GST on advance received and subsequently the advance is returned

[SARAVANAN RENGACHARY]

Please suggest:

GST is paid on the advance received from Customer.

Subsequently, Customer has cancelled the order and asking us to refund the advance paid. Goods also not supplied.

Please suggest how to adjust the GST paid on advance amount.

Saravanan.

AI Summary

GST on advance payments: refund voucher and refund claim or adjustment against outward GST liability permitted.
A registered person receiving an advance must issue a receipt voucher and, where no supply follows and no tax invoice is issued, may issue a refund voucher to the payer. Tax charged on the advance can be recovered by filing a refund claim in the prescribed form or by adjusting the tax paid against GST payable in the periodic return; input tax credit correlation is not strictly required for such adjustment.