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For services, an advance is received before the service is provided. Tax liability arises:
AOnly on issue of invoice
BOn the date of provision of service
COn the date of receipt of advance to the extent of the advance
DOn the date of payment of full consideration
Answer & Solution
Correct answer: C. On the date of receipt of advance to the extent of the advance
1. Sec 13(2)(a) makes time of supply for services the earlier of date of invoice or date of receipt of payment.
2. Therefore tax must be paid on the advance to the extent of the amount received.
3. Notification 66/2017-CT exempting tax on advances applies only to GOODS, not services.
_Source: ICAI BoS CA Final Paper 8, Ch 4 "Time of Supply", §Sec 13(2)_
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