No GST Payments on Advances received for supplying goods

GST updates

Dear Readers,

The central government on Wednesday exempted businesses from paying goods and services tax (GST) on advances received for supplying goods in the future. The move would spare industry liquidity pain, confusion over tax liability on supplies that are yet to be made and help repair the disruption caused in the supply chain.

The exemption by the Union government on paying GST at the time of receipt of advances is in line with the decision of the GST Council. State governments are in the process of notifying similar exemptions under state GST laws.

The centre’s notification specified that businesses need to pay central GST (CGST) on supply of goods only at the time of supply. Experts described the decision as a big concession by the authorities to support taxpayers.

“It is a very significant relief, which industry was looking forward to. Under the earlier value-added tax (VAT) regime, there was no tax on advances for goods but was introduced under GST. Since the input credit was only available after receipt of goods, this led to working capital blockage for industry.

For services, GST continues to be payable in advance in line with the provisions under erstwhile service tax laws, said Jain.

Small businesses, which pay taxes and file returns on a quarterly basis, were exempted from the requirement of paying GST on advances earlier. The same benefit is now available to all businesses.

“This (the exemption) comes as a huge sigh of relief for businesses both in terms of compliances as well as working capital loss.”

The central government issued a host of notifications on Wednesday, bringing into force decisions made by the GST Council last Friday at its 23rd meeting in Guwahati.

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