No GST on Advances for Goods: How the Relief Actually Works

No GST on Advances explained: this guide covers what it means, who it applies to, the step-by-step process, documents required, fees, due dates and penalties in India — so you can stay compliant with confidence and avoid costly mistakes.

Section 12(2) makes the time of supply of goods the earlier of the date of invoice (or the last date on which the invoice was required to be issued under s.31) and the date of receipt of payment.

Read that alone and every advance received against an order triggers tax. In practice it does not, because a 2017 notification removed the payment limb — and understanding exactly what it removed changes how you compute the date.

Notification No. 66/2017-Central Tax dated 15.11.2017 provides that a registered person supplying goods shall pay tax at the time of supply as specified in s.12(2)(a) — that is, the date of issue of invoice, or the last date on which the invoice was required to be issued under s.31. The date of receipt of payment in s.12(2)(b) is ignored. No GST is payable on advances received against a supply of goods. The relief does not apply to composition dealers or to suppliers of specified actionable claims, and it does not apply to services at all.

What the notification replaced

The relief arrived in two steps.

Notification No. 40/2017-CT dated 13.10.2017 first gave it only to small taxpayers — those whose aggregate turnover in the preceding financial year did not exceed, or was not likely to exceed, ₹1.5 crore.

Notification No. 66/2017-CT dated 15.11.2017 extended it to all registered persons supplying goods, other than those who had opted for composition under s.10.

Notification No. 50/2023-CT dated 29.09.2023 added a second exclusion — registered persons making supply of specified actionable claims as defined in s.2(102A), the gaming and betting category.

The two events that remain

With s.12(2)(b) out of the picture, the time of supply of goods is the earlier of:

(a) the date of issue of invoice by the supplier; or

(b) the last date on which the supplier was required to issue the invoice under section 31.

That second limb is the one people forget, and it is where liability actually arises in most disputes.

Section 31(1) requires a tax invoice for goods to be issued:

• before or at the time of removal of goods for supply to the recipient, where the supply involves movement of goods; or
• before or at the time of delivery of goods or making available to the recipient, in any other case.

So if the goods left the factory on 20 March and the invoice was raised on 8 April, the time of supply is 20 March — the last date on which the invoice was required to be issued. Delaying the invoice does not delay the tax.

Successive payments and the last date of invoice

The ICAI commentary works through a case worth reproducing, because it shows how the two remaining events interact with s.31(4).

Where a contract involves successive statements of account or successive payments, s.31(4) makes the last date of issuance of the invoice the date of receipt of each such payment.

So the payment date re-enters the analysis — not through s.12(2)(b), which is disapplied, but through s.31(4), which fixes the invoice due date by reference to the payment.

The commentary's conclusion: the time of supply is the earlier of the date of receipt of the successive payment (being the last date of issuance of the invoice) or the actual date of issue of the invoice. And the due date on which the payment ought to have been received is immaterial, because neither the time-of-supply provisions nor the invoice-timing provisions refer to it.

That is a subtle but important point. Notification 66/2017 does not make payment dates irrelevant in every case; it makes them irrelevant as a direct time-of-supply trigger.

Who does not get the relief

Composition dealers under s.10. Expressly excluded by the notification. A composition taxpayer receiving an advance against a supply of goods is on the unmodified s.12(2), with the payment date live.

Suppliers of specified actionable claims. Excluded from 29.09.2023 — betting, casinos, gambling, horse racing, lottery and online money gaming.

Everyone, for services. The notification covers goods only. Under s.13(2), the time of supply of services remains the earliest of the invoice date (if issued within the s.31(2) period), the date of provision of service (if not), or the date of receipt of payment. Advances for services are taxable when received, and a receipt voucher must be issued under s.31(3)(d).

Reverse charge. Section 12(3) governs the time of supply for goods under RCM and is unaffected by the notification.

Practical consequences

• Do not issue a receipt voucher for a goods advance. No tax arises, so there is nothing to voucher. A receipt voucher issued anyway suggests a liability that does not exist.
• Do not report goods advances in GSTR-1 Table 11A. That table is for advances on which tax is payable — in practice, service advances.
• Where a single contract covers goods and services, split the advance. The service portion is taxable on receipt; the goods portion is not.
• Watch the invoice-timing discipline. Because the s.31 due date is a limb of the time of supply, a habit of invoicing after dispatch creates liability in the earlier month without anyone noticing.
• Composition dealers: build the advance into the CMP-08 computation for the quarter of receipt.

Key takeaways

• Notification 66/2017-CT disapplies s.12(2)(b) — no tax on advances for goods.
• Time of supply is the earlier of the invoice date and the s.31 due date.
• The s.31 due date is removal or delivery — invoicing late does not defer tax.
• Under s.31(4), successive payments fix the invoice due date, so payment dates matter indirectly.
• Composition dealers and specified actionable claim suppliers are excluded.
• Advances for services remain taxable on receipt, with a receipt voucher.

Read next

• Time of Supply of Goods: When Liability Arises
• GST on Advance Payments
• Continuous Supply of Goods and Section 31(4)
• Section 12-13 CGST Act: Time of Supply

Disclaimer: Positions stated as on 5 September 2026, based on ICAI Background Material on GST, Volume I (2026 edition).