GST on Advance

[Kaustubh Karandikar]

Advance received from the customer which includes value + GST in the month of August’21 and goods supplied against the same in the month of October’21. Is the supplier required to pay interest since the goods not supplied in the same month? In my view yes, since the advance received is with GST and goods not supplied in the same month. Views of the experts please.

[RAMASWAMY Advocate]

In my view advance received for the future supplies gst is payable on the date on which which the supplier receives the payment.Therefore, liability to pay tax on goods will arise at the time of supply subject to compliance of procedures laid down. on interest point of view your assumption seems proper understanding.

[KASTURI SETHI]

Sh. Kaustubh Karandikar Ji,

Sir, You have collected GST from your buyer in advance.None can retain Govt. revenue in one's pocket even for a single day without payment of interest. Your view is correct.

[Ashiesh Prremji]

Dear Experts,

I am adding my query also related to that, whether Not. No. 66/2017 dated 15-11-2017 will not apply here ?

[KASTURI SETHI]

Notification No.66/17-Central Tax is not applicable here inasmuch as advance amount is inclusive of GST. Had the advance amount been exclusive of GST, Notification No.66/17-CT would have been applicable.

[Ashiesh Prremji]

Just for clarification i am putting my doubts, any advance received always grossed up for gst calculation. If this Notification is not there then any amount received as advance need to pay GST by grossing up the advance. I mean we receive GST part also with any amount of advance.

Please clear my doubts as i was under impression that gst not to be payable as its categorically exempted.

[KASTURI SETHI]

Suppose you receive advance inclusive of GST in the month of October, 21 and supply the goods against that advance amount in April, 22. Can you retain Govt. revenue (GST collected with advance) for six months in your pocket without interest ? Have you legal right to do so in the guise of Notification No. 66/17-CT ?

Pl. answer.

[Ashiesh Prremji]

You are right Sir, we can not take any undue advantage of any relaxation provided by Department. I am talking about normal situation, if a computer supplier gets order & full payment on 28/09/2021 & dispatches machines with Invoice dated 01/10/2021. Whether supplier need to declare & pay gst for Sep month GST returns else interest will payable along with Oct 21 3B.

With due respect Sir, i am not in position to argue with you. Just seek your advice.....amount received up to Taxable value / Lumpsum (Without GST) no gst payable as per No. 66/2017. But in above example GST is payable in Sep month only. In nutshell, Grossing up of advance will applicable only for services.

[KASTURI SETHI]

Sh.Ashish Prremji,

(i) There is no doubt about applicability of GST on the advance amount in respect of services. That is not the issue here.

(ii) Govt. has given relaxation of one month plus 20/22/24 days for payment of GST in respect of goods and services both. If any person charges tax in October, 21 and he can pay tax in Govt. account by 20th/22nd/24th Nov.,21. No doubt. I agree with you to this extent as mentioned by you in para-1 above.

(iii) Relaxation for retention of GST is admissible for a period of one month plus 20/22/24 days in respect of goods and services both and not more than that period.

(iv) Now the question arises can an assessee retain Govt. revenue in one’s pocket for more than one month plus 20/22/24 days on the advance amount in respect of goods without payment of interest.Constitutionally one cannot retain Govt. money in one’s pocket beyond the prescribed limit.

(vi) Notification No.66/17-CT does not grant such ‘freedom’.

[Ashiesh Prremji]

Thank so much Kasturi Sir for clarification!

[Shilpi Jain]

There is no liability of gst for advance received in respect of supply of goods. it does not matter for how long the advance has been kept without supply of goods

[Shilpi Jain]

There is a notification issued which has given relaxation for liability of GST on advances received in respect of supply of goods. thereby GST liability arises only on issue of invoice which has to be done max on removal of goods. until the invoice is raised no GST liability will arise irrespective of whether advance is received and how long before it is received

[Shilpi Jain]

Only because the supplier has received the tax in advance due to the agreement terms, would not mean that there would be interested liability. On the converse it can be seen that where a supplier has paid GST to the government but the recipient has not paid to the supplier within 180 days the government is demanding interest. thereby these logics may not work while determining interest liability.

[KASTURI SETHI]

Sh.Ashiesh Prremji Ji,

In continuation of our discussion on the issue, also think about Section 76 (1) of CGST Act which is extracted below :

SECTION 76. Tax collected but not paid to Government. - (1) Notwithstanding anything to the contrary contained in any order or direction of any Appellate Authority or Appellate Tribunal or court or in any other provisions of this Act or the rules made thereunder or any other law for the time being in force, every person who has collected from any other person any amount as representing the tax under this Act, and has not paid the said amount to the Government, shall forthwith pay the said amount to the Government, irrespective of whether the supplies in respect of which such amount was collected are taxable or not.

[Amit Agrawal]

Interesting query and equally importantly, interesting debate among fellow professionals! That's beauty of this forum! It sometimes forces professionals to think beyond obvious.

On the issue under discussion here, I tend to agree with views of Ms. Shilpi JainJi, though views of Shri Katuri SethiJi forced me to think beyond the obvious. I thank both of them, the querust and other contributors for this experience.

And in my humble submission, requirements under section 76 needs to be interpreted covering a situation where a person, who has collected from any other person any amount as representing the tax under the Act, does not pay the same to Govt. on the ground that concerned supply is not taxable under law.

It is worth noting that all other provisions (such as section 73, 74 and so on) deals with recovery of taxes and penalty for not paying the same under various situations.

But what happens when underlying supply is claimed / held as not taxable thereby 'amount representing tax' though collected but it does not fulfils characteristc of 'taxes' in law. Hence, Section 76 covers a situation where person collects an 'amount representing taxes' but does not deposit it to Govt. by claiming non-taxable supply thereby trying to avoid regular recovery & penal provisions of law.

For the situation under discussion here (where taxability of supply per se is not under dispute), in my view, Notification No. 66/2017 – Central Tax "officially" allows postponement of paying 'taxes so collected' to the point of the time of supply as specified in clause (a) of sub-section (2) of section 12 of the CGST Act, 2017.

Once there is no delay in paying the 'taxes so collected', there is no interest liability in given situation in my view.

Kindly treat all my views as strictly personal and not as a professional advice / suggestion.

[Amit Agrawal]

* Shri Kasturi SethiJi (Apology for typo error/s above)

[KASTURI SETHI]

Sh. Amit Agrawal Ji,

First of all no need for apology. Nobody is perfect. I am also prone to errors.

Secondly, on the issue no person intends to face the rigours of litigation as far possible.

[KASTURI SETHI]

Pl. read 'as far as possible'. Everyone has right to express one's views on this forum. Without going into jugglery of words and in simple words, one cannot retain Govt.revenue in one's own pocket beyond limitation.

Why to invite SCN unnecessarily ? Is there shortage of legal provisions ?

AI Summary

GST on advance payments may be required to be remitted when collected, with limited postponement under notification for goods.
The document addresses whether GST collected on advances must be deposited when received or may be deferred until supply; one position requires remittance on receipt with interest for delay, while another relies on a notification permitting postponement for advances relating to goods until invoice or removal, with services generally requiring grossing up. Contributors stress that any postponement is limited by permitted return/payment timelines and that amounts collected as tax should not be retained beyond those limits.