An upgrade has been provided to handle calculation of GST on Advance Received or Paid. Here, we will see the transaction of Advance received from Customer and calculation of GST on the same.
Posting Bank Receipt with GST on Advance
1) Go to Bank payment and update the required details i.e. Party Type: Customer, Balance A/c type: Bank and select the respective Customer and Bank.
Now, this is similar to normal Bank Receipt entry. But, a boolean named "GST on Advance" has been introduced for the purpose. So, you have to check this for the GST calculation. Also, make sure the GST Group and HSN are selected.
2) Now, post the Bank Payment document and check the General Ledger Entries to understand the accounting impact.
Here, you can see that my GST Liability has been created as per G/L Account 5981 (IGST Payable A/c).
To balance the IGST Payable A/c, IGST Payable A/c (Interim) has come to play.
Note: This interim a/c will be reversed when the Invoice is applied against this Advance.
3) Also, have a look at the Detailed GST Ledger Entries as shown below.
Here, you can see that the GST Base Amount is 8474.58. This means that the system perform reverse calculation to calculate GST on the advance.
So, it's important to note the Advance received from customer is considered as the amount inclusive of GST. Hence, when we put 10,000 in the Bank Payment window, system performed the back calculation and hence the Actual Advance received shall be considered to be 8478 INR.
The same will be shown in the GSTR 1 (AT) and GSTR 3B.
4) Few validations are applied in the system to comply with GST Rule for Advance.
Validation A)
As per CGST Law, GST on Advance to be calculated only in case of Service (not goods). It means that as per GST, the Liability shall be cretaed on Advance Receipt only if the Advance is received against the service to be provided and not goods.
So, if GST Group of type Service is selected and you try to check GST On Advance boolean, system will throw error.
Validation B)
GST on Advance Receipt is not calculated in the following scenarios. In other words, system shall not allow to check GST on Advance Payment in the following scenarios:
➢ Exports
➢ Deemed Export
➢ Exempted Sales
➢ SEZ Unit
➢ SEZ Development
For the above scenarios, no GST liability is created at the time of advance payment and hence no GST related accounting entries are generated.
Hence, if selected Customer type is any of the above, then system will throw error.
Advance Receipt application to Sales Invoice
1) Create Sales Invoice and apply the payment (i.e. Advance with GST).
2) Post the Invoice and check GL Impact.
Here, you can see that the IGST Paybale Acc (Interim) Debited during Payment has been now Credit, nullifying the ledger.
Now, as the application has been made in the same month, the entry from GSTR1 (AT) is removed and also no entry is created in GSTR1 (ATADJ).
When Invoice Application to Advance Receipt is in different month.
When Advance in taken in a particular month and the Invoice is applied to it in the subsequent month, then GSTR 1 (ATADJ) will be updated with the Adjustment/applied amount.
Here, you can see that the Invoice and Payment are of different month.
Hence, if we check GSTR1 (ATADJ) for the April 2020 (for above entry), then you will get below impact.
