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.

[Himansu Sekhar]

In my view taking ITC is doubtful. The condition as prescribed under sec. 16 is receipt of goods which is satisfied in the instant case.I would like comments of other experts for enhancing my knowledge

[Himansu Sekhar]

Receipt vouchers issued during advance can be adjusted if goods are not supplied.

[KASTURI SETHI]

Point-wise my views are as under:-

1.No. 2.No 3.Yes. 4. No. because advance payment of GST is subject to final payment at the time of issuance of invoice/completion of service. 5. Read Column 12 of GSTR.1 Accounting is not my field.

[Himansu Sekhar]

Just an amendment to my reply. Conditions of sec. 16 is not satisfied when goods are not received or deemed to be received

AI Summary

GST on advances: tax may be payable on receipt and immediate input tax credit is doubtful pending receipt of goods. GST on advances for tailor made goods raises whether tax should be shown on a proforma invoice, whether the buyer must pay GST with the advance, how advances are adjusted against supply or refunded, and when input tax credit becomes available. Forum responses noted that GST incidence and reporting arise on receipt of advance, receipt vouchers can be adjusted if goods are not supplied, and immediate ITC is doubtful because entitlement depends on the statutory receipt condition which is not met if goods are not received or deemed received.