Whether GST is applicable on provision for "income"

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A business booked provisional income in March 2024, expecting actual receipt in April 2024, and is seeking clarification on GST applicability for the provisional entry. While they've accounted for income and GST in April based on actuals, they question if GST should have been included in March. The advice given is to follow proper accounting principles, avoid booking unrealised gains, and suggests that if an invoice wasn't raised in March, booking provisional income then might be incorrect.

Manoj Chauhan

Manoj Chauhan (Querist)

09 May 2024 Dear Sir/Madam,
During the year end (March 2024), we made some provisional entries for income (which we are sure to get in April 2024).

Whether we need to account for GST in the month of provisional entry (March 2024). In other words, please guide whether GST will be applicable for the provisional income booked by us in March 2024.

We have already booked the income + GST in April 2024, on the basis of actual information.

Nikhil Kaushik

Nikhil Kaushik (Expert)

09 May 2024 a simple question for you. The basic accounting rule is to account for all expenses and ignore unrealised profits.

What you are doing simply violates this rule itself.

So forget the GST. do proper accounting. Do not provide for unrealised gains!

Manoj Chauhan

Manoj Chauhan (Querist)

16 May 2024 But sir, this income we are sure to get. Even the income tax department also insists that we should be this income in the correct year. That is why we have booked it on provisional basis. Thanks.

Nikhil Kaushik

Nikhil Kaushik (Expert)

16 May 2024 then should you not also raise the invoice in March? if not, then it would not be correct accounting treatment.

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