Under GST taxable event is the supply of goods and services but the liability to pay tax depends upon the time of supply. In this article, you will get complete detail about Advance Payment Receipt treatment under GST like how to deduct GST on advance payment, how to pay GST on advance payment receipt, Advance Payment Receipt Voucher Format and more.
As per the provisions of GST, time of supply is the earliest of the following:
- Date of receipt of payment in bank, OR,
- Date of issue of invoice by the supplier.
Advance Receipt under GST
In case of Advance receipt from the customer, tax liability will become due even before issue of invoice and even before the actual supply of goods and services as date of receipt of payment in bank has taken place.
Note: If tax is not paid by customer separately at the time of payment then it is assumed that the advance is inclusive of all taxes.
As per the provisions of CGST act the supplier has to issue ADVANCE RECEIPT VOUCHER to its customer on the early of the both dates mentioned above.
Moreover, the Advance Receipt Voucher should be numbered specifically for every financial year and this voucher is also applicable to the transactions on which tax is to be paid under the reverse charge.
GST Procedure on Advance Payment Receipt from Customer (Step by Step)
Step 1- Issuance: An Advance Receipt Voucher is to be issued by the registered supplier on the receipt of advance from customer on early of above mentioned dates.
Step 2- Specific: ARV must have specific numbering which may include numbers, alphabets or special characters or combination of all.
Step 3- Sign: ARV must be signed by the registered supplier.
Step 4- Attachment of invoice with ARV: When the invoice is issued, supplier has to mention the specific ARV number or transaction ID on the invoice.
Note: Invoice should be issued with full value of goods and services supplied. Transaction ID is a ID which is issued on filling of GSTR-1. Preference should be given to transaction ID over the specific number of ARV.
Step 5- File GSTR-1: When GSTR-1 is filed supplier has to mention the details of all ARV’s. After mentioning the details in GSTR-1, a transaction ID will be issued by GSTN system for every transaction on which tax is paid in advance.
Note: Supplier has to mention Transaction ID and Invoice Number in GSTR-1 along with the amount of tax paid.
Hence by this the tax paid on advance will be taken into account while calculating the final tax liability based on the invoice. This will lead to the net payment of tax on the invoice value.