Is GST Payable on an Advance for Services? How It Works

Yes. If you supply services and you are registered under GST, tax is payable on an advance in the month you receive it — even if the work has not started and the invoice will not be raised for weeks. The rule that decides this is the time of supply for services in Section 13 of the CGST Act: it is the earlier of the invoice date and the date you receive payment. An advance is a payment, so it usually comes first.

This catches out agencies, consultants, contractors and event companies more than anyone, because their whole business runs on advances. A 50% mobilisation advance received on 28 March is March's liability, not April's.

Goods and services are treated differently

The relief people half-remember is real, but it is for goods. Since Notification 66/2017-Central Tax, most suppliers of goods do not pay GST on advances; they pay when the goods are invoiced. No such relief exists for services. If you sell both — say, equipment plus installation — the advance has to be split between them, and the services part is taxable on receipt.

What you have to issue: a receipt voucher

Section 31(3)(d) of the CGST Act requires a registered supplier who receives an advance to issue a receipt voucher, and Rule 50 of the CGST Rules lists what it must contain. In short:

• your name, address and GSTIN, and the client's name, address and GSTIN if registered;
• a serial number unique within the financial year, and the date;
• a description of the services, and the amount of the advance;
• the rate and amount of tax, split as CGST and SGST or as IGST;
• the place of supply, whether tax is payable under reverse charge, and a signature.

Two fallbacks in Rule 50 save you when the details are not settled yet. If you cannot tell the rate of tax when the money arrives, you pay at 18%. If you cannot tell whether the supply will be intra-State or inter-State, you treat it as inter-State and charge IGST.

When the work is invoiced

The final tax invoice is raised for the full value as normal. The tax you already paid on the advance is then adjusted against the tax on that invoice, so the same rupee is not taxed twice. In the GSTR-1 return, advances received and not yet invoiced are reported in Table 11A, and advances adjusted against invoices in Table 11B.

When the job is cancelled

If the work never happens and you return the money before any invoice is issued, you issue a refund voucher against the receipt voucher, which reverses the tax. If an invoice was already raised, the correction is a credit note instead.

Who this does not apply to

If you are not registered under GST, there is no tax to pay on the advance and no receipt voucher to issue. If you only supply goods, the advance is generally not taxed on receipt. And under the composition scheme, the rules differ again. Everything above is for a registered supplier of services under the regular scheme.

A test you can run this week

Open last month's bank statement and mark every receipt from a client that was not against an invoice. For each one, ask two questions: was a receipt voucher issued, and was the tax on it included in last month's return? If the answer is "we just adjust it when we invoice", tax has probably been paid a month or more late on every advance, and interest has been accruing quietly.

In Grovia, a receipt voucher is its own document: it carries the GST rate (defaulting to 18%), the CGST/SGST or IGST split and the place of supply, it prints as a PDF, and it is marked applied when you link it to the invoice. The GSTR-1 workings then list open vouchers under Table 11A and applied ones under 11B, ready for your CA to check and file. Grovia prepares the figures; it does not file the return.

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Figures checked on 27 October 2026. Tax and labour rules change; confirm the current position with your CA before you act on it.

Frequently Asked Questions

Is GST payable on an advance received for services?

Yes, for a registered supplier under the regular scheme. The time of supply for services is the earlier of the invoice and the payment, so tax falls due in the month the advance is received.

Is GST payable on advances for goods?

Generally not since Notification 66/2017-Central Tax, which moved the time of supply for most goods to the invoice. The exemption does not extend to services.

What rate do I charge if the final scope is not decided?

Rule 50 says that if the rate cannot be determined when the advance is received, tax is paid at 18%. If the place of supply is unclear, the supply is treated as inter-State.

Do I need to issue a receipt voucher for every advance?

Yes. Section 31(3)(d) of the CGST Act requires a receipt voucher or similar document whenever a registered supplier receives an advance against a supply.

What if the client cancels and I return the advance?

If no invoice has been issued, you issue a refund voucher against the receipt voucher, which reverses the tax. If an invoice was already issued, you issue a credit note instead.