GST on Advance Payment or Normal Payment Application with Purchase Invoice
An advance payment made to vendor for a transaction that is subject to reverse charge is to be reported in GSTR-2.
If the advance payment is applied to the invoice in the same month, then such applications need not be disclosed in GSTR-2. However, if advance payment is paid in a month and is applied to invoice in the subsequent month, then this application is to be reported in GSTR-2.
Process for application and un-application of payment and invoice has been explained in this document
GST on advance payment and application with purchase invoice
GST is liable at the time of advance payment to vendor, for example, service amount is INR 20000 and advance payment made to vendor for INR 10000 and 18% GST (i.e. 9% CGST and 9% SGST/UTGST) has to be charged. Taxpayer paying advance is not eligible to claim ITC on advance paid. The taxpayer can claim ITC on advance paid only on receipt of services.
GST calculation for Intra-State or Intra-Union Territory transactions will appear in the Fact Box, as following:
Component Amount GST Base Amount 10,000 CGST 900 SGST 900 GL Entries for advance payment made to vendor, will be as following:
Particulars Amount Vendor Account 10,000 SGST/UTGST Receivable (Interim) Account 900 CGST Receivable (Interim) Account 900 SGST/UTGST Payable Account -900 CGST Payable Account -900 Bank Account -10000
Later invoice for service purchase issued by vendor for INR 20,000 and 18% GST (i.e. 9% CGST and 9% SGST/UTGST), will be charged.
GST Calculation will appear in the Fact Box, as following:
Component Amount GST Base Amount 20000 CGST 1800 SGST 1800 GL Entries for application of an advance payment with an invoice for services, where input tax credit is available:
Particulars Amount Service Account 20000 CGST Receivable (Interim) Account 1800 SGST/UTGST Receivable (Interim) Account 1800 CGST Payable (Interim) Account -1800 SGST/UTGST Payable (Interim) Account -1800 Vendor Account -20000 CGST Payable (Interim) Account 900 SGST/UTGST Payable (Interim) Account 900 CGST Receivable Account 900 SGST/UTGST Receivable Account 900 CGST Receivable (Interim) Account -1800 SGST/UTGST Receivable (Interim) Account -1800 GL Entries for application of an advance payment with an invoice for services, where input tax credit is not available:
Particulars Amount Service Account 23600 CGST Payable (Interim) Account -1800 SGST/UTGST Payable (Interim) Account -1800 Vendor Account -20000 CGST Payable (Interim) Account 900 SGST/UTGST Payable (Interim) Account 900 CGST Receivable (Interim) Account -900 SGST/UTGST Receivable (Interim) Account -900
If this is found that the payment and invoice was wrongly applied and the application needs to be reversed, in such a case un-apply functionality can be used. Un-application entries are same for both online application and offline application.
GL Entries for un-application of an advance payment with an invoice for services, where input tax credit is available:
Particulars Amount CGST Receivable (Interim) Account 1800 SGST/UTGST Receivable (Interim) Account 1800 CGST Receivable Account -900 SGST/UTGST Receivable Account -900 CGST Payable (Interim) Account -900 SGST/UTGST Payable (Interim) Account -900 GL Entries for un-application of an advance payment with an invoice of services, where input tax credit is not available:
Particulars Amount CGST Receivable (Interim) Account 900 SGST/UTGST Receivable (Interim) Account 900 CGST Payable (Interim) Account -900 SGST/UTGST Payable (Interim) Account -900
Normal payment to vendor and application with purchase invoice
For unregistered, import vendor and reverse charge purchase of service from registered vendor, user has to post a separate invoice for goods and services in the system. No GST calculation is done at the time of application. In ordinary course, when a normal payment is applied to the invoice, system proportionately posts the liability from Payable Interim Account to Payable Account and credit (if applicable) from Receivable Interim Account to Receivable Account.
For example, Purchase Invoice for service purchase issued to vendor for INR 60,000 and 18% GST (i.e. 9% CGST and 9% SGST/UTGST), has to be charged. Later a payment of INR 10,000 has been made to vendor against to the purchase invoice, which doesn't have any GST impact.
GST Calculation will appear in the Fact Box, as following:
Component Amount Total GST Transactional Value 60000 Invoice Total CGST Amount 5,400 (60000*9%) Invoice Total SGST/UTGST Amount 5,400 (60,000*9%) Normal Payment Applied 10000 SGST/UTGST Amount = Invoice Total SGST/UTGST amount x (Normal Payment Applied/Total Transactional Value) 900 (5,400*(10,000/60,000) CGST Amount = Invoice Total CGST amount x (Normal Payment Applied/Total Transactional Value) 900 (5,400*(10,000/60,000) GL Entries for Application of invoice with normal payment:
Particulars Amount Vendor Account 10000 CGST Payable (Interim) Account 900 SGST/UTGST Payable (Interim) Account 900 CGST Receivable Account 900 SGST/UTGST Receivable Account 900 CGST Payable Account -900 SGST/UTGST Payable Account -900 CGST Receivable (Interim) Account -900 SGST/UTGST Receivable (Interim) Account -900 Bank Account 10000
If this is found that the payment and invoice was wrongly applied and the application needs to be reversed, in such a case un apply functionality can be used. Un-application entries are same for both online application and offline application.
GL Entries for un-application of invoice with normal payment:
Particulars Amount CGST Payable Account 900 SGST/UTGST Payable Account 900 CGST Receivable (Interim) Account 900 SGST/UTGST Receivable (Interim) Account 900 CGST Payable (Interim) Account -900 SGST/UTGST Payable (Interim) Account -900 SGST/UTGST Receivable Account -900 CGST Receivable Account -900
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Note: In case of Inter-State Purchase, IGST will be calculated.