Advance from customers

[MohanLal tiwari]

Sir,

We are manufacturer of tailor made castings / machinery parts meant for a particular customer for their specific use. We are generally taking mobilization advance against Advance Bank Guarantee from our customers to ensure they will take ordered materials after their readiness. If they cancel order or do not take materials, it will be just scrap for us.

from 1st July'17 onward, GST will be payable on such advance as per rate applicable for goods, kindly advise for :-

1. Whether we should charge GST in our Proforma Invoice for advance payment.

2. Whether Buyer is legally bound to pay GST alongwith advance payment.

3. Whether the GST paid at the time of advance will be adjusted in proportionate to advance being adjusted against each supply.

4. Whether ITC will be available immediately after payment of GST.

5. How the transaction will reflect in GST R-1 & GST R-2.

6. How the accounting will be done for such advance payment of GST.

AI Summary

Manufacturer Seeks Clarity on GST for Mobilization Advances and Input Tax Credit; Experts Provide Varied Opinions A manufacturer of custom castings and machinery parts raised queries regarding the application of Goods and Services Tax (GST) on mobilization advances from customers. The concerns included whether GST should be charged on proforma invoices for advances, the buyer's obligation to pay GST with the advance, adjustment of GST with subsequent supplies, availability of Input Tax Credit (ITC), and accounting for such transactions. Respondents provided varied opinions, with one noting that ITC might be doubtful as it requires receipt of goods, and another offering point-wise responses, indicating no GST should be charged initially and ITC is not immediately available.