provision accounts and book of entry

[Sudhir Kumar]

Can a construction company books revenue on the basis of provisions. If yes what is its impact on billing procedure and GST liability. Whether GSTR-9C and GSTR-9 will be un-reconciled due to provision entry. The basis of a construction company to make accounting on the basis of provisioning entry.

[YAGAY andSUN]

Great question — and one that often trips up businesses in the construction and real estate sector. Let’s break this down step-by-step:

🔹 Can a construction company book revenue on the basis of provisions?

Yes — from an accounting standpoint, a construction company can recognize revenue based on provision (i.e., accrual basis) especially under Percentage of Completion Method (POCM) or as per Ind AS 115.

📌 This is done to match income and expenses in the correct period — even if billing hasn’t occurred yet.

BUT — this is purely for accounting (books of accounts), not for GST.

🔸 What’s the impact on billing and GST liability?

Here’s the key distinction:

Basis	Provision Entry (Books)	GST Liability
Revenue Recognition	Based on stage of completion	Based on time of supply rules
Billing	May not be done yet	No billing = no GST
GST Payment	Not required on provision	Pay only when invoice is raised or payment received

✅ GST is NOT payable merely on provision entries unless an invoice is issued or advance is received.

So, you book revenue in your financials, but you don’t pay GST unless a taxable event happens.

🔍 Will GSTR-9C and GSTR-9 show mismatches due to provision?

Yes, they can show mismatches — and that’s expected.

Here’s Why:

• GSTR-9/GSTR-9C pulls turnover based on actual outward supplies reported in GSTR-1 & 3B.
• Your books may show higher turnover (due to provision entries), which hasn’t yet been billed.

⚠️ This difference will appear in GSTR-9C Reconciliation — typically in Table 5B/5O (reconciliation of turnover).

🛠️ What Should Be Done?

✅ In GSTR-9C:

• Mention the provision-based revenue as a reconciliation item.
• Add a note like:
  "Provision for unbilled revenue as per Percentage of Completion Method (not liable to GST as invoice not yet raised).”

✅ In Books:

• Maintain a clear trail between:
  • Provision entries
  • Actual billing
  • GST invoices

📋 Summary:

Aspect	Provision-based Revenue
Allowed in Books?	✅ Yes (Ind AS 115 / Accrual)
Billing Required?	❌ Not yet
GST Liability?	❌ Not until invoice/advance
GSTR-9 vs Books	🔁 Difference will show — explain in GSTR-9C
Risk of Penalty?	❌ No, if well-documented

[Ryan Vaz]

Yes, a construction company can book revenue on a provision / unbilled basis for accounting and income-tax purposes.

However, GST is NOT payable merely on provisioning entries unless a tax invoice is issued or payment is received.

? Provision entries do not create GST liability by themselves, but they often lead to differences between:

• Books of accounts

• GST returns (GSTR-3B / GSTR-1)

• Annual return & reconciliation (GSTR-9 / 9C)

AI Summary

Construction firms booking unbilled revenue provisions: GST payable on invoice/payment, not entries; mismatches require proper reconciliation disclosures A construction company may recognize revenue in its books on a provision or unbilled basis for accounting and income-tax purposes. Such provisioning entries alone do not trigger GST liability; GST generally becomes payable upon issuance of a tax invoice or receipt of payment, as applicable. Recording revenue through provisions can create timing differences between financial statements and GST filings (such as outward supply and tax payment returns), which may result in mismatches during annual reporting and reconciliation in the annual return and reconciliation statement. Consequently, reconciliations may show differences attributable to provisioned or unbilled revenue that has not yet been invoiced or received, requiring proper disclosure and reconciliation rather than indicating incorrect GST liability.