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Businesses need not deduct GST on advances received for goods supply: CBEC
November, 17th 2017

The government has exempted businesses from deducting GST on advances received for supplying goods in future, a move which will help unblock working capital of firms.

The government has also allowed exporters to manually file before tax officers claims for GST refunds as it looks to fast track clearance of dues to ease liquidity stress faced by them.

Now exporters of services who paid IGST and those making zero rated supplies to SEZ units as well as those merchant exporters who want to claim refunds for input credit can approach their jurisdictional commissioner with their refund form.

"Due to the non-availability of the refund module on the common portal, it has been decided by the competent authority that the applications/documents/forms pertaining to refund claims on account of zero-rated supplies shall be filed and processed manually till further orders," the CBEC said in a circular.

The Central Board of Excise and Customs (CBEC) last month said that businesses with turnover up to Rs 1.5 crore are exempt from deducting Goods and Services Tax (GST) on advance payment for supply of goods.
The CBEC, through a notification, has now extended this exemption to all businesses, except for those who have opted for composition scheme under the new indirect tax regime.

The composition scheme can be availed by businesses with turnover up to Rs 1 crore and they can pay taxes at a lower rate of 1 per cent, while for restaurants the rate is 5 per cent.

"This comes as a huge sigh of relief for businesses both in terms of compliance as well as working capital loss," EY India Tax Partner Abhishek Jain said.

Also Read: Indian economy recovering from 'temporary blip': FM Arun Jaitley
Businesses had lobbied hard with the Finance Ministry to exempt them from deducting GST on advances received for supply of goods as this norm was not there in the erstwhile excise duty or VAT regime.

"In a significant relief to the industry, the government, through a notification, has done away with GST on advance received against supply of goods. This meets the long standing demand of the industry, particularly by FMCG and auto," PwC Leader-Indirect Tax Pratik Jain said.

However, service providers will have to continue to deduct GST on any advance received as payment, in line with the provisions under erstwhile service tax laws.

"While the issues in respect of payment of GST on advances for supply of goods, which was leading to significant working capital and other challenges, appears to be resolved for now, similar working capital blockages for service providers continue," Deloitte India Partner GST M S Mani said.

GST, which subsumed over a dozen taxes including excise, service tax and VAT, was rolled out from July 1.

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