QUESTION

Facts: We are Air travel agents. We have received advance against the booking of air tickets during certain period without knowing the sector for which tickets are to be booked . So as of now we don’t know about the trip and therefore unable to ascertain the basic fare amount for charging GST as valuation rule 32(3). Query: 1) Whether we are liable to pay GST on this advance amount. If so at what rate it is to paid. We have to show this in GSTR-1 as advance received. 2) At the time of actual ticket booking, chargeable GST [(18% of 5% of basic fare as per Rule 32(3)] will be much lower amount, how can we adjust excess GST paid at the time of advance? Because we can`t raise Credit note under GST against advance received. Where we can report (in GSTR-1) the adjustment of excess GST paid at the time of advance.

ANSWER

Facts of the case: Liability of GST on advance received against the booking of air tickets during certain period without knowing the sector for which tickets are to be booked and therefore unable to ascertain the basic fare amount for charging GST as valuation rule 32(3).

Law Applicable: SECTION 13 of CGST Act
(2) The time of supply of services shall be the earliest of the following dates, namely:'
(a) the date of issue of invoice by the supplier, if the invoice is issued within the period prescribed under section 31 or the date of receipt of payment, whichever is earlier; or
(b) the date of provision of service, if the invoice is not issued within the period prescribed under section 31 or the date of receipt of payment, whichever is earlier; or
(c) the date on which the recipient shows the receipt of services in his books of account, in a case where the provisions of clause (a) or clause (b) do not apply:

Provided that where the supplier of taxable service receives an amount upto one thousand rupees in excess of the amount indicated in the tax invoice, the time of supply to the extent of such excess amount shall, at the option of the said supplier, be the date of issue of invoice relating to such excess amount.

Explanation.'' For the purposes of clauses (a) and (b)''

(i) the supply shall be deemed to have been made to the extent it is covered by the invoice or, as the case may be, the payment;
(ii) 'the date of receipt of payment' shall be the date on which the payment is entered in the books of account of the supplier or the date on which the payment is credited to his bank account, whichever is earlier.

Interpretation: Payment of GST is to be made on the basis of time of supply. Section 13 of CGST Act covers the same. As per section 13(2), the time of receiving advance is the time of supply. So you have to pay tax at the time of advance received.

Further as per explanation (i) to section 13 "the supply shall be deemed to have been made to the extent it is covered by the invoice or, as the case may be, the payment."

Therefore the rate of tax and the valuation rules as they are applicable on supply will apply mutatis mutandis on the payment of tax on advance. So you should pay tax on the discounted value of the advance received.

Conclusion: Tax is required to be paid at the time of receipt of advance as per section 13. The rate of tax and the valuation rules as they are applicable on supply will apply mutatis mutandis on the payment of tax on advance.

If something is missing in our reply then please revert back to us (Reply dt.14-07-2020)