Do i need to pay GST on Advance Payment?

[Harish GV]

Im a self employee, my job is to exporting services to outside the India, all my export services fall under 0% GST, Now if i am receiving 100% full advance payment before raising the invoice do i need to pay any GST on advance payment?

[KASTURI SETHI]

Export being zero rated no GST is required to pay on advance.

[ANITA BHADRA]

Yes , You need to pay GST on advance payment .

As per the explanation 1 to Section 12 of the CGST Act, 2017 a “supply” shall be deemed to have been made to the extent it is covered by the invoice or, as the case may be, the payment.

Government has come out with Notification no. 66/2017 dated 15.11.2017, whereby all suppliers of goods who have not opted for composition scheme, have been exempted from the burden of paying GST on Advances received.

But the supplier of services are required to pay GST at the time of receipt of Advance

[SHIVKUMAR SHARMA]

I agree with the view of Shri Shethi Sir.

[Harish GV]

Thank you Kasturi Sethi Sir, Anita Bhadra Mam and Shivkumar Sharma Sir for replying

Lets take an example:
Im received full 100% payment from the foreign country on August 10, Im exporting software service on August 25th, now for the amount received from the foreign client

what are all taxes i need to pay any tax?

is that amount will be considered as advance payment? and if considerd do i need to pay tax for advance payment?

Thank you

[SHIVKUMAR SHARMA]

It is not the advance payment because the transaction is Completed in the same month i.e.In August.

[ANITA BHADRA]

It is not an advance .

Since you had exported without filing LUT ( Letter of Undertaking ) , You need to pay IGST and then claim refund for taxes paid

[Harish GV]

Thank you Shivkumar Sharma Sir and Anita Bhadra Mam for replying

Above replay is just example for me to understnad and the original transaction happened below

I received 100% full payment on July 27th 2018 from foreign client

Im going to generating the invoice and exporting the software on 25th August 2018

I already registered GST and taken LUT Bond before 20th August 2018 only,

Now my question is

1. Full 100% payment what i received in last month is considered as Advance Payment?

2. Since i have taken LUT, can i export under LUT rather than paying IGST?

Thanks

[KASTURI SETHI]

You can export under LUT. Ultimate purpose of LUT or Bond is to safeguard revenue, if something untoward happens.

[ANITA BHADRA]

Clarification by council on the subject .:-

Link :-

http://gstcouncil.gov.in/sites/default/files/GST-Fliers/3-Advance%20received%20on%20future%20supplies.pdf

in case of advance received for any supply, time of supply is fixed at the point when advance is received, irrespective of the fact whether the supply is made or not. Accordingly, GST needs to be paid with reference to the time at which advance is received,

If a service exporter receives advances, it is beneficial to him to apply for refund at that stage itself.

[KASTURI SETHI]

Govt. is very liberal regarding export whether of goods or services. Such procedural requirements do nit create hurdle in exporting under LUT ( without payment of tax). Govt. has been liberal since the inception of Central Excise Act.

[Ganeshan Kalyani]

LUT is easy to apply and it beneficial as the exporter need not have to pay IGST. In my view, the querist is not liable to pay tax as he is in possession of lut.

[Nash Industries I Pvt Ltd]

Not liable to tax.

Regards

S.Ramaswamy

AI Summary

GST on advance payments: exporters can use LUT to avoid paying IGST on advance receipts for zero-rated services.
Advances constitute the time of supply and ordinarily create a GST liability at receipt; suppliers of services are required to account for GST on advances. Exports of services are zero-rated, and an exporter who furnishes a Letter of Undertaking may make supplies without paying IGST; otherwise IGST paid on advances can be claimed as a refund. A notification exempts goods suppliers (non-composition) from paying GST on advances but does not equivalently relieve service suppliers.