No GST on Advance from Now on FMCG Companies

The GST council has offered a relaxation to all the FMCG companies which are into taking advance from the dealers and stockists before supplying the goods to the market by exempting them from GST on all such kind of advances. The notification was released by the department recently after the 23rd GST council meeting held in Guwahati stating the relaxation for all the taxpayers and companies from the tax payment on advances received in case of goods of supply.

Earlier there were some issues regarding the GST on advance goods as there was no fixed rate which is to be applied to such kind of advance goods under GST. Also, it was to be seen that the fund was getting blocked due to the payment of GST on advance goods. Pratik Jain, indirect tax partner, PwC mentioned that “Under VAT regime, there was no tax on advances for goods but was introduced under GST. Since the input credit was only available after receipt of goods, this led to working capital blockage for industry and additional compliance burden, further, there was ambiguity around the state where tax has to be paid in few cases.”

But to be aware, the relaxation is only available for those who are not under the composition scheme of GST. There was total 12 notification released by the CBEC department related to relaxation and tax rates being reduced by the GST council on higher tax slab. Abhishek Jain, tax partner at EY India said, “In furtherance to the government’s earlier move of exempting businesses with up to Rs 1.5 crore from paying GST on receipt of advances for the future supply of goods, a similar exemption has also been extended to all except those who have opted for composition scheme.”