GST ITC Eligibility in Barter Arrangement - Invoice Raised Before Receipt of Services

[NYAYASETU LEGAL ASSOCIATES LLP]

Dear Experts,

We are engaged in the trading of Plastic products and have entered into a reciprocal (barter) agreement with a media agency wherein we supply our products to the agency and in return, the agency provides advertisement/media services.

Some more Facts of the case:

1. We supplied goods to the service provider in November 2025 and discharged GST accordingly.

2. As per the agreement, advertisement services are to be provided over a period based on mutual execution (campaigns, media releases, etc.).

3. As on date (March 2026), no advertisement services have actually been executed or received, nor have any specific media slots or campaigns been finalized.

4. However, the service provider is proposing to raise an invoice in March 2026 for the agreed value of services.

Query:

1. Whether ITC can be availed based on such invoice in March 2026, even though services have not been actually received or executed [Sec 16(2)(b)]?

2. Can this arrangement be treated as a case where 'right to receive service' is created, thereby allowing ITC (similar to prepaid services like software licenses or pre-booked advertisement slots)?

3. Does the absence of specific deliverables (such as confirmed media slots, campaign schedule, etc.) impact the eligibility of ITC?

4. Whether raising of invoice before actual execution of services is in line with Section 31 read with Section 13 of the CGST Act?

In an agreement, it is mentioned that all individual transactions are to be executed through separate deal letters / purchase orders.
Request your expert guidance on the above.

[VIPUL JHAVERI]

one cardinal principal to avail ITC credits always remains is "to receive good and services"

Section 16. Eligibility and conditions for taking input tax credit.-

(b) he has received the goods or services or both.

[NYAYASETU LEGAL ASSOCIATES LLP]

Thanks for giving your valuable time for your kind response.

[Raam Srinivasan Swaminathan Kalpathi]

Dear Querist

I am of the opinion that ITC cannot be denied in your case. The time of supply for services includes raising of invoice by the supplier of services or receipt of payment. This is provided in Sec.13(2). Also Sec.31(5) will cover your case. Also, please appreciate that Sec.16(2)(b) includes deemed supply.

[Pinnacle Tax Advisor]

You are not eligible to avail ITC as on date as condition of Section 16(2) is not fulfilled. Once you receive the service, ITC can be availed

[NYAYASETU LEGAL ASSOCIATES LLP]

Thanks for giving your valuable time for your kind response.

[YAGAY andSUN]

The transaction is a barter arrangement wherein supply of goods is reciprocated by advertisement services, taxable under the Central Goods and Services Tax Act, 2017. Discharge of GST on goods is in order.

ITC Eligibility (Section 16(2)(b)): Section 16(2)(b) mandates actual receipt of services as a condition precedent for availing ITC. In the present case, no advertisement services have been executed, nor any campaigns or media deliverables finalized as of March 2026. Mere issuance of invoice by the service provider does not constitute receipt. Accordingly, ITC is not admissible at this stage.

Right to Receive vs Receipt of Service: A contractual "right to receive service" does not equate to receipt unless supported by identified and crystallized deliverables (e.g., confirmed media slots, campaign schedules). In the absence of such specifics, the transaction remains executory and does not qualify as deemed receipt. Hence, ITC cannot be claimed on a notional basis.

Absence of Defined Deliverables: The agreement contemplates execution through separate deal letters/purchase orders. As none have been issued and no scope of service is determined, it cannot be concluded that services have been supplied or received. This deficiency directly impacts ITC eligibility.

Invoice Validity (Section 31 read with Section 13): Section 31 requires issuance of invoice within the prescribed time post supply of service. Where no service has been performed or milestones agreed, raising an invoice in March 2026 appears premature. Section 13 governs time of supply for tax liability and does not override the requirement of actual receipt for ITC.

Conclusion: In law, ITC cannot be availed as on date, as the condition of receipt under Section 16(2)(b) is not fulfilled. ITC shall become available only upon actual execution and receipt of advertisement services, evidenced by defined deliverables.

[NYAYASETU LEGAL ASSOCIATES LLP]

We really appreciate your response, it helped us to fix the issue.

[KALLESHAMURTHY MURTHY K.N.]

Sir,

Even though there was an agreement, and the invoice was raised in good faith without the supply of goods or services or both, it is against the provisions of Sec.16(2)(b) and is an offence u/s 122(1)(ii) of the CGST Act. ITC availment thereon will be liable for reversal along with interest and penalty. If the supply is received belatedly, interest will be levied for the period from the date of availment of ITC till the date of supplies. Please refer to Circular No. 171/03/2022-GST dated the 6th July, 2022.

There can be provision made in the books of accounts for future payments on receipt of supplies, but ITC cannot be availed in advance.

[NYAYASETU LEGAL ASSOCIATES LLP]

Thanks for your kind response, its really help us a lot especially referring the quoted circular

[Shilpi Jain]

Pls note that as per section 13, to the extent of the invoice issued, the service is deemed to have been provided. So as to say that it is deemed to be received as well. You can proceed to take the credit lest it may get time barred pretty soon.

Invoice for services can be issued even before provision of services.

[KALLESHAMURTHY MURTHY K.N.]

Sir,

As per Sl. No. -6 expressed by learned Madam, the invoice can be issued by determining the time of supply of service u/s 13.

The ITC can be availed up to November 30 following the financial year-end, subject to fulfilling the provisions of Sec 16(2). Unless the supply of service is received, the availment of ITC will be treated as ineligible.

AI Summary

Input tax credit in barter arrangements turns on receipt of services, not merely advance invoicing or contractual entitlement. GST input tax credit in a barter arrangement for future advertisement services was discussed with reference to the statutory condition of receipt of services under section 16(2)(b). The facts involved supply of goods already made and tax discharged, while no campaigns, media slots, or other deliverables had yet been finalised, though an invoice was proposed in advance. The commentary examined whether a contractual right to receive services, advance invoicing, and the time-of-supply provisions under sections 13 and 31 could support ITC despite the absence of actual receipt and defined deliverables.