In this article, you will learn:
There can be situations where manufacturers, traders, or service providers demand advance payment with respect to a particular supply.
Such an advance payment is received even before the actual supply of goods or services takes place. In such situations, traders, manufacturers or service providers issue Receipt Voucher to the recipient for advance received for such a supply.
However, at times it so happens that supply is canceled after the advances are received. In such situations, either the supplier is required to refund the advance payment and issue a Refund Voucher for the same. Or adjust the advance payment at the time of the supply made in future.
This article talks about what is Refund Voucher, components of Refund Voucher and the circumstances when the Refund Voucher is issued.
What is Refund Voucher in GST?
There can be circumstances where a supplier receives advance payment in respect of a particular supply to be made in the future. In such situations, the supplier issues a Receipt Voucher for the amount of advance received from the recipient.
However, there can be times when supply of goods or services against which advance is received gets canceled subsequent to the receipt of advance payment by the supplier. That is to say, the supplier has received the advance payment and issued the Receipt Voucher for which the supply of goods or services gets canceled.
In such a case, the supplier needs to refund the advance amount received and issue a refund voucher to the recipient.
In other words, where advance payment is received for which the Receipt Voucher had been issued but no supply of goods or services was done in future. In such cases, supplier issues a Refund Voucher evidencing the refund of advance received from the recipient.
Components of Refund Voucher
As per rule 51 of CGST rules, 2017, a refund voucher must contain the following particulars:
- Name, address and GSTIN of the supplier.
- A consecutive serial number not exceeding 16 characters, in one or multiple series, containing letters or numerals or special characters (hyphen or dash and slash symbolized as “-” and “/” respectively) and any combination thereof, unique for a financial year.
- Date of its issue.
- Name, address and GSTIN or UIN, if registered, of the recipient.
- Number and Date of Receipt Voucher issued as per Rule 50 of CGST Rules
- Description of goods or services in respect of which refund is made.
- Amount of refund made
- Rate of tax (central tax, state tax, integrated tax, union territory tax or cess).
- Amount of tax charged in respect of taxable goods or services (central tax, state tax, integrated tax, union territory tax or cess).
- Whether the tax is payable on reverse charge basis.
- Signature or digital signature of the supplier or his authorized representative.
When to Issue Refund Voucher?
Refund Voucher is issued when:
- advance payment has already been received
- for which the Receipt Voucher has also been issued
- but subsequent to this the supply is not made in future
In such cases, supplier must refund the amount received as advance to the recipient. Now, there can be multiple situations beyond this.
First no tax invoice is issued post the receipt of advance payment and issue of Receipt Voucher. In this case the advance amount can be refunded and a Refund Voucher need to be issued against such a refund.
Second, where no tax invoice is issued post the receipt of advance and issuance of Receipt Voucher, Credit Note will have to be issued to square off the transaction.
For example, say the supplier receives Rs 1 Lakh in advance for a supply worth Rs 5 Lakhs to be made in future. Thus, he issues a Receipt Voucher for Rs 1 Lakh.
As per the GST Law, time of supply for this advance of Rs 1 Lakhs would be taken as time at which such an advance payment is received by the supplier.
Accordingly, the supplier would be required to pay GST on Rs 1 Lakh at the time of receipt of advance payment.
For the remaining Rs 4 Lakh, time of supply would be determined based on the date of issue of invoice and other parameters.
Suppose, the above order got cancelled. In such a case, the supplier would be required to issue a Refund Voucher at the time of cancellation for Rs 1 Lakh.
Time of Supply and GST Payment
It is the time of supply that decides when the taxpayer is required to discharge his tax liability under GST.
As per the provisions of Act, typically, the earliest of the date of issue of invoice or receipt of payment is taken as time of supply under GST.
In cases where advance payment is received by the supplier for which supply is to be made in the future, the time of supply in such a case shall be the time when advance payment is received by the supplier.
This is irrespective of the fact whether supply is made for such an advance payment. As per GST Law, the extent to which advance payment has been received shall be considered as supply under GST.
Accordingly, the supplier would be liable to pay GST on the amount of advance payment at the time when such an advance payment is received.