TMI Blog2021 (3) TMI 802X X X X Extracts X X X X X X X X Extracts X X X X ..... ects are provided entirely by the Government, generally in lump sum before the start of the work string with certain restrictions viz. the funds cannot be diverted to any other project and any interest accruing from these funds will be paid back to the Government by depositing it in the relevant Head of Accounts. Whether the advance received by the appellant, for the said deposit work, is to be treated as Advance Payment received for the said work or as Deposit ? - HELD THAT:- As per the appellant the money received for the said deposit work to be treated as deposit in terms of proviso of Sub Section (31) of Section 2 of the CGST Act, 2017. Absolute control of the money - HELD THAT:- Advances are generally given so that the work get completed smoothly without any hindrances and may not get delay due to lack of fund. Restrictions regarding use of advance are normally attached so that the amount cannot be diverted for any other project and to avoid any delay in timely completion of the project - any condition/restrictions attached with the advance do not alter its character, it remains advance which later on get adjusted in payment once bills /invoices are issued). ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lex, Indira Nagar, Lucknow (here in after called the appellant) is a registered assessee under GST having GSTN: 09AAAJU0103AFZF. 2). The appellant is a Board constituted under Uttar Pradesh Avas Evam Vikas Parishad Adhiniyam, 1965 and entrusted with the work to execute housing and improvement schemes in the State, whether chalked out by itself or by any local authority. Further, as per Section 46 of the Uttar Pradesh Avas Evam Vikas Parishad Adhiniyam, 1965, the applicant may also undertake the execution of any housing or other building project at the request of the State Government on such terms and conditions as may be agreed upon. This work is popularly known as Deposit Work . 3). The appellant receives funds, in advance, for said Deposit Work , with certain prefixed conditions such as: i. All the money should be used for execution of particular project only and not for any other purpose. ii. If any interest is earned on the money received for execution of the project, the same will be transferred back in the head of account from which it was drawn. 4). As per the appellant the said fund received can neither be classified as Advance Payment nor as Loans , ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hich can be adjusted against the consideration receivable later on. 7.4) Accordingly the Authority has erred by holding the date of receipt of funds as the time of supply and the total amount of funds received as value of supply . 8). The appellant was granted personal hearing on 11 th March 2020 and 10 th June 2020. Sh. M. K. Singh, Consultant and Sh. A. K. Sinha, Consultant/ Authorized representatives appeared for hearing on behalf of appellant on 10 th June 2020. During the personal hearing they submitted additional written submission and also reiterated their submission already made vide their application dated 24.01.2020. Gist of the additional submission filed by the appellant is as under: 8.1). The funds required for execution of such projects are provided entirely by Government, generally in lump sum before the start of the work, with conditions that funds cannot be diverted for any other work/project and any interest earned on the said amount are to be paid back to the Government. 8.2) In view of conditions and restrictions imposed on spending, the funds so received cannot be treated as Advance Payment rather they are to be classified as Deposit which ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... for municipalities and other public bodies fall under this category when the cost is chargeable either to cash deposits made for the purpose or to their credit balances at treasuries. 11). We observe that apart from entrusted work of executing housing and improvement schemes in the State, the applicant may also undertake the execution of any housing or other building project at the request of the State Government or, with the previous approval of the State Government, at the request of any other person on such terms and conditions as may be agreed upon. This work is known as Deposit Work . As per the appellant the funds required for execution of such projects are provided entirely by the Government, generally in lump sum before the start of the work string with certain restrictions viz. the funds cannot be diverted to any other project and any interest accruing from these funds will be paid back to the Government by depositing it in the relevant Head of Accounts. 12). Now coming to the first query raised by the appellant that whether the advance received by the appellant, for the said deposit work, is to be treated as Advance Payment received for the said work or as De ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in the account of the service recipient agency. 15). Further we also observe that as per general accounting standard the Advances are reflected as liability in the balance sheet of the recipient and as and when the portion of work get completed / invoice is issued, that amount of advance get transferred from liability head to the income head of the recipient. This fact is also confirmed by the appellant in their additional submission that the Deposit Work .amount is reflected as liability in their balance sheet. Accordingly we are in unison with the Authority for Advance Ruling that the said Deposit Work amount received by the appellant is an Advance Payment and not Deposit . 16). As regard to the appellant's contention regarding proviso of Sub Section (31) of Section 2 of the CGST Act, we observe that the proviso itself makes it clear that if the deposit are applied towards consideration for the said supply then such deposit will be treated as payment towards said supply. Accordingly, in our opinion, the said proviso envisages a condition wherein the funds are not at all used for the provision of service and in such case no GST will be applicable on it. Howev ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the date of receipt of payment. Accordingly, in our opinion, the law is crystal clear in this regard that once any advance amount is received towards provision of any service that will be treated as the time of supply. We, therefore, opined that the Authority has rightly ruled that the time of receiving of advance payment will be time of supply with reference to discharge of GST liability. 18). Now coming to the value of taxable supply in case of advance payment, we observe that explanation given in the sub Section 2 of Section 13 of the CGST Act, 2017 provides that-: Explanation - For the purpose of clause (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. We also observe that the issue regarding advance payment received has been addressed in the flyer issued by the Central Board of Indirect Taxes and Customs Advance received for future supply under GST. Para 2 of the said flyer deals with the advance payment, which is as under:- As per the explanation 1 to Section 12 of the CGST Act, 2017 a supply shall be deemed to have been made to the extent it is covered ..... X X X X Extracts X X X X X X X X Extracts X X X X
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