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

Deposit not consideration under GST; tax arises only if the supplier applies the deposit as consideration for supply.
An advance or deposit received is not taxable under GST because it does not qualify as consideration unless the supplier applies the deposit as consideration for the supply; accordingly deposits retained as mere deposits are not subject to GST. The Point of Taxation rules that came into force after 2010 do not affect the taxability of that earlier receipt. The legal distinction between deposit and advance is material, and tax consequences turn on whether the supplier appropriates the deposit as payment for the supply.