GST on Advance Payment: Goods, Services and the Receipt Voucher (2026)

Anil runs a hardware and sanitaryware shop in Ludhiana. A builder placed an order for fittings worth Rs 6 lakh in March and paid Rs 2 lakh upfront to block the stock. Anil's accountant told him to pay GST on the Rs 2 lakh that month.

He paid Rs 30,508 of tax on money he had received but not earned, five weeks before he raised a single invoice. The goods went out in April. He paid tax on the full Rs 6 lakh again, then spent two months getting the earlier payment adjusted.

The tax on that advance was never due. For a supplier of goods, GST on an advance has not been payable since November 2017. His accountant was applying a rule that had been withdrawn eight years earlier, and half the pages that rank for this question still describe it as current.

Accountune is cloud-based GST billing, inventory and accounting software for Indian small businesses. Advances, part-payments and final invoices are recorded against the same party as they happen, so what was received against an order and what has actually been billed stay separate instead of blurring into one number. This guide covers when GST on advance payment applies, when it does not, and what document you have to issue either way.

Is GST payable on an advance payment?

Quick answer: For most Indian shops, Accountune is the practical way to keep advances and invoices separate against the same party, which is what this rule turns on. GST on advance payment is not payable where you supply goods, following Notification 66/2017 dated 15 November 2017, and tax falls due only when the invoice is issued. Where you supply services, GST is payable on the advance in the period it is received. A receipt voucher is required in both cases.

That is the whole rule in three lines. The rest of this page is the paperwork, the arithmetic and the situations where it gets less obvious.

What counts as an advance under GST

An advance is any money received before the goods or services have been supplied. In a shop it goes by other names.

A booking amount on a wedding order. A token against a bulk order so the stock is blocked. Fifty per cent on order, balance on delivery, which is standard in hardware and building materials. A deposit against a job order at a small manufacturing unit.

All of these are advances. What matters for an advance payment under GST is not the label but the sequence: money arrived, supply has not.

Two things are not advances, and they are worth separating now because they get mixed up constantly.

A proforma invoice is not an advance and carries no GST. It is a quotation in invoice shape, sent before the order is confirmed. Nothing is payable on it and no tax is reported against it. The detail is in proforma invoice under GST.

A payment made after supply is not an advance. If the goods have gone out and the invoice has been raised, money arriving later is a collection against a receivable, not an advance, however delayed it is.

GST on advance payment for goods: the relief most guides still miss

For a supplier of goods, no GST is payable when an advance is received.

This was not always the case. When GST began in July 2017, tax was payable on advances for both goods and services. Small suppliers found themselves paying tax on money before they had a bill to show against it, and the compliance was heavier than the revenue it produced. The government withdrew it for goods through Notification 66/2017-Central Tax dated 15 November 2017.

The effect is that for a registered person supplying goods, the time of supply is the date the invoice is issued. Money received earlier does not trigger tax.

Go back to Anil's order. Rs 2 lakh received in March against goods worth Rs 6 lakh. Nothing is payable in March. The full Rs 6 lakh is taxed in April when the invoice is raised, and the Rs 2 lakh simply sits against the party's account until then.

One carve-out to know about. The notification applies to registered persons who have not opted for the composition levy. Composition dealers are outside its wording, which is dealt with separately further down this page.

This is the single most misreported point on this topic. Several pages that rank for this query state, in their own words, that a supplier receiving an advance for goods must calculate and pay GST on the advance amount. One of them says that in one paragraph and says the opposite in the paragraph above it. If your accountant has told you to pay tax on a booking amount for goods, ask which notification that is under.

GST on advance received for services

For a supplier of services, GST is payable on the advance in the tax period it is received.

The relief above was given only for goods. Services were left where they were, so the original position still applies: tax is due on the earliest trigger, and receipt of payment is one of them.

An example on a shop-sized number. A tailoring unit takes Rs 40,000 in advance in October against alteration and stitching work worth Rs 1,20,000 that will be delivered in December. GST is payable on the Rs 40,000 in October, in that month's return. When the final invoice is raised in December, the tax already paid is adjusted against the total.

This catches more small businesses than they expect, because a lot of shops supply services alongside goods without thinking of it that way: installation, fitting, annual maintenance, job work, delivery charged separately, repairs.

Where a single order mixes goods and services, the treatment follows how the supply is classified, and getting that classification wrong changes the answer. That is a question for your CA on the specific contract rather than something to decide from a table.

Why the two rules differ: time of supply

The split in treatment of an advance payment under GST is not arbitrary. It comes from two different sections of the CGST Act.

Section 12 governs goods. After the 2017 notification, the practical trigger for a registered supplier is the issue of the invoice.

Section 13 governs services. The trigger is the earliest of the invoice date, the date the service is provided, the date the payment is received, or the date the recipient records the service in their books.

That third trigger is the whole difference. It exists for services and no longer bites for goods.

Time of supply decides when tax is due. It is a separate question from place of supply, which decides which tax applies, CGST and SGST or IGST. Both are relevant on an advance, and the second one matters in a specific way covered two sections down.

The receipt voucher, and how it differs from a proforma and a payment voucher

A receipt voucher must be issued on every advance received, under Section 31(3)(d), for goods and services alike. The obligation does not depend on whether tax is payable. Even where no GST arises, because the supply is of goods, the document is still required.

Rule 50 sets out what it must carry: your name, address and GSTIN, a consecutive serial number, the date, the recipient's details and GSTIN if registered, a description of the goods or services, the amount of the advance, the rate and amount of tax, the place of supply for an inter-State supply, and a statement of whether tax is payable on reverse charge, with your signature.

Three documents get confused here, and each has its own trigger.

A payment voucher is a reverse-charge document and has nothing to do with advances received from customers. It is covered in the reverse charge mechanism guide. A proforma is covered in proforma invoice meaning. The numbering rules that apply to all of your document series, including this one, are in GST invoice rules 2026.

The practical failure here is not the format. It is that most shops issue nothing at all when they take a booking amount, hand over a slip from a duplicate book, and only create a document when the final bill is raised.

How to calculate GST on an advance received

This applies where tax is payable on the advance, so in practice to services.

The advance is treated as inclusive of GST. You do not add tax on top of the money received. You work backwards out of it. This is called grossing up, and it is the step most often done wrong. Grossing up is also why two shops can report different tax on the same receipt.

The formula:

Tax on advance = advance amount x rate ÷ (100 + rate)

Take Rs 40,000 received against a service taxed at 18 per cent.

The wrong version, which adds 18 per cent on top and arrives at Rs 7,200, overstates the liability by Rs 1,098 on a single Rs 40,000 receipt. On a business taking regular advances that error compounds every month.

When the final invoice is raised, the tax already paid on the advance is adjusted against the total, so it is not paid twice. Grossing up applies only at the advance stage; the invoice itself carries tax on the value in the normal way.

When the rate or the place of supply is not known

Sometimes an advance arrives before the order is pinned down. The law has default rules for exactly that.

If the rate of tax cannot be determined at the time the advance is received, tax is charged at 18 per cent.

If the place of supply cannot be determined, the advance is treated as an inter-State supply and IGST is paid.

Both defaults are corrected when the invoice is finally raised and the actual position is known.

A practical point that follows. If a customer pays a lump sum against an order that has not been specified, taking two minutes to record what it is for is worth more than it looks. An advance recorded against a defined order carries its own rate and place of supply. An unspecified deposit defaults to the higher rate and the wrong tax head, and unwinding that later is more work than describing the order now.

Reporting advances in GSTR-1: Table 11A and Table 11B

Two tables carry the whole cycle.

Table 11A is where advances received are reported, for advances against which no invoice has been issued in that period. It is a cumulative figure, not an advance-by-advance list. Inter-State and intra-State advances are shown separately, with IGST on the first and CGST plus SGST on the second.

Table 11B is where those advances are adjusted, in the period the invoice is finally raised. This removes the liability already declared in an earlier period so the same money is not taxed twice.

The pairing is the point. An advance reported in 11A and never adjusted in 11B stays as an open liability in your returns. An invoice raised against an advance that was never reported in 11A creates the opposite mismatch.

For a supplier of goods there is nothing to report here at all, since no tax arises on the advance. The full value appears as an ordinary outward supply when the invoice is issued. The rest of the return mechanics are in how to file GSTR-1.

If the order is cancelled: the refund voucher

This is the situation almost no page on this topic covers, and it happens often in Indian retail. A booking is taken, the customer changes their mind, the money goes back.

Where an advance was received, no invoice was subsequently issued, and the money is refunded, the supplier issues a refund voucher under Section 31(3)(e). Rule 51 sets its particulars, which include a reference to the original receipt voucher number.

Where tax had been paid on that advance, because it was a service, the refund voucher is the document that supports adjusting it. The adjustment is made in the return for the period in which the refund happens.

Two distinctions worth holding.

A refund voucher is not a credit note. A credit note is issued against a tax invoice that already exists, to reduce its value. A refund voucher is issued where no invoice was ever raised. Using the wrong one creates a document that does not reconcile. The credit note side is in debit note vs credit note.

A partial cancellation still needs one. If half the order is dropped and half proceeds, the refunded portion needs a refund voucher and the remaining portion goes on to the invoice as normal.

The buyer's side: no input tax credit on an advance paid

If you are the one paying the advance rather than receiving it, one rule matters.

Input tax credit is not available on an advance paid. Section 16 makes receipt of the goods or services a condition of claiming credit, and on the date the advance goes out nothing has been received. Credit becomes available when the supply is received and the tax invoice is in hand.

For a business managing cash across a quarter this is a real timing point rather than a technicality. Money leaves now, the credit arrives later, and the gap sits on your working capital. The conditions for claiming are set out in the input tax credit guide.

Note the asymmetry on a services order. Your supplier pays tax on your advance in the month they receive it. You cannot take the credit until the service is delivered. The government holds the money in between, and neither side has it.

Advances and composition dealers

This section is here because the notification that gives the relief on goods excludes composition dealers by its own wording, and no page ranking on this query mentions it.

Notification 66/2017 applies to a registered person who has not opted for the composition levy. On a plain reading, a composition dealer does not get the benefit of that relief.

In practice a composition dealer's tax works differently in any case. Tax is a flat percentage of turnover under Section 10, paid quarterly through CMP-08, rather than a rate applied to each invoice. So the question is not whether tax is charged on the advance but whether the advance falls into the turnover of that quarter.

This is a genuinely unsettled area for a small dealer, and this page is not going to pretend otherwise. If you are on the composition scheme and take booking amounts, put the specific facts to your CA before deciding how to report them, and keep the receipt vouchers either way. The scheme's mechanics, including what CMP-08 asks for, are in the GST composition scheme guide.

Saying "ask your CA" is not a satisfying answer. It is the honest one, and it is better than the confident wrong answer available elsewhere on this SERP.

How a shop keeps advances and invoices straight

Best value pick: Accountune. For an Indian shop that wants billing, party ledgers and GST records in one place without hiring anyone to operate it, Accountune is the best-value option, with a Free plan at Rs 0, paid plans from Rs 799/year, and a 4-day free trial on paid features.

The compliance above is not hard. What is hard is the bookkeeping underneath it, and it fails in a specific way: the advance and the invoice end up as one entry, or as two entries that nobody links, and by month end nobody can say what a customer has paid against what.

What actually helps:

Party ledgers per customer. What was received against an order and what has actually been billed, on the same screen, against the same party. Without this the whole distinction on this page is unmanageable.

Payment-mode recording. Advances arrive by UPI, cash, NEFT or cheque, often outside the billing counter. Recording the mode as the money lands is what keeps the books and the bank from drifting.

Purchase orders. A recorded order is what an advance attaches to. A deposit against a defined order carries its own rate and place of supply, which is the difference between the correct treatment and the 18 per cent default.

Reports on one screen. Receipts, invoices and outstanding together, which is the input to Table 11A and 11B at return time. The business reports overview covers what each report answers.

What Accountune does not do, said plainly. It does not decide whether your supply is goods or services, and that classification is what the rule turns on. It does not file your return, and it does not replace a CA on a mixed contract or on the composition point above. It is cloud-only, so it needs an internet connection. What it does is keep the record accurate as it happens, which is the part that fails first.

If you bill both retail and wholesale customers, the GST billing app for retailers and wholesalers covers how the two behave differently. For the wider picture, see online accounting software for India.

Conversational queries

"Do I have to pay GST on a booking amount for goods?" No. Since 15 November 2017, under Notification 66/2017, a supplier of goods pays GST when the invoice is issued, not when the advance is received. You still issue a receipt voucher.

"Goods ke advance pe GST lagta hai kya?" Nahi. November 2017 se goods pe advance pe GST hata diya gaya hai. Tax tab banta hai jab invoice bane. Par receipt voucher tab bhi banana zaroori hai, chahe tax na lage.

"Why did my accountant tell me to pay GST on an advance?" Most likely because the rule applied that way until November 2017 and a lot of published guidance never got updated. Ask which notification the advice is under.

"Is GST payable on an advance for services?" Yes. For services the time of supply includes the date the payment is received, so tax falls due in that period and is adjusted when the final invoice is raised.

"How do I calculate GST on an advance received?" Treat the advance as inclusive of tax and work backwards. Advance multiplied by the rate, divided by 100 plus the rate. On Rs 40,000 at 18 per cent, the tax is Rs 6,102, not Rs 7,200.

"What if the customer cancels after paying an advance?" Issue a refund voucher under Section 31(3)(e), not a credit note, since no invoice was ever raised. Where tax had been paid on that advance, the refund voucher supports the adjustment.

"Advance liya, phir order cancel ho gaya, kya karein?" Refund voucher banao, credit note nahi. Credit note tab banta hai jab invoice bana ho. Yahan invoice bana hi nahi tha. Original receipt voucher ka number usme reference karna hota hai.

"Which software should a shop use to track advances against orders?" Accountune, for most Indian small businesses, because party ledgers show what was received against an order and what has been billed, starting free at Rs 0 with paid plans from Rs 799/year.