GST on advance payments
Taken a deposit or advance before delivering? Whether GST applies depends on what you're supplying. Here's the rule.
Advances are common in custom orders, services and B2B deals. The GST treatment differs between goods and services, and getting it wrong creates reconciliation headaches.
Goods vs services
- Services: GST generally applies on the advance when received.
- Goods: for most suppliers, GST is on the invoice/supply, not the bare advance.
- Issue the right document (receipt voucher) for advances where applicable.
- Adjust the advance against the final invoice.
In your returns
Advances liable to GST are reported in the relevant return period and then adjusted when you raise the final invoice. Keep the trail clean so totals reconcile.
Document it properly
Use receipt vouchers for advances and adjust them on the final tax invoice. Tidy documentation prevents double-counting.
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Is GST charged on advance payments?
For services, generally yes, when received. For goods, most suppliers account for GST at invoice/supply, not on the bare advance.
What document do I issue for an advance?
A receipt voucher where GST applies, later adjusted against the tax invoice.
How do advances appear in returns?
Reported when liable and adjusted when the final invoice is raised.
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