Guides · GST
GST on advance payments
An advance is money received before the goods or services are supplied. Under GST, an advance can bring the tax forward through the time-of-supply rules, so it is not always a tax-neutral event.
How advances are treated
Because the time of supply can be tied to the earlier of specific events, receiving payment before a supply can, in some cases, make GST payable at the point of the advance rather than only when the supply happens. The treatment differs between goods and services, so the specific case has to be checked.
When a supply is later completed, the advance is adjusted against the final invoice so tax is not counted twice.
The receipt voucher
When a registered supplier receives an advance, it generally issues a receipt voucher recording the amount received and the details the law requires. If the supply does not go ahead and the advance is refunded, a refund voucher is issued instead.
These vouchers are what keep an advance documented before there is a tax invoice to attach it to.
How Lekha records advances
Lekha records receipts against the bills and buyers they relate to, so an advance and the later invoice it is adjusted against are tracked together in the ledger.
Lekha records what your documents say and tracks the money on both sides — what you owe and what you are owed. It records and tracks; it does not replace your accountant.
Questions
- Is GST payable on an advance?
- It can be, because the time-of-supply rules can bring the tax forward to when the advance is received. The treatment differs between goods and services, so check the specific case.
- What is a receipt voucher?
- The document a registered supplier issues when it receives an advance, recording the amount and required details before a tax invoice exists.
- What happens to the advance when the supply is invoiced?
- The advance is adjusted against the final tax invoice so the same value is not taxed twice.
This guide is general information, not legal or tax advice. Confirm the current rules and your own circumstances for any specific case.