1.
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
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Provision Entry (Books)
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GST Liability
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Revenue Recognition
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Based on stage of completion
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Based on time of supply rules
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Billing
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May not be done yet
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No billing = no GST
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GST Payment
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Not required on provision
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Pay only when invoice is raised or payment received
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✅ 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
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Provision-based Revenue
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Allowed in Books?
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✅ Yes (Ind AS 115 / Accrual)
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Billing Required?
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❌ Not yet
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GST Liability?
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❌ Not until invoice/advance
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GSTR-9 vs Books
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🔁 Difference will show — explain in GSTR-9C
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Risk of Penalty?
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❌ No, if well-documented
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