GST on Unadjusted Pre-GST Mobilization Advances
The Appellate Authority ruled that mobilization advances remaining unadjusted on July 1, 2017, are subject to GST.
- Ruling
- Appeal Case No. 11/WBAAAR/APPEAL/2019 dated 17.09.2019; Order dated 16.12.2019
- Authority
- Appellate Authority for Advance Ruling
This page was written by Patron Accounting’s AI from the official release and reviewed before publishing. It explains the document in plain language. It is not the document itself. Where this page and the original differ, the original governs.
The short version
- Siemens Limited asked if GST applies to unadjusted pre-GST mobilization advances.
- The authority ruled the entire unadjusted balance is taxable under GST.
- The ruling denies pre-GST tax treatment for these outstanding amounts.
In short
The company asked whether they must pay Goods and Services Tax (GST) on the full invoice amount or only on the net amount after subtracting old mobilization advances received before GST began. The authority decided that any advance money still sitting on the books on July 1, 2017, is treated as a new taxable supply under the GST law.
What has changed
How it worked before
Businesses generally assumed that advances received under the old service tax regime would not be subject to GST if the work was completed or adjusted later.
What has changed
The authority ruled that unadjusted advances do not count as 'deposits' and are taxable immediately upon the transition to GST. This means businesses must pay GST on the full value of these outstanding balances, effectively increasing the tax cost for long-term contracts.
Who this affects
Construction and infrastructure companies with long-term contracts that received mobilization advances before July 2017.
An example
Imagine a construction firm that received a 10 lakh rupee mobilization advance in 2015 for a project. By July 2017, only 6 lakhs were adjusted against work done, leaving 4 lakhs unadjusted. Based on this ruling, the firm would be required to pay GST on that remaining 4 lakh balance as if it were a new payment received on July 1, 2017.
What you should do
If you have similar unadjusted advances, review your contracts and tax filings. Remember that an advance ruling only binds the company that asked and its specific tax office; it is not a law that automatically applies to your business.
If you do nothing
If you assume this ruling does not apply and fail to pay GST on such advances, your local tax officer may issue a demand notice for the unpaid tax plus interest and penalties. Relying on a ruling that does not cover your specific case can lead to costly litigation and unexpected financial liabilities.
The terms explained
- Mobilization advance
- An upfront payment made by a client to a contractor to help them start a project, such as buying materials or hiring staff.
- Advance ruling
- A formal decision from tax authorities on how GST applies to a specific business transaction.
- Consideration
- The payment or value given in exchange for goods or services provided.
The ruling in detail
Appellate Authority for Advance Ruling
M/s Siemens Ltd
Appeal Case No. 11/WBAAAR/APPEAL/2019 dated 17.09.2019; Order dated 16.12.2019 · West Bengal
Questions before the authority
- Whether GST shall be charged on the gross amount of the invoice raised under GST regime or net amount of invoice after adjustment of lump-sum amount outstanding as on 30.06.2017.
Facts
The appellant entered into a contract with Kolkata Metro Rail Corporation Limited (KMRCL) for design, supply, and installation services before the inception of GST. They received a mobilization advance in 2011, a portion of which remained unadjusted as of 01.07.2017. The appellant sought a ruling on whether GST applies to the gross invoice amount or the net amount after adjusting the pre-GST outstanding advance.
Ruling
| Question | What the authority ruled |
|---|---|
| Taxability of unadjusted mobilization advance | The entire unadjusted amount of Rs. 13,80,74,549/- is taxable on 01.07.2017. The amount is treated as an advance paid on 01.07.2017. |
The Appellate Authority upheld the original ruling, determining that the unadjusted mobilization advance as of 01.07.2017 is taxable under the GST regime. It concluded that the entire unadjusted amount must be treated as if it were credited on 01.07.2017, thereby attracting GST on that date.
Reasoning
The authority reasoned that upon the introduction of GST, the erstwhile Finance Act, 1994 ceased to exist, and the transaction must be governed by the GST Act. It held that the unadjusted advance does not qualify as a deposit under the proviso to section 2(31) of the GST Act because it was not applied as consideration for a supply prior to the GST regime. Consequently, the time of supply is determined by section 13(2) of the GST Act, making the outstanding balance taxable immediately upon the transition to GST.
Provisions relied on
- Section 100(1) of the West Bengal Goods and Services Tax Act, 2017
- Section 97 of the West Bengal Goods and Services Tax Act, 2017
- Section 2(31) of the GST Act
- Section 13(2) of the GST Act
For the practitioner
This ruling clarifies that **unadjusted mobilization advances** received in the pre-GST era are subject to GST upon the transition to the new regime. It serves as a warning that such balances will be treated as taxable advances on the appointed day, effectively **denying the benefit of pre-GST tax treatment** for unadjusted amounts. Practitioners should note that the authority strictly interpreted the definition of 'deposit' to exclude these advances.
Source
This is a summary prepared from the published order, which is a scanned document. It is a reading aid and not the authority: where the two differ, the order governs. Verify every provision against the original before relying on it.
Original order: https://www.gstcouncil.gov.in/sites/default/files/2024-02/wb_aaar_11_2019_17.09.2019.pdf
Legibility of the scan, as read: high.
Prepared 13-10-2026.
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