The Authority has rightly ruled that the time of receiving of advance payment will be time of supply with reference to discharge of GST liability.
Time of supply— Section 13 of CGST Act— In the instant case, being aggrieved with order of AAR, the appellant filed this appeal application on following grounds—
Funds received for execution of “Deposit Work” is wrongly classified as “Advance Payment” by the Authority. The amount received by the appellant is attached with certain restrictions and the appellant are never in constructive control of the unspent fund.
The Authority has erred in describing the term “Deposit”, mentioned in proviso to sub section 31 of the Section 2 of the CGST Act, 2017, as “Security Deposit”. As per appellant, the term “deposit”, mentioned in the said Section, refers to an amount given to the supplier which can be adjusted against the consideration receivable later on.
Accordingly the Authority has erred by holding the date of receipt of funds as the “time of supply” and the total amount of funds received as “value of supply”.
as per general accounting standard the “Advances” are reflected as “liability” in the balance sheet of the recipient and as and when the portion of work get completed / invoice is issued, that amount of advance get transferred from liability head to the income head of the recipient. This fact is also confirmed by the appellant in their additional submission that the “Deposit Work” .amount is reflected as liability in their balance sheet. Accordingly we are in unison with the Authority for Advance Ruling that the said “Deposit Work” amount received by the appellant is an “Advance Payment” and not “Deposit”.
The Authority of Advance Ruling has correctly ruled that the value of the supply, on the advance payment received by the applicant, will be the amount of advance received by the applicant towards that particular work/supply.