Here is the rule that trips up most service businesses: if you take money before you have done the work, GST is due the moment that money hits your account — not when you finally raise the invoice. So the freelance designer who collects a Rs. 50,000 advance in March and delivers in May has a GST liability in March. Miss it, and you are looking at interest and a mismatch that shows up when the department reconciles your returns.
The good news is that this rule applies only to services. For goods, advances are effectively GST-free until supply happens. That single distinction — and knowing how to report the advance and then knock it off later in GSTR-1 — is what this article walks you through, with a worked example you can copy for your own books.
Why services tax advances but goods do not
Both goods and services were originally caught by the “time of supply” rules in the CGST Act, 2017. Time of supply is simply the point at which the law says GST becomes payable. For services under Section 13, time of supply is the earliest of the date of invoice (if issued within the prescribed period), the date of provision of service, or the date of receipt of payment. Because receipt of payment is one of the triggers, an advance pulls the liability forward.
Goods used to work the same way — until the government stepped in. Through Notification No. 66/2017 – Central Tax dated 15 November 2017, all registered suppliers of goods were relieved from paying GST on advances. For goods, GST is now payable only when the invoice is issued (or is due to be issued) under Section 12. The advance itself carries no tax.
The net effect is a clean split that every business should have memorised:
| Situation | Advance for goods | Advance for services |
|---|---|---|
| Is GST payable when advance is received? | No (relief via Notification 66/2017) | Yes |
| When does GST fall due? | On issue of tax invoice at supply | On receipt of advance (or invoice/service, whichever is earliest) |
| Document to issue on receipt | Receipt voucher (no tax charged) | Receipt voucher (with tax) |
| Reported in GSTR-1 | Only at invoice stage | Table 11A when received; adjusted in 11B later |
One caveat: the goods relief does not extend to advances on which tax is payable under reverse charge, nor to a composite supply where the principal supply is a service. When in doubt about how a bundled contract is taxed, run the numbers through our GST Calculator or raise it on our Ask a CA – GST desk.
The receipt voucher: the document you must issue
When a service provider receives an advance, Section 31(3)(d) requires a receipt voucher to be issued — not a tax invoice. This is a distinct document and it must carry: your name, address and GSTIN; a consecutive serial number; date of issue; the recipient’s details; a description of the goods or services; the amount of advance; the rate and amount of tax (CGST/SGST or IGST); the place of supply for inter-State cases; and whether tax is payable on reverse charge.
Two practical problems arise at the advance stage, and the law has an answer for each:
You don’t yet know the rate of tax
If the nature of the service is not clear when the advance is received and the rate cannot be determined, tax is to be charged at 18%. This is the default fallback built into the rules.
You don’t yet know whether it is inter-State or intra-State
If the place of supply is not ascertainable at the time of the advance, it is to be treated as an inter-State supply and IGST is charged. You correct the character later at the invoice stage if it turns out to be intra-State.
A worked example: advance in March, service in May
Suppose Meridian Consulting (registered in Karnataka) signs a Rs. 2,00,000 + GST advisory engagement with a Karnataka client. The client pays a 40% advance of Rs. 80,000 (plus GST) on 20 March 2026. The service is delivered and the final invoice is raised on 12 May 2026. The applicable rate is 18%.
| Step | Date | Amount | GST treatment |
|---|---|---|---|
| Advance received (40%) | 20 Mar 2026 | Rs. 80,000 | Issue receipt voucher; GST of Rs. 14,400 (CGST 7,200 + SGST 7,200) payable for March |
| Report in GSTR-1 (March) | By 11 Apr 2026 | Rs. 80,000 | Table 11A – advance received, tax Rs. 14,400 |
| Pay tax in GSTR-3B (March) | By 20 Apr 2026 | — | Rs. 14,400 discharged in cash/credit |
| Final invoice on completion | 12 May 2026 | Rs. 2,00,000 | Full invoice with GST of Rs. 36,000; advance adjusted |
| Report in GSTR-1 (May) | By 11 Jun 2026 | Rs. 2,00,000 invoice | Table 11B – adjust the earlier Rs. 80,000 advance so it is not taxed twice |
The key insight is the last line. In May you raise a full invoice for Rs. 2,00,000 and report Rs. 36,000 of GST. But you have already paid Rs. 14,400 on the advance back in March. If you do nothing, you would end up paying tax on the same Rs. 80,000 twice. Table 11B is where you back that out.
How the GSTR-1 tables actually work
GSTR-1 has a dedicated pair of tables for advances so that the money is taxed once and only once:
Table 11A — Advance received: In the tax period in which you receive the advance, report the gross advance and the tax on it, split into inter-State and intra-State. This is what creates your liability that month even though no invoice has been raised.
Table 11B — Adjustment of advances: In the later tax period when you raise the actual invoice and the supply is complete, report the adjustment here. This tells the system “the advance I taxed earlier is now covered by an invoice” and prevents double counting. Your net GSTR-1 output for the invoice month is therefore the full invoice value minus the already-taxed advance.
If you want to sanity-check the tax on any advance or final invoice before you file, our GST Calculator gives you the CGST/SGST/IGST split in one step.
When the deal falls through: the refund voucher
Deals collapse. If you took an advance, paid GST on it, and then the service is cancelled and you refund the money, you are not stuck having paid tax on a supply that never happened. Section 31(3)(e) lets you issue a refund voucher against the original receipt voucher. That refund voucher is the document on which you reduce your output liability — effectively reversing the earlier tax — provided no tax invoice was issued and no ITC was passed on. Keep the receipt voucher and refund voucher linked in your records; that trail is what an officer will ask for.
Common mistakes that create notices
The advance rules are simple but unforgiving in reconciliation. The errors we see most often are: treating a service advance like a goods advance and skipping the tax entirely; paying the tax in GSTR-3B but forgetting to report it in Table 11A, so the return figures don’t tie; and — the classic — taxing the advance in March and then taxing the full invoice again in May without the Table 11B adjustment, quietly overpaying. A fourth is issuing a tax invoice instead of a receipt voucher at the advance stage, which muddles your invoice serial numbering.
Key takeaways
- GST on advances applies to services, not goods — goods advances were exempted by Notification 66/2017 from 15 November 2017.
- For services, time of supply under Section 13 is the earliest of invoice, service, or receipt of payment, so an advance pulls the liability into the month it is received.
- Issue a receipt voucher (Section 31(3)(d)) on receiving an advance — not a tax invoice.
- If the rate is unknown, charge 18%; if place of supply is unknown, treat it as inter-State (IGST).
- Report the advance in Table 11A of GSTR-1 when received, then adjust it in Table 11B when the invoice is raised — this is what stops double taxation.
- If the deal is cancelled, issue a refund voucher (Section 31(3)(e)) to reverse the tax.
Frequently Asked Questions
Do I have to pay GST on an advance received for the supply of goods?
No. From 15 November 2017, Notification No. 66/2017 – Central Tax exempts all registered suppliers of goods from paying GST on advances. GST on goods is payable only when the tax invoice is issued. This relief does not, however, cover supplies taxed under reverse charge.
I received an advance but haven’t raised the invoice — where do I report it in GSTR-1?
Report the advance and the tax on it in Table 11A of GSTR-1 for the month you received it. When you later raise the invoice, report the invoice normally and adjust the earlier advance in Table 11B so the same amount is not taxed twice.
What if I don’t know the GST rate when the advance comes in?
Charge tax at 18%. The rules provide that where the rate is not determinable at the time of receiving the advance, 18% is applied. Similarly, if you cannot tell whether the supply is inter-State or intra-State, treat it as inter-State and charge IGST, correcting it at the invoice stage.
The client cancelled after paying an advance on which I already paid GST. Can I recover that tax?
Yes. Issue a refund voucher under Section 31(3)(e) against the original receipt voucher when you return the advance. You can then reduce your output tax liability, provided you had not issued a tax invoice or passed on the credit.
Is a receipt voucher the same as a tax invoice?
No. A receipt voucher is a separate document issued on receipt of an advance under Section 31(3)(d). The tax invoice is issued only when the supply actually takes place. Using the wrong document at the advance stage is a common cause of numbering and reconciliation errors. If you are unsure which applies to a bundled contract, ask our team via Ask a CA – GST.