Rules And Regulations:
The rules and regulations related to the time of supply according to the GST contains a very important part in the determination of the time in order to pay the tax for the transaction. The general rules and regulations related to the time of supply for the services is to be done are early as possible as of the following.
- Date of the issue of the invoice
- Date of the receipt of the payment or GST on advance payment
- Date determined on which the invoice has to be issued
The second point as mentioned above is known as the receipt of advance. This term means that I the advance payment has been received before the issues of the invoice, the date of the receipt of advance will be the time of supply. Hence, the tax payer, who is receiving the money, has to pay GST on advance payment as he receives.
It is to be noted that, for the supply of the products, the advance payment received is not the subject of the GST. The full amount will be susceptible to tax on the issue of the invoice (according to the World Economic Forum of 15th November 2017)
Task of the Tax Payer after receiving the Advance Payment :
After receiving the advance payment, a tax payer has to do the following.
Issue a Receipt Voucher:
A receipt voucher has to be issued by the supplier to the person who is paying in advance. The receipt voucher has to contain the following details – description of the products and services, the rate of the tax which is applicable, amount of the advance payment and so on.
Calculation of the Tax on Advance Received:
Calculation of the tax on the advance has to be done and the payment of the tax has to be done when one is filing the return for the month. The advance that is received has to be summed up. This means that one has to pay the GST on advance payment.
GST at the rate of 18 percent has been charged when the rate of the tax has not been able to get determined during the receipt of the advance. Moreover, is the point of the sale cannot be calculated, then the advance is seen as an interstate supply and in this case, the IGST has to be paid.
The following example may help to understand the treatment of the GST on advance payment.
“Mr. A has entered into a contract where he has to supply goods worth Rs 1,000,000 by February 20.
The total invoice value along with the GST at the rate of 18% is Rs 1,180,000.
He gets the receipt of an advance of Rs 400,000 on January 10 and the balance payment of Rs 780,000 on February 20. The invoice has also been raised on 20th February.”
This is how the tax has to be calculated.
A very important part to be taken into consideration in this case is that, the tax payer who is paying the tax is not allowed to claim the ITC on the advance he paid. The tax payer is only eligible to claim the ITC on the advance paid only as on the receipt of the services or goods. All these mean that the person of the given example, Mr. A has been made eligible to claim the ITC on any advance in the month of February, provided that the goods are received on February 20.
Incorporation of the Advance which is received on GSTR 1:
The advance which is received by a tax payer should be mentioned in the “Pt.11A of GSTR 1” provided that the invoice of the advance has not been issued. Details of each of the advance is not required to be provided. Instead, a full summation of all the advances which are received has to be given.
Before doing so, the advance has to be divided into the intrastate and the interstate advances. Under the section of Gross Advance Adjusted or Received, the gross figures of the advances which are received have to be mentioned. After this ordeal, the tax payable has to be stated. One has to state IGST for the interstate advances and the CGST and the SGST for the intrastate advances. Finally, the tax issued on the advance has to be added to the tax liability of the provided or the supplier.
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