GST on advance payment and application with sales invoice
GST can also be liable at the time of receiving advance payment from customer. If advance payment is applied to an invoice in the same month, then such applications need not be disclosed in GSTR-1. However, if advance payment is paid in a month and is applied to invoice in the subsequent month, then this application needs to be reported in GSTR-1.
Process of application of advance payment from customer and sale invoice has been explained in this document.
Apply a customer advance
- Create the service advance receipt as described in GST on advance payment received from customer.
- Create a sales invoice for the same customer and enter the service lines with the relevant GST Group Code and HSN/SAC Code.
- On the invoice, select the advance receipt in Applies-to Doc. No. Review the GST calculation, and then post the invoice.
The GST group on the invoice lines must match the group on the advance receipt when you apply an advance that has GST on Advance Payment turned on.
Example of an advance application
For example, service amount is INR 20000 and customer made an advance payment of INR 10,000 and 18% GST (that is, 9% CGST and 9% SGST/UTGST) has to be charged on the advance payment.
GST calculation appears in the FactBox as follows:
Component Amount GST Base Amount 10,000 GST Transactional Value 8,474 (10000*100/118) CGST 763 (8,475*9%) SGST 763 (8,475*9%)
Later sales invoice for services is issued to the customer for INR 20,000. 18% GST (that is, 9% CGST and 9% SGST/UTGST in case of Intra-State or Intra-Union Territory transaction or 18% IGST in case of Inter-State transaction) has to be charged on the invoice amount.
GST calculation appears in the Fact Box as following:
Component Amount GST Base Amount 20000 CGST 1800 SGST 1800 GL Entries for application of advance payment with sales invoice are as following:
Particulars Amount Customer Account 23600 CGST Payable Account -1800 SGST/UTGST Payable Account -1800 Sales Account -20000 CGST Payable Account 763 SGST/UTGST Payable Account 763 CGST Payable (Interim) Account -763 SGST/UTGST Payable (Interim) Account -763
Unapply a customer advance from a sales invoice
If the payment and invoice were applied incorrectly, use the unapply functionality to reverse the application. Unapplication entries are the same for applications made during posting and applications made afterward.
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An advance receipt and invoice application can't be unapplied, if the tax liability on both is discharged through GST Settlement Screen.
GL Entries for un-application of an advance payment and sales invoice:
Particulars Amount CGST Payable (Interim) Account 763 SGST/UTGST Payable (Interim) Account 763 CGST Payable Account -763 SGST/UTGST Payable Account -763
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In case of Inter-State Sale, IGST is calculated.