Applicability of GST on payment prior to dispatch of goods

[MohanLal tiwari]

Dear Panelist,

We are supplying few of our goods with payment terms "prior to dispatch" and immediately on receipt of payment material is dispatched on same day or within 2-3 days.

Please advise whether this payment prior to supply of goods should be considered as advance and required Receipt Voucher is to be issued or it can be taken payment against supply and GST should be charged in supply invoice.

[KASTURI SETHI]

As per Section 12(2)(b) of CGST Act, your liability for deposit of GST becomes due from the date of receipt of payment from the customer. That is your time of supply.

[DR.MARIAPPAN GOVINDARAJAN]

When you used to issue invoice?

[MohanLal tiwari]

After receipt of payment, mostly we use to supply in same month. To avoid duplication,

[Himansu Sekhar]

It is a payment against supply, usual business practices. Also this amount must have not shown as advance in your books of accounts.

[KASTURI SETHI]

Rightly advised by Sh.Himansu Ji.

[MohanLal tiwari]

But customer is insisting for copy of Receipt Voucher and asking as to why Advance Receipt Voucher should not be issued if payment is released prior to supply.

[DR.MARIAPPAN GOVINDARAJAN]

If the recipient insists, in my view, you have comply with the request of the recipient.

[Ganeshan Kalyani]

Any amount received from customer before the actual supply is made is treated as advance. If the receipt of advance and supply of material against the advance falls in the same month, then GST is payable on supply of material. But if advance is received and supply of material is in next month then GST is payable on advance money.

If customer is asking for receipt voucher then you may issue the same. Thanks.

[KASTURI SETHI]

I agree with you, Sir.

[Nash Industries I Pvt Ltd]

Receipt voucher is to be provided for the advance received. GST is paid at the time of invoice and reference of refund voucher and the adjustment made is shown in the invoice. Since it is in the same month, there is no duplication of taxes and easy to reconcile

AI Summary

Time of supply under GST: receipt of payment triggers tax liability; issue receipt voucher if advance requested.
The time of supply is the date of receipt of payment, which determines when GST liability arises; payments received before dispatch are advances if recorded as such and attract GST at receipt if supply occurs in a later tax period, whereas payments and supply in the same tax period correspond to GST on the supply. A receipt voucher may be issued where the recipient requests one, and consistent accounting and invoicing should prevent duplication.