GST: Simplified way to understand Tax Invoice & Bill of Supply

Summary:The article explains the distinction between a Tax Invoice and a Bill of Supply under the GST law, highlighting their purpose, applicability, contents, and compliance requirements. A Tax Invoice, issued under Section 31 and Rule 46, is mandatory for taxable supplies of goods or services and serves as proof of supply, GST payment, and the basis for claiming Input Tax Credit (ITC). It contains prescribed particulars, including supplier and recipient details, GST rates, tax amounts, HSN/SAC codes, place of supply, and other mandatory information. A Bill of Supply, issued under Section 31(3)(c) and Rule 49, applies to composition taxpayers and suppliers of exempt or non-taxable goods or services. It does not show GST separately, and buyers generally cannot claim ITC. The article also outlines key differences between the two documents, common invoicing mistakes, and the consequences of issuing incorrect documents, including GST notices, ITC disputes, return mismatches, customer complaints, and penalties under Sections 122 and 132 of the CGST Act.

Introduction:

Under the Goods and Services Tax (GST) Law, every registered person supplying goods or services is required to issue a proper document as evidence of supply. The two main documents are:

1. Tax Invoice

2. Bill of Supply

Choosing the correct document is important because it affects GST payment, Input Tax Credit (ITC), compliance, and future disputes.

Importance of Tax Invoice under GST:

A Tax Invoice is an important document under GST because it acts as evidence of a taxable supply and helps in compliance, payment of tax, and claiming Input Tax Credit (ITC).

Key Importance:

1. Proof of Supply: It is a legal document showing that goods/services have been supplied by a registered person.

2. Basis for GST Payment: Supplier uses the tax invoice details to calculate and pay GST to the government.

3. Input Tax Credit (ITC) Claim: The buyer can claim ITC only when a valid tax invoice is available (subject to GST conditions).

4. Maintains Transparency: Shows taxable value, GST rate, and tax amount separately, reducing tax disputes.

5. Required for GST Returns: Details of tax invoices are reported in GST returns like GSTR-1 and GSTR-3B.

6. Helps in Audit and Verification: Tax authorities use invoices to verify transactions during
GST audits and assessments.

7. Controls Tax Evasion: Proper invoicing creates a record of transactions and helps prevent fake billing.

8. Commercial Evidence: Acts as proof for accounting records, payment claims, and business transactions.

In Simple Words: Tax Invoice = Proof of Sale + Proof of GST Charged + Basis for ITC Claim + Record for GST Compliance.

Simplified Understanding: Tax Invoice vs Bill of Supply under GST

1. Tax Invoice (As per Section 31 + Rule 46)

Under the Goods and Services Tax (GST) in India, a tax invoice is a mandatory legal document issued by a registered supplier to a buyer. It details the goods or services sold, applicable taxes, and serves as the foundational proof required by the buyer to claim Input Tax Credit (ITC).

When issued:

• For taxable supply of goods
• For taxable supply of services

Time of Issue:

Goods:

• Before or at the time of removal/delivery of goods
  Services:
• Within 30 days from date of supply of service
• Within 45 days for banking/insurance/NBFC sector

Main Contents of Tax Invoice (As per Rule 46):

1. Name, address and GSTIN of supplier

2. Unique invoice number – (Invoice number (Notably, it should be a consecutive serial number. The number should not exceed 16 characters. Also, the number should be a combination of alphabets, numerals, special characters and slash symbols)

3. Date of issue

4. Name, address and GSTIN/UIN of recipient

5. Name and address of the recipient and the address of delivery, along with the name of the State and its code, if such recipient is unregistered and where the value of the taxable supply is fifty thousand rupees (Rs.50,000) or more

6. Name and address of the recipient and the address of delivery, along with the name of the State and its code, if such recipient is unregistered and where the value of the taxable supply is less than fifty thousand rupees (Rs.50,000) and the recipient requests that such details be recorded in the tax invoice

7. HSN code of goods / SAC code of services [ Refer the Notification No.78/2020-C.T., dated 15-10-2020]

8. Description of goods/services

9. Quantity and unit (for goods)

10. Total value of supply of goods or services or both

11. Taxable value of the supply of goods or services or both taking into account discount or abatement, if any

12. Rate of GST (CGST, SGST/UTGST, IGST or Cess)

13. Amount of tax charged (CGST, SGST/UTGST, IGST or Cess)

14. Place of supply along with the name of the State, in the case of a supply in the course of inter-State trade or commerce

15. Address of delivery where the same is different from the place of supply

16. Quick Response Code, having embedded Invoice Reference Number (IRN) in it, in case invoice has been issued in the manner prescribed under sub-rule (4) of rule 48 [Refer the Notification No. 72/2020-C.T., dated 30-09-2020]

17. Signature/Digital signature

18. Reverse charge indication (if applicable)

Export invoices shall carry an endorsement: “SUPPLY MEANT FOR EXPORT ON PAYMENT OF IGST” or “SUPPLY MEANT FOR EXPORT UNDER BOND OR LETTER OF UNDERTAKING WITHOUT PAYMENT OF IGST”.

As per rule 48, the tax invoice should be prepared in the following manner- GST Law requires taxpayers to issue specified number of tax invoice copies. Let’s have a look at number of invoices we must issue.

 The serial number of invoices issued during a tax period shall be furnished electronically through the Common Portal in Form GSTR-1.

2. Bill of Supply (As per Section 31(3)(c) + Rule 49)

A Bill of Supply is a document issued by registered businesses under the GST regime when they sell exempted goods/services or operate under the Composition Scheme. Unlike a standard tax invoice, it does not include any tax charges, meaning the buyer cannot claim an Input Tax Credit (ITC).

When issued:

Under GST law, you must issue a Bill of Supply in the following scenarios:

Composition Scheme Dealers: Businesses registered under this scheme pay tax at a fixed rate but cannot collect GST from their customers. Example: A small trader under composition scheme selling goods.

Exempted or Non-Taxable Supplies: When a business exclusively deals in goods or services that are completely exempt or Non-Taxable from GST (e.g., unbranded food items, educational services, Electricity, Diesel, Petrol)

Main Contents of Bill of Supply: (As per Rule 49)

1. Name, address and GSTIN of supplier

2. Bill of Supply number

3. Date of issue

4. Name and address of recipient (if registered)

5. HSN/SAC code (where applicable)

6. Description of goods/services

7. Value of supply

8. Signature/Digital signature

9. No GST amount shown

Important Point:

• No GST amount is shown in Bill of Supply
• Buyer generally cannot claim ITC because no tax is charged.

Invoice-cum-bill of supply: Where a registered person is supplying taxable as well as exempted goods or services or both to an unregistered person, a single-invoice-cum-bill of supply may be issued for all such supplies.

Tax Invoice Vs Bill of Supply – Key Differences

Easy Memory Trick: –

Tax Invoice = Used when GST Charged. Taxable Supply + GST Charged + ITC Available

Bill of Supply = Used when GST is not charged separately. Exempt/Composition Supply + No GST + No ITC

Example: Tax Invoice

A GST registered trader sells worth ₹10,000 charge GST @18%

Tax Invoice Required

Goods Value ₹10,000

GST @18% ₹1,800

Total Invoice ₹11,800

Bill of Supply: –

 A composition dealer sells worth ₹10,000 GST cannot be collected separately.

Bill of Supply Required

Goods Value ₹10,000

GST ₹0

Total ₹10,000

–

 Refer: 1. Section 31 of CGST Act,2017 read with rules 46,47,48 and 49 of CGST Rule,2017.

2. Section 122 and 132 of CGST Act,2017.

To conclude this article, it is important to understand the before issuance of Tax Invoice and Bill of Supply. If particulars as per law are not present in the invoice, then ITC taken on such invoice should be reversed as per law. Thus, it is important to ensure that invoices issued as well as invoices received by taxpayers are verified while entering the same in their books. Therefore, each taxpayer should take care to choosing the correct document is not just a compliance requirement- it helps avoid future disputes, penalties and ITC issues.

********

DISCLAIMER: This publication is merely a general guide meant for knowledge purposes only. All the references or content are for educational purposes only and do not constitute a legal advice. We do not accept any liabilities whatsoever for any losses caused directly or indirectly by the use/reliance of any information or conclusion contained in this publication. Prior to acting upon this publication, you’re suggested to seek the advice. This work is entirely in the interest of profession and to contribute into my beloved subject of GST.