ADVANCE RECEIPT IN GST FOR CONTRACTOR

Hey Akshay, here’s how you can handle this situation with advance receipt and TDS for GST and ITR:

Issue Summary:

• You received advance payment in March 2023 but didn’t issue an invoice or pay GST on that advance at that time.

• TDS was deducted by the payer on that advance (reflected in Form 26AS).

• You issued the final invoice in May 2023 (next financial year).

• Now filing ITR and unsure whether to show turnover as per GST (invoice in May) or 26AS (TDS on advance in March).

What you should do:

1. GST Treatment of Advance:

   • Under GST law, when advance is received, you should ideally raise a tax invoice or receipt voucher and pay GST on that advance amount in the month you received it.

   • If you did not do so in March 2023, technically, you were supposed to declare the advance receipt and pay GST on it before March 31.

2. Impact on Turnover for ITR:

   • For income tax purposes, income is generally recognized on accrual basis, so advance received in March 2023 is taxable income for FY 2022-23 (AY 2023-24), regardless of invoice date.

   • Since TDS is deducted on that advance, you must show that advance amount as income in the respective FY while filing ITR.

3. What about GST Return?

   • If you missed reporting advance in March 2023 GST returns, you can rectify by paying GST with interest (if applicable) in the next month’s return or via a GST correction process.

   • This will align your GST turnover with actual receipts.

4. Risk of Notice?

   • Showing turnover as per GST invoice (May 2023) but claiming TDS credit for advance receipt (March 2023) might trigger mismatch issues and could attract notices.

   • To avoid this, you should ensure GST and income tax books reflect the same reality of receipt date.

Suggested Steps:

• File a GST amendment (if possible) or pay GST on advance amount for March 2023, with applicable interest.

• Show the advance amount as income in your ITR for FY 2022-23 to match TDS reflected in 26AS.

• When issuing invoice in May 2023, show only the balance amount (invoice minus advance).

• Maintain clear records explaining the situation in case of any query.