding financial year should not be more than 1 crore and 50 lakh rupees or aggregate turnover in the year in which taxpayer has obtained registration is likely to be less than 1 crore and 50 lakh rupees, and
• Taxpayer did not opt for the composition scheme under section 10 of the said Act.

Later on Notification No. 66/2017- central tax dated 15.11.2017 has been issued and according to this if advance received for the supply of services then the supplier has to pay the tax because as per the notification only advance received for supply of goods is exempt.

Conclusion

• In case of supply of services advances are always taxable.
• In case of supply of goods:
• If an advance has been taken between the period starting from 1.07.2017 to 13.10.2017 then the registered person has to pay taxes on those advances.
• If an advance 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 1.5 crore in the preceding 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.