Many Indian businesses work on advances: a builder pays a part of the tile order up front, a client pays a retainer before an audit, a wedding family books a caterer months ahead. Under GST, whether that advance carries tax depends on what is being sold. For goods, it usually does not. For services, it does.
01Why goods and services differ
GST is due at the "time of supply", which sections 12 and 13 of the CGST Act define.
| Supply | Time of supply | Effect on advances |
|---|---|---|
| Goods | Date of invoice, or the last date by which the invoice should have been issued | No GST on advances, under Notification 66/2017-Central Tax |
| Services | The earlier of the invoice date, if issued within the time allowed, or the date payment is received | GST on advances, in the month received |
Before November 2017, GST was due on advances for goods too. Notification 66/2017-Central Tax, from 15 November 2017, removed that for all registered persons other than composition dealers.
02Advances for goods
A Morbi tile maker receives ₹2,00,000 from a Pune builder on 10 August as an advance against an order of 1,000 boxes. No GST is payable on the advance. When the tiles are dispatched on 25 September, the tax invoice is issued and GST is paid on the full value in September's return.
The advance is still recorded. Issue a receipt for the money, and show the advance against the invoice when it is made, so the builder's ledger and yours agree.
03Advances for services
The receipt voucher
When you receive an advance for services, rule 50 of the CGST Rules asks you to issue a receipt voucher showing:
- your name, address and GSTIN,
- a serial number of up to 16 characters and the date,
- the buyer's name, address and GSTIN if registered,
- a description of the services,
- the amount of the advance,
- the rate and amount of tax,
- the place of supply, if inter-state,
- whether tax is payable under reverse charge,
- your signature.
If the rate is not known when the advance arrives, tax is charged at 18%. If you cannot tell whether the supply will be intra-state or inter-state, treat it as inter-state and charge IGST.
Working out the tax
The advance is treated as including GST. At 18%:
Tax = advance × 18 ÷ 118A worked example
An Ahmedabad CA firm agrees an audit fee of ₹2,00,000 plus GST with a Gujarat client, and receives ₹1,18,000 as an advance on 15 April.
| Month | Event | Taxable value | CGST | SGST |
|---|---|---|---|---|
| April | Advance of ₹1,18,000 received | ₹1,00,000 | ₹9,000 | ₹9,000 |
| June | Invoice for ₹2,00,000 issued | ₹2,00,000 | ₹18,000 | ₹18,000 |
| June | Less tax already paid on advance | ₹1,00,000 | ₹9,000 | ₹9,000 |
| June | Tax paid in June | ₹1,00,000 | ₹9,000 | ₹9,000 |
Total tax over the two months is ₹36,000, the correct amount on ₹2,00,000. The advance only brings part of it forward.
Small excess payments
If a client pays up to ₹1,000 more than the invoice amount, you can treat the time of supply for that excess as the invoice date. You do not need a receipt voucher for small round-ups.
04Reporting advances in GSTR-1
| Table | What goes in |
|---|---|
| 11A | Advances received in the period on which tax is paid, and no invoice yet issued |
| 11B | Advances from earlier periods adjusted against invoices issued in this period |
In GSTR-3B, the tax on advances is included in Table 3.1 for the month the advance is received, and reduced in the month the invoice is issued.
05When the deal falls through
If no service is supplied and no invoice is issued, issue a refund voucher under rule 51 when you return the money. It refers to the receipt voucher and shows the amount and tax refunded. The tax you paid on the advance is then adjusted.
06Advances from the buyer's side
If you pay an advance to a supplier of services, you cannot claim input tax credit until you have the tax invoice and receive the service. The receipt voucher alone is not a document for credit.
07Event and seasonal businesses
A Jodhpur wedding caterer takes bookings eight to ten months ahead, with 25% paid on booking. On a ₹6,00,000 booking, the ₹1,50,000 advance received in November carries GST in November's return, even though the wedding is the following February. Caterers who forget this pay the full tax in February with interest on the advance part.
08For larger businesses
A Pune IT services company that bills milestones on large contracts often receives mobilisation advances. It raises a receipt voucher on each, pays the tax in that month, and adjusts it against the milestone invoices. Its contract team and accounts team need to see the same list of advances, or the adjustment is missed and tax is paid twice.
09Common mistakes
- Paying GST on advances for goods. It is not due under the 2017 notification, and paying it ties up cash.
- Not paying GST on advances for services, then paying it with interest when the invoice is raised months later.
- No receipt voucher. The client has no document, and the advance cannot be traced to the invoice.
- Adjusting the wrong advance when a client has several orders open.
10A note on goods with services
Where an order mixes goods and services, such as machinery with installation, check whether the contract is mainly a supply of goods or of services, because that decides whether the advance carries GST. A composite supply takes the treatment of its principal supply. When in doubt, ask your CA before the first advance arrives.
This guide is general information as of October 2026 and does not amount to tax advice.
MatruOS records each advance with a receipt voucher and sets it against the invoice when you make it.