Urd tax on advance

This query is : Resolved

Chirag Sheth (Querist)
Follow

05 November 2014 Dear All,

I am from one NGO and we have made one contract with one NGO for food supply. As per the contract we have to get some amount as advance in chq. But NGO has given us their material stock against the advance. Now whether we have to pay VAT as this is the URD purchase ?

Please advice.

CA CHIRAG DOSHI

CA CHIRAG DOSHI (Expert)
Follow

05 November 2014 NO YOU DONT HAVE TO PAY MVAT ON URD PURCHASE,
ALSO IF YOU DONT HAVE RC U CANT TAKE INPUT SET OFF

CA CHIRAG DOSHI & CO
9833027231

Chirag Sheth

Chirag Sheth (Querist)
Follow

05 November 2014 Dear Sir,

Can u share some document evidence for the same,so i can save for future audit queries.

Also please note that we haven't taken any input against that stock transfer.

Thanks in advance

Chirag Sheth
09924204464

Asha Kanta Sharma

Asha Kanta Sharma (Expert)
Follow

02 August 2025 Hey! About your query on **URD tax on advance and material stock received**:

---

### Situation Recap:

* You got an advance payment (cheque) from an NGO.
* Instead of cash, the NGO gave you **material stock** against the advance.
* Question: Do you need to pay VAT on this as URD purchase?

---

### Key Points:

1. **Is VAT payable on material received against advance from an unregistered dealer (NGO in this case)?**

* Generally, **if the material is received without a proper tax invoice from an unregistered dealer (URD), you do NOT have to pay VAT under URD purchase rules** because there is no actual taxable sale.
* In your case, since it is a **stock transfer against advance** and not a purchase invoice, it is **not considered a taxable purchase** under VAT.

2. **Can you claim Input Tax Credit (ITC)?**

* Without a valid **tax invoice or RC (Registration Certificate)** from the supplier, you **cannot claim input tax credit** on these goods.
* Since the NGO is unregistered, no VAT invoice will be available; hence, no ITC.

---

### Supporting Documents for Audit:

* Contract copy showing terms of advance and material stock transfer.
* Delivery note or material receipt voucher.
* Bank statement/cheque copy showing advance payment receipt.
* Explanation letter for audit stating no VAT payable as no taxable purchase occurred.

---

### Summary:

| Question | Answer |
| ------------------------------------------------------- | ------------------------------------------------------ |
| VAT payable on stock received against advance from URD? | No, not liable under URD purchase rules |
| ITC on such stock | Not allowed without tax invoice from registered dealer |
| Documentation | Maintain contract, delivery vouchers, payment proof |

---

If you want, I can help draft an audit explanation note or help with any other documentation you might need. Let me know!

You need to be the querist or approved CAclub expert to take part in this query .
Click here to login now