Is GST payable on advance received for goods and services?

Question

A client of mine took an advance from a customer in September 2026 and the invoice will be issued in November. Someone told me GST must be paid on the advance itself, but another person said that rule was removed. Which is correct for goods and for services?

GradeHunt_Team · Answer

Both are partly right. It depends on whether the advance is for goods or for services.

Advance for services: GST is payable on the advance.
Under Section 13(2) of the CGST Act, the time of supply of services is the earliest of:
(a) the date of the invoice, if it is issued within the time allowed under Section 31, or the date the supplier receives payment, whichever is earlier;
(b) if the invoice is not issued in time, the date of providing the service or the date of receiving payment, whichever is earlier;
(c) if neither applies, the date the recipient shows the receipt of service in his books.
So when payment comes before the invoice, the date of receiving the advance is the time of supply, and tax on the advance goes into that month's return.

Advance for goods: no GST on the advance for a normal taxpayer.
The law also links goods to the date of payment (Section 12(2)), but Notification No. 66/2017-Central Tax dated 15 November 2017 lets every registered person other than a composition taxpayer pay tax on goods only at the time of supply under Section 12(2)(a), leaving out the date of payment. So for goods, the advance itself is not taxed. Tax is due on the date of the invoice, or the last date by which the invoice should have been issued under Section 31 (generally when the goods are removed or delivered), whichever is earlier.

Example for a service: a consultant receives Rs 1,18,000 on 20 September 2026 as an advance including GST at 18%, and issues the invoice in November.
Tax on the advance = 1,18,000 x 18/118 = Rs 18,000, reported in the September 2026 return.
When the November invoice is issued, the tax already paid is adjusted, so no tax is paid twice.

Documents:
- On receiving an advance, issue a receipt voucher (Rule 50). If the rate is not known at that time, charge 18%. If you cannot tell whether the supply will be inter-State or intra-State, treat it as inter-State.
- If the supply never happens and the advance is returned, issue a refund voucher (Rule 51).

For your client: if the advance was for services, tax was due in the September 2026 return. If it was left out, report it in the next GSTR-3B and pay interest under Section 50. If it was for goods and the client is not under composition, no tax is due on the advance; tax is due when the goods are supplied and invoiced in November.

Is GST payable on advance received for goods and services?

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