GST on Mobilisation Advance

A contractor executing infrastructure works for AUDA received a mobilisation advance equal to ten percent of the contract value. 

The contractor argued that the advance was merely a loan to facilitate execution of the project and therefore GST should not apply until the amount was adjusted in the running account bills. 

The Gujarat AAR rejected this view and held that the advance represents consideration for supply. Accordingly, GST becomes payable at the time the advance is received.

The ruling further clarified that the time of supply arises on receipt of payment or issuance of invoice, whichever is earlier.