A guide to Tax invoice

Hello, in this post we will discuss on the tax invoice. As a GST registered dealer, you have to generate a tax invoice or a bill of supply.

We will cover the following topics:

What is a Tax-Invoice or GST Invoice?

A tax-invoice or a bill is a legal document containing a list of goods and services provided by the GST registered seller/dealer to the buyer/purchaser along with the amount due for payment. If the purchaser is not the consumer (the end user) then the seller needs to issue a tax invoice. If the goods / service is sold to a consumer, then the seller needs to issue a retail invoice.

Tax invoices are not a receipt, they are both different documents. Invoice is a request made by the seller for payment the sale of goods/services to the customer. It will have prices, credits, discounts, taxes and total amount.

Receipt is a proof document, which shows that payment has been made. It is a proof of ownership and lists goods/ services, prices, credits, discount, taxes, total amount paid and payment method.

Tax- invoice VS Bill of Supply VS Pro forma Invoice

Tax Invoice Bill of Supply Proforma Invoice
Businesses registered under GST must issue the tax invoice on all sales Business registered under Composition scheme will issue the bill of supply instead of a tax invoice on sales Preliminary Invoice for the goods/services in advance to the delivery.
It is a Bill sent by the seller to the buyer The seller gives Bill of supply to the customer It Is an estimated invoice sent by a seller to a buyer.
This is issued before the payment is made Issued in case of exempted sales or sales by composition dealer Is issued in advance of a shipment or delivery of goods.
This is given for both local and central transactions This is given only for local transactions Given along with a quotation or for customs purposes in the importation
Tax Amount is shown on the invoice No taxes to be shown on the bill This invoice cannot be considered for demand or request for payment

Importance of Tax Invoice under the GST regime

It is very important for the effective operation of the GST system. It is evidence for:

  1. Support a registered person’s claim for the GST deduction(input tax) incurred on his / her standard-rated purchases.
  2. Trigger the time of supply as the invoice date will determine when GST is to be accounted for by a registered person on the supply of goods and services (accounting on invoice basis);
  3. Determining which supplies made by him/her should be included in a particular taxable period.
  4. Determine when he may claim his input tax based on the tax invoice received from his supplier.
  5. It is compulsory to mention the GSTIN of the supplier in the tax invoice along with the serial number which is unique for that FY.
  6. GST tax invoice is an essential document for the recipient to avail Input Tax Credit (ITC)
  7. A registered person cannot avail ITC unless he has a tax invoice or debit note.

Invoice Format

  • Name, address, and GSTIN of the supplier
  • Tax invoice number (it must be generated consecutively and each tax invoice will have a unique number for that FY)
  •  Date of issue.
  •  If the buyer (recipient) is registered, then the name, address, and GSTIN of the recipient.
  • If the recipient is not registered and the bill value is more than Rs. 50,000 then the invoice should carry:
    • Name and address of the recipient,
    • Address of delivery,
    • State name and state code.
  • HSN code of goods or accounting code of services*
  • Description of the goods/services.
  • Quantity of goods (number) and unit (metre, kg etc.)
  • Total value of the supply of goods/services.
  • The Taxable value of supply after adjusting any discount.
  • GST applicable rate (Rates of CGST, SGST, IGST, UTGST, and cess is mentioned)
  • Amount of tax (with the breakup of amounts of CGST, SGST, IGST, UTGST, and cess)
  • Place of supply and name of destination state for inter-state sales.
  • Delivery address if it differs from the place of supply.
  • Whether GST is payable on the reverse charge basis.
  • Signature of the supplier.
  • HSN Code:
    • Turnover of less than 1.5 crores- HSN code is not required.
    • The Turnover between 1.5 -5 crores can use 2-digit HSN code.
    • Turnover above 5 crores must use 4-digit HSN code.

Download the Invoice format pdf

With that, we end this post on the tax invoice. Let us know your opinion by commenting below.