GST implication on forfeiture of advance received

[Krishna Murthy]

Sir, What is the GST implication of advance received towards goods before GST but no sale is made and now the same is being forfeited as the party is no longer claiming the same.

[KASTURI SETHI]

Although the advance pertains to pre-GST era and against goods, yet this activity (forfeiture) is covered in Schedule-II of CGST Act.

5. Supply of services

(e) agreeing to the obligation to refrain from an act, or to tolerate an act or a situation, or to do an act;

This is my view.

[Himansu Sekhar]

There will be no GST on the goods against which advances received prior to the appointed date and no sale is effected now.

But the forefeiture activity if carried out now, the same will be a service and liable to GST under Schedule II of CGST Act, 2017. The relevant portion is extracted below for your kind observation:

"(e) agreeing to the obligation to refrain from an act, or to tolerate an act or a situation, or to do an act; and..."

[Ramesh Kothari]

No GST applicable bcz advance rec'd before appointment of GST and supply not existed

AI Summary

Forfeiture of advance considered a taxable service when forfeiture occurs after GST implementation, not a goods supply. Forfeiture of an advance paid for goods, when effected after GST commencement, is characterised as consideration for a taxable supply of services-agreeing to refrain from an act-and thus attracts GST; an alternative view treats advances received before GST with no ensuing supply as outside GST.