Writing off advances from Clients

[ROHIT GOEL]

Dear Sirs,

In case an advance was received by the company(a service enterprise) from a client in 2010 but no service tax was paid on the same. Now, the company as well as the auditors believe that the amount is not payable and neither billable as client in question has shut operations and should be written off, whether GST on such write off will be applicable and if yes under which section or provision of law?

AI Summary

Advance from 2010 not taxable under GST as it's not 'consideration' per CGST Act. Query on construction advances remains. A service enterprise received an advance from a client in 2010, but the client has since ceased operations, and the company considers the amount non-payable and non-billable. The query concerns whether Goods and Services Tax (GST) applies to writing off this advance. One response clarified that under the Central Goods and Services Tax (CGST) Act, such an advance does not qualify as 'consideration' and is not taxable under GST or the previous service tax regime. Another participant questioned if this principle applies to advances in construction, highlighting the nuanced legal distinction between 'deposit' and 'advance.'