Cancelled Supply • Refund Voucher

GST Refund: Advance Received, Supply Not Made

Deposited GST on an advance for a service that got cancelled? You can claim that tax back — once you've repaid the customer.

What This Refund Covers

When you receive an advance payment for a service, you're generally required to pay GST on it at the time of receipt, evidenced by a receipt voucher. If the deal later falls through and the service is never actually supplied — the client cancels, the project doesn't proceed — that GST becomes refundable, but the process has a specific order of operations.

First, you must issue a refund voucher cancelling the original receipt voucher, and actually repay the advance amount to your customer. Only once that's done can you file Form RFD-01 to claim back the tax you deposited. The GST portal and department will not refund tax on an advance you're still holding onto — the customer's money has to move first.

Step 1Repay the advance to your customer

Step 2Issue a refund voucher

Step 3File RFD-01 to reclaim the tax

Be Prepared

Documents Required

Original Receipt Voucher

The document issued when the advance was first received and tax was paid on it.

Refund Voucher

Issued to formally cancel the receipt voucher once the supply won't go ahead.

Proof of Repayment

Bank statement or UTR showing the advance amount was actually returned to the customer.

GSTR-1 & GSTR-3B

Showing the advance was originally reported and the tax was paid in the relevant period.

CA Certificate / Self-Declaration

Rule 89(2) declaration on unjust enrichment — self-declaration under ₹2 lakh, CA/CMA certificate above it.

Avoid the Common Traps

What Can Still Go Wrong

Claiming Before Repaying

Filing for the refund before the advance has actually been returned to the customer — a hard precondition.

Timing Mismatch

The refund voucher date doesn't line up with how the original advance was reported in GSTR-1.

FAQs

Do I need to return the customer's money before claiming this GST refund?

Yes. You must issue a refund voucher and actually repay the advance amount to your customer before you can claim back the GST you deposited on it. The refund of GST is disallowed if the underlying advance itself hasn't been returned.

Does this apply to advances for goods too?

It's mostly relevant for services. GST on advances for the supply of goods was removed for most taxpayers (except a small notified class), so tax is typically only paid at the time of invoicing for goods, not at the advance stage.

What is a refund voucher?

A refund voucher is the document you issue to cancel a receipt voucher when an advance is returned without a supply being made — it's the formal proof, alongside the bank record of repayment, that supports your GST refund claim.

Deal Fell Through After You Collected an Advance?

Tell us the details on WhatsApp — we'll help you issue the refund voucher correctly and reclaim the GST.

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