Advance Received Falls Under Ambit of 'Consideration': AAR Rules on GST Liability [Read Order]

The Gujarat Authority of Advance Ruling at Ahmedabad decided a matter regarding Goods and Service Tax liability wherein it was held that the advance received by the applicant fell under the ambit of ‘consideration’.

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The applicant is a government contractor providing services related to Sewage Treatment Plant. They had received a contract for providing services related to storm water drainage, for newly developed areas falling under Ahmedabad Urban Development Authority (AUDA). As per the terms of the tender, 10% of the contract amount is given as advance to the applicant. All payments made by AUDA towards execution are paid along with GST @ 18%.

The issue that the applicant was concerned with as the GST applicability on the advance payment. This advance is adjusted in the R.A. Bills. The counsel for the applicant submits that no GST is payable of the advance.

The adjudicating authority notes that the applicant is providing works contract services to AUDA. It was observed that the deposit made through an advance would qualify as ‘consideration’. It was held that as per Schedule II of the CGST Act, works contract shall be treated as a supply of service. Additionally, as per Section 13, the liability to pay tax on services shall arise at the time of supply.

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The case of Re: S.P. Singla Constructions P. Ltd was referred to and it was held by the two member bench of CGST Members Sushma Vora and Vishal Malani that GST is liable to be paid on the advance payment received.