Dealer books car for buyer and deposited Rs. 10000/- for booking. Later some buyer did not come and their balance is still reflecting in books. Dealer adjust the amount as no buyer come to take refund. Is GST payable on dealer on this amount.
Where a dealer receives booking advances (e.g., ₹10,000) and the buyer never turns up to complete the purchase or claim refund, and the dealer adjusts the amount in books, the GST implications depend on how the transaction is treated.
🔍 Key Legal Position:
✅ 1. Advance Receipt & GST – Rule 50 & Section 12(2) CGST Act
For goods, GST is not payable on advance receipts, unlike in services.
GST liability arises only at the time of issue of invoice or delivery, whichever is earlier.
🔹 So, mere receipt of ₹10,000 advance does not attract GST immediately, unless the car is delivered or invoice is issued.
❌ 2. If the sale never happens (buyer disappears):
The dealer never issued an invoice.
No goods were supplied.
No tax was charged or collected.
In this case, the advance becomes a forfeited amount, recorded as income or other liability write-off.
🔎 Is GST payable on forfeited advance?
This hinges on Section 7 and Schedule II, Entry 5(e) of CGST Act:
“Agreeing to the obligation to refrain from an act, or to tolerate an act or a situation, or to do an act” is treated as a supply of service.
🧩 CBIC Clarification – Circular No. 178/10/2022-GST dated 03 August 2022:
Forfeiture of advance for non-fulfilment of contract may be treated as consideration for tolerating the act of non-performance.
GST will be applicable in such cases under Schedule II Entry 5(e).
✅ However, this is applicable only if:
There was a binding contract with forfeiture clause.
The forfeiture is contractually agreed as consideration for tolerating breach.
📌 In your case:
Scenario 1: No specific terms agreed, just a casual booking
Buyer never returns.
No contract or written agreement specifying forfeiture terms.
No “toleration of act” in legal sense.
➡️ GST not payable, as there is no supply (goods or service).
Scenario 2: Booking form or contract has clause that forfeiture applies on cancellation
The advance is retained as consideration for tolerating buyer’s non-performance.
➡️ GST is payable on the forfeited amount as “supply of service” under Entry 5(e), at the time of forfeiture.
✅ Conclusion
Condition GST Payable on ₹10,000 Forfeited?
No invoice, no delivery, no written contract ❌ No
Written contract or booking form with forfeiture clause ✅ Yes, GST applicable on ₹10,000
Forfeiture is voluntarily done without buyer’s consent or without terms ❌ Generally No, unless shown as consideration
📄 Suggestion:
Review your booking documents / T&Cs. If they explicitly state that the amount will be forfeited on cancellation/no-show, GST is likely payable under “tolerating an act”.
