February 25, 2023

Treatment of Advance Received under GST

Small and medium businesses and startup owners in India are required to comply with various GST regulations to avoid legal troubles. One such regulation is the treatment of advance received under GST. This article will guide you through the process of incorporating advance received in GSTR 1 and show you how to treat it under GST.

What is Advance Payment under GST?

Advance payment is a common practice in the business world. It is a payment made by the buyer to the seller before the delivery of goods or services. The buyer makes the payment in advance to ensure that the seller holds up their end of the bargain. Under GST, the advance payment must be treated as a supply and must be taxed accordingly. It is essential to understand the tax implications of advance payments to avoid any legal hassles.

How to Incorporate Advance Received in GSTR 1?

The GSTR 1 is a monthly or quarterly return filed by registered taxpayers. It contains details of all the outward supplies made by the taxpayer during the period. If the taxpayer has received any advance payment during the period, they must incorporate it in GSTR 1.

The following steps must be followed to incorporate advance received in GSTR 1:

1. Login to the GST portal using your credentials

2. Select the 'Services' tab and click on 'Returns'

3. Select the appropriate financial year and tax period (monthly or quarterly)

4. Select 'GSTR 1' and click the 'Prepare Online' button

5. Select the 'Advance Received' section and enter the details of the advance payment received. The details include the advance payment received, the rate of tax applicable, and the amount of tax payable on the advance payment

6. After entering the details, click on the 'Save' button and verify the details entered

7. Submit the GSTR 1 after verifying all the details entered

How to Treat Advance Payment under GST?

The advance payment must be treated as a supply under GST. The tax on the supply must be paid at the time of receipt of the advance payment. The tax must be paid even if the supply is made in the next financial year. The tax rate applicable on the advance payment is the rate applicable on the goods or services supplied.

If the supply is not made within one year from the date of receipt of the advance payment, the taxpayer must refund the advance payment to the buyer. If the refund is not made within three months from the expiry of one year, interest must be paid at the rate of 18% per annum on the amount of refund due.


Complying with GST regulations is essential for small and medium businesses and startup owners in India. Understanding the treatment of advance received under GST and incorporating it in GSTR 1 is crucial to avoid any legal hassles. Following the steps mentioned above will ensure that you comply with the regulations and avoid any legal troubles.


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