How does GST apply to an advance received from a foreign client?

Asking a new foreign client for 30 or 50 per cent upfront is common practice for freelancers and agencies, whether you are a web developer starting a build, a documentary editor beginning a cut or a consultant opening a project. It also changes the GST timeline, because for services, money received before the invoice fixes the time of supply.¹

This guide explains what an advance means for GST under an LUT and under the IGST-paid route, the documents to issue, the effect on refunds, and the foreign exchange rules for advances. It reflects the law as of October 2026.¹¹¹

What is GST on an advance received from a foreign client?

GST on an advance received from a foreign client starts with the time of supply: under section 13(2) of the Central GST (CGST) Act, the time of supply of services is the earlier of the invoice date, if the invoice is issued on time, and the date of receipt of payment.¹ If the invoice is late, it is the earlier of the date the service is provided and the date of receipt of payment.¹ An advance received before you invoice therefore sets the time of supply for the amount received.

• Extent of the payment: the supply is treated as made only to the extent covered by the payment, so a 40 per cent advance fixes the time of supply for that 40 per cent.¹
• Date of receipt: the "date of receipt of payment" is the earlier of the date you enter it in your books and the date it is credited to your bank account.¹

Whether tax is actually payable on that advance depends on your export route.

Who pays GST on an advance from a foreign client?

Only an exporter on the IGST-paid route pays GST on an advance from a foreign client; an exporter under an LUT supplies at nil tax but still issues the documents.¹⁶⁹

The GST portal FAQs say a supplier is liable to pay tax on advances received for services and reports them in the month of receipt.⁹ That describes taxable advances. Under an LUT there is no tax to report, but how practitioners report export advances in GSTR-1 varies, so agree the treatment with your accountant.

How do you handle GST on an advance from a foreign client?

You handle GST on an advance from a foreign client by issuing a receipt voucher, valuing the advance at the right exchange rate, reporting it if you pay IGST, and later issuing the tax invoice.²³⁵⁹¹⁰

1. Record the date of receipt: the earlier of the books entry and the bank credit.¹
2. Issue a receipt voucher: section 31(3)(d) of the CGST Act requires a registered person to issue a receipt voucher, or any other document with the prescribed particulars, on receipt of an advance.²
3. Value the advance: use the exchange rate for the date of time of supply under rule 34(2).¹⁰
4. Report if you pay IGST: report the advance in the advances table of GSTR-1 for the month of receipt, net of amounts already invoiced.⁹
5. Issue the tax invoice: rule 47 requires the invoice within thirty days from the date of supply of the service; refer to the receipt voucher and show the balance due.⁵ See the export invoice format.
6. Adjust or refund: on the IGST route, adjust the advance in the advance adjustment table when the invoice is issued in a later period.⁹ If no supply is made and no invoice is issued, issue a refund voucher under section 31(3)(e).²

On the IGST route, that IGST forms part of what you later claim back in a refund of tax paid on export of services. See export of services without an LUT.

What must a receipt voucher for an export advance show?

A receipt voucher for an export advance must show the particulars listed in rule 50 of the CGST Rules.³

• Supplier: your name, address and GSTIN.
• Serial number: a consecutive serial number of up to sixteen characters, unique for the financial year.
• Date: the date of issue.
• Client: the client's name and address.
• Service: a description of the services.
• Amount: the amount of advance taken.
• Tax: the rate and amount of tax (nil IGST under an LUT).
• Place of supply: the place of supply.
• Reverse charge: whether tax is payable on reverse charge.
• Signature: your signature or digital signature.

If the rate of tax cannot be determined when the advance is received, rule 50 says tax is paid at 18 per cent. If the nature of supply cannot be determined, it is treated as inter-State.³

What documents, deadlines and rules apply to an export advance?

An export advance brings three GST documents, a set of refund and LUT deadlines, and FEMA conditions on the bank and interest.^2581112

For the banking side in detail, see advance payment against exports, refunding an export advance and the purpose code for advance payments.

What happens if you get GST on an export advance wrong?

If you get GST on an export advance wrong, the effects show up in your LUT position and your refund claims.⁷⁸¹²

• Rule 96A deadline: under an LUT, rule 96A(1)(b) requires you to pay the tax with interest if payment is not received within the set period, counted from the invoice date.¹² A fully prepaid export cannot fall foul of this; a part-paid one can, for the unpaid balance.
• ITC refund formula: rule 89(4)(D) counts, for a refund period, the payments received for zero-rated services, adds services completed in the period that were paid for in advance in an earlier period, and deducts advances received for services not completed in the period.⁷ An advance only counts towards your refund once the related work is completed. See refund of ITC on zero-rated supplies.
• Two-year refund deadline: Explanation 2(c)(ii) to section 54 of the CGST Act sets the relevant date as the invoice date where payment was received in advance; for a completed-then-paid service, it is the date of payment.⁸

Counting an advance in the wrong refund period can delay the refund.

How is the rupee value of a foreign-currency advance calculated for GST?

The rupee value of a foreign-currency advance is calculated at the exchange rate for the date of receipt, because rule 34(2) of the CGST Rules values a taxable service in a foreign currency at the exchange rate determined under generally accepted accounting principles "for the date of time of supply".¹⁰ The advance fixes the time of supply for the amount received, so the rate for the date of receipt applies to that part, not the later invoice date.¹¹⁰

For example, say a documentary editor agrees a $5,000 project and receives a 40 per cent advance of $2,000. The $2,000 is valued at the rate for the date it is received, and the remaining $3,000 at the rate for its own time of supply.¹¹⁰ Under an LUT the IGST on both parts is nil; on the IGST route, IGST on the $2,000 falls due in the tax period of receipt.¹⁶⁹ See exchange rate for GST on export invoices.

What are the common mistakes with GST on advances from foreign clients?

The common mistakes with GST on advances from foreign clients come from treating the invoice date as the only date that matters.¹²

• No receipt voucher: a registered person must issue one even when the IGST is nil.²
• Wrong exchange rate: the advance is valued at the rate for the date of receipt.¹⁰
• Late tax invoice: rule 47 allows thirty days from the date of supply.⁵
• Switching banks silently: FEMA regulation 10(1) requires intimation to both banks.¹¹
• Counting advances early: rule 89(4) counts an advance only when the related work is completed.⁷

How an advance should be recorded depends on your contract terms, your GST route and your bank's process. Agree the approach with a chartered accountant (CA) before your first large advance.