GST on advance received explained

Services: tax on the advance

For services, Section 13 of the CGST Act makes the date of receipt of payment a possible time of supply. If a client pays an advance in March for work done in May, GST on that advance falls due in the March return. The supplier issues a receipt voucher under Rule 50 and reports the advance in GSTR-1.

Goods: generally no tax at advance stage

For goods, a government notification relieves registered persons, other than composition taxpayers, from paying GST at the time of receiving an advance. Tax on goods becomes payable when the invoice is issued or the goods are removed, as per Section 12.

Adjusting and refunding advances

• When the final invoice is raised, the tax already paid on the advance is adjusted in GSTR-1 so it is not paid twice
• If the order is cancelled and no supply happens, a refund voucher under Rule 51 is issued and the tax is adjusted
• Where the rate or nature of supply is unclear at the advance stage, the receipt voucher may show the higher applicable rate or treat it as inter-state, as Rule 50 allows

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This guide explains the law in general terms as of October 2026. Time limits and requirements can depend on the facts of your case and on the notice you received.