Under the old indirect tax system, you had to create a tax invoice or a retail or commercial invoice for most sales. But under the GST, you have to generate a tax invoice or a bill of supply, and the invoice requirements have changed. Here’s an overview of when to use these documents and what to include on them.
Businesses registered under the GST must issue a tax invoice for all sales. As of May 2018, all businesses with annual turnovers of over ₹10 lakhs in the northeastern states or over ₹20 lakhs in the rest of the country have to register for the GST. If your business has less turnover than that but you want to claim input credits, you can opt to register as well. Once you’re registered, your invoices must include the following details:
- The recipient’s name
- Buyer’s details if different than the recipient
- Serial number based on the tax year
- Value of the goods or services
- Harmonised system of nomenclature (HSN) code
- Services accounting code (SAC)
- Other accounting codes as relevant
- State code if value is over ₹50,000
- State code if goods are being supplied over state lines
In addition to including these details, you also need to issue your invoices in a timely manner. Typically, you should issue the invoice when you supply the goods to your customer. If you’re transporting goods, the invoice needs to be issued when the goods reach the seller or earlier. For goods manufactured on your customer’s site, you don’t need to issue the invoice until the goods are available for your client to use. When it comes to services, you can issue the invoice up to 30 days after providing the services. Banks and financial institutions have 45 days.
Bill of Supply
If you sell tax-exempt goods or services, you should issue a bill of supply instead of an invoice. Similarly, if you’re registered for the composite scheme you should also use this form. The composite scheme is available to businesses with annual turnovers less than ₹75 lakhs for the northeastern states and less than ₹1.5 crores in the rest of the country. Under the composition scheme, you don’t collect GST from your buyers, and by extension, you don’t fill out a tax invoice. Instead, as a composition dealer, you pay a flat tax on all your sales once a quarter. For instance, if you’re a manufacturer, you pay 2% sales tax on all your income rather than worrying about the exact GST tax slab for each of the products you manufacture.
That said, whether you’re a composition dealer or someone selling tax-exempt supplies, you need to include the following details on your bill of supply:
- Your name, address, and GST identification number
- A unique serial number based on the tax year
- The date the supply was issued
- The name and address of the recipient or buyer
- The GSTIN of the buyer if applicable
- The HSN of the goods or SAC for services
- The value of the supply
- Your signature or the signature of your representative
At the top of the bill of supply, note if you’re a composition dealer, and also keep in mind you need signs declaring that status in your business as well.
Both of these forms contain very similar information, but they’re used in different situations. To get help keeping everything in order, consider checking out a cloud-based accounting system like QuickBooks.