The requirement to pay GST on Advances received is proving to be burdensome for small dealers and manufacturers.

In order to mitigate their inconvenience on this account, it has been decided that taxpayers having annual aggregate turnover up to Rs. 1.5 crores shall NOT be required to pay GST at the time of receipt of advances on account of supply of goods.

The GST on such supplies shall be payable only when the supply of goods is made.


  • Details of each Advance need not be given. A cumulative figure (total) of all the advances received has to be provided in the return.
  • The Advances should be segregated into Intrastate (CGST + SGST) and Interstate (IGST) advances.
  • It is important to note the buyer cannot claim ITC on the taxes for Advance paid by the Seller. The taxpayer can claim ITC on advance paid only on receipt of goods or services.
  • If the receipt of goods or supplies is in the same month as the Advance , then the entries are nullified / squared off. Tax Liability on Advance Receipts accrues only if the actual receipts of goods / services happens in subsequent months.
    • Same month : Normal treatment. ---- Receive Advance || receive supply of goods (i.e. invoice raised) || Pay tax -- i.e. Liability raised
    • Different month : Special treatment. --- Receive Advance || Journal voucher to raise Tax Liability on Advance || Pay tax -- i.e. Liability raised . || Subsequent month, receive supply of goods (i.e. invoice raised) || Journal voucher to reverse Tax Liability || NO further tax to be paid, as tax liability is set off and equal to zero. (Tax has been paid in earlier month)
  • Advance Receipts are assumed to be inclusive of taxes. So if an advance of Rs 100,000 is received (on subsequent supply of 18 % rated goods) then the invoice amount before tax is Rs 84,745.76 and the tax on the same is Rs 15,254.24
    [ TAX = 100,000 * (18/(100 +18))     i.e. Amount * {( Tax rate / (100 + Tax rate)} ; tax rate being in percentage. ]
  • If the point of sale cannot be ascertained, the advance is considered as interstate supply and IGST has to be paid.