Every interior project starts the same way. Client says yes, you send them the number, and before a single carpenter shows up, money lands in your account. The advance. Usually 30% to 50% of the total, sometimes more if the client is new and you want your material money covered.
Getting that advance is the easy part. Handling it correctly on paper is where most studios quietly mess up. And under GST, "quietly messing up" can turn into a notice, a penalty, or a client who refuses to pay the final invoice because your numbers don't add up.
So let me walk you through exactly how to do this right. No jargon dump. Just the steps you actually follow when a client sends you an advance.
First, get one thing straight: an advance is a taxable event
This is the part people miss. In most of India, we grew up thinking tax happens when you deliver the work and raise the final bill. For goods, that's roughly true today. But for services, and interior design is a service, GST is due the moment you receive an advance.
Read that again. The day the client's advance hits your bank, GST liability is triggered on that amount. Not when the project ends. Not when you raise the final invoice. The day the money comes in.
So if a client sends you ₹3,00,000 as an advance on a ₹10,00,000 project, you owe GST on that ₹3,00,000 in the month you received it. If you sit on it thinking "I'll bill everything at the end," you've already fallen behind on your returns.
This one rule is why advances cause so much pain. The money feels like a deposit, but the tax department treats it as income the second it arrives.
The document you raise is a Receipt Voucher, not an invoice
When you get an advance, you do not raise a tax invoice. You raise a Receipt Voucher. These are two different documents and mixing them up is the most common error I see.
A Receipt Voucher is what you give the client to acknowledge the advance and to record the GST on it. It's a proper GST document with its own rules. It must carry:
- Your studio name, address, and GSTIN
- A unique serial number for that financial year
- Date of issue
- Client's name, address, and GSTIN if they're registered
- A short description of the service (e.g. "Advance towards interior design and execution, 3BHK, Whitefield")
- The advance amount received
- The GST rate and the tax amount (CGST + SGST, or IGST)
- Whether tax is on reverse charge (usually no, for you)
- Your signature or digital signature
The GST rate for interior design services is 18%. So on that ₹3,00,000 advance, you're looking at ₹54,000 of GST. Now here's the subtle bit people get wrong: is the advance inclusive or exclusive of GST?
If your agreement says the project is ₹10,00,000 plus GST, and the client pays 30% advance, then the advance is ₹3,00,000 and GST of ₹54,000 sits on top. Ideally the client pays ₹3,54,000. If instead the client just sends ₹3,00,000 and calls it "30% advance," you have to decide whether that ₹3,00,000 is inclusive of tax. If it is, then your taxable value is ₹3,00,000 divided by 1.18, which is ₹2,54,237, and the GST portion is ₹45,763. Sort this out in your quote before any money moves, because arguing about it later is a nightmare. A clean, GST-labelled quote is half the battle, and I've written about that in How to Raise a GST-Compliant Invoice for Design Work.
Where does the advance go in your GSTR-1 and GSTR-3B
You report the advance received in your returns for the month you received it. In GSTR-1 there's a table specifically for advances received (11A), and later a table to adjust advances against invoices (11B). In GSTR-3B, the tax on the advance goes into your output tax for that month and you pay it out.
The pain is the reconciliation later. You pay tax on the advance in month one. Then two months later you complete the work and raise the final invoice for the full ₹10,00,000. If you're not careful, you end up paying GST twice on the same ₹3,00,000, once when it came in as advance and again when it sits inside your final invoice. That's real money leaking out of a small studio.
So the whole game is: tax the advance now, then correctly subtract it later so you never double-pay.
Adjusting the advance against the final invoice
When the project is done and you raise the final tax invoice, you show the full contract value, but you clearly adjust the advance already received and taxed. On paper it looks like this:
- Total project value: ₹10,00,000
- GST at 18%: ₹1,80,000
- Total: ₹11,80,000
- Less: advance received (₹3,00,000) and GST already paid on it (₹54,000)
- Balance now due from client: ₹8,26,000
Your final invoice references the earlier Receipt Voucher number so anyone auditing can trace the trail. In your GSTR-1, you use table 11B to knock off the advance you'd already reported, so your net tax for the month reflects only the new ₹7,00,000 of value. Done right, you pay GST on ten lakh total across the project's life. Not thirteen lakh. Not double.
This sounds simple written out. In practice, across five or ten live projects, each with its own advance date, milestone payments, and completion date, it's exactly the kind of thing that slips. An advance gets received and nobody raises the Receipt Voucher. Or the final invoice bills the full amount and forgets to adjust the advance. That's not a rare accident, it's the default when you're tracking this in a spreadsheet and your head. I've seen studios lose serious money to it, which is the whole point of Untracked Advances: The Payment Leak Nobody Notices.
What if the project gets cancelled after the advance
Happens more than we admit. Client pays advance, then goes cold, or the deal falls apart. You've already paid GST on that advance. If you refund the advance, you issue a Refund Voucher against the original Receipt Voucher, and that lets you reverse the GST you paid. No Refund Voucher, no clean way to claim that tax back. So keep the paper tidy even when a deal dies.
A few more things worth knowing
Place of supply matters. If your client and the property are in your state, it's CGST + SGST. If the client is registered in another state, it can be IGST. For interior work tied to a specific property, the location of that property usually drives the answer, and it's not always obvious. Get this wrong and your whole invoice is wrong. Read Place of Supply for Interior Design Services, Explained before you assume.
TDS is separate from GST. If your client is a company or above the threshold, they'll deduct TDS on your professional fee before paying, including on the advance. That doesn't change your GST. You still owe GST on the full taxable value, but you'll receive less in your bank because TDS was held back. Track it so you claim credit at year end. More on that in TDS Basics Every Interior Designer Should Know.
Collect the advance cleanly. A shared account number over WhatsApp is how reconciliation dies. Send a proper payment link tied to the invoice so the money and the record match automatically. That's covered in How to Send GST Invoices and Collect Payment via Razorpay.
The honest bottom line
The rules aren't hard. What's hard is doing them consistently across every live project while you're also running site, chasing sign-offs, and managing vendors. The advance comes in on a Tuesday when you're at a client site, and the Receipt Voucher never gets raised. Multiply that by a dozen projects and you've got a mess that surfaces only at return-filing time or, worse, during a notice.
That's the exact problem Designa is built to kill. When a client pays an advance, you raise the Receipt Voucher in a click, the GST gets recorded, and when you generate the final invoice it automatically adjusts the advance already taxed so you never double-pay. The Razorpay collection, the GST maths, and the Tally and Zoho Books sync all sit in one place, tied to the project the money belongs to. No more matching bank entries to memory.
One flat price, ₹2,299 + GST a year for the whole studio, up to 10 members, unlimited free client logins, and we migrate your existing data for you. Try it live with your own numbers at demo.designa.work, and when you're ready to stop leaking money on messy advances, grab the founding offer at go.designa.work. Seven-day money-back, no drama.