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.
For example, service amount is INR 20000 and customer made an advance payment of INR 10,000 and 18% GST (i.e. 9% CGST and 9% SGST/UTGST) has to be charged on the advance payment.
GST Calculation will appear in the Fact Box, as following:
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 (i.e. 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 will appear 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, will be 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
GST un-application of customer advance with sales invoice
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.
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An advance receipt and invoice application cannot 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 will be calculated.