The introduction of GST has revolutionized the whole taxation structure. Under the GST regime, many changes have been implemented, including a modification in invoicing requirements.
Under the former indirect tax system, most sales required tax invoices or commercial invoices to be generated before they could be used in the country. Only a tax invoice or a bill of supply is required under GST legislation.
Tax Invoice vs Bill of Supply
The main difference between tax invoices and bill of supply is that a tax invoice is issued during a taxable supply, and the input tax credit can be claimed. On the other hand, a bill of supply is issued during an exempt supply only, and an input tax credit cannot be claimed on it.
Tax invoices are critical in every country’s tax system since they document transactions. The content of the tax invoices is submitted to the tax authorities after each financial year for the aim of obtaining tax relief. The government relies on these invoices because they help catch those who are trying to avoid paying taxes.
The bill of supply provided by these individuals does not include information about the tax rate or the amount of tax. Values included in the Bill of Supply are not subject to taxation. Some firms, despite being registered for GST, are not allowed to charge any tax on their invoices. Dealers in this category are required to provide a Bill of Supply to customers.
Comparison Table Between Tax Invoice and Bill of Supply
What is Tax Invoice?
The term “invoice” or “tax invoice” refers to the CGST Act, 2017 section 31 tax invoice. Each time an item or service is provided, it is required that a bill be issued.
As a general rule of thumb, an invoice is a business document issued by the seller to the customer. In addition to identifying both parties and listing, describing, and quantifying the things sold, this document also reveals the date of shipping and mode of conveyance, pricing and discounts, if applicable, and delivery and payment terms.
GST-registered businesses are required to provide tax invoices for each sale. All firms with annual revenues of more than 10 lakhs in the northeastern states or more than 20 lakhs in the rest of the nation are required to register for the GST as of May 1, 2018.
A variety of information must be included on invoices, including the recipient’s name, buyer information if they are separate entities from each other, the serial number for that year’s tax year, state and other accounting codes as applicable, etc., once you have registered.
Essentially, the tax invoice is the invoice or bill of sale delivered by a seller to a buyer. Every time a sale is made, a tax invoice must be issued by a business or trade that is registered with GST.
In most cases, an invoice must be prepared and sent to the client for each delivery of products. If you’re carrying items, you must provide an invoice as soon as the products arrive at the seller’s location, if not sooner.
What is Bill of Supply?
When a bill of supply is issued to a customer, there is no tax amount since the seller is not allowed to collect GST. Because the tax amount isn’t written on a bill of supply’s invoice, it doesn’t indicate that tax is being levied on the bill.
For those registered in the composite scheme, this form is required as well. Businesses in the northeastern states and the rest of the nation with yearly revenues under 75 lakhs or 1.5 crores are eligible for the composite program.
As a result of the composition system, you don’t have to fill out a tax invoice for your customers. Rather, you pay a quarterly flat tax on all of your composition sales as a composition dealer.
Even if you’re a composition dealer or a tax-exempt supplier, you’ll need to provide a variety of facts on your bill of supply, such as your name and address as well as your GST identification number and the date the supply was given, as well as a unique serial number depending on your tax year.
The ‘composition plan’ eliminates the need for a tax invoice because the seller pays a quarterly fixed GST payment and does not collect GST from customers. Instead of worrying about the precise GST tax slab for each product they create, a company unit operating under a composition system pays a 3 per cent sales tax on total revenue.
Main Differences Between Tax Invoice and Bill of Supply
- A tax invoice is issued in the case of a taxable supply, whereas a bill of supply is issued in the case of an exempt supply.
- The input tax credit is claimed on a tax invoice and isn’t claimed on a bill of supply.
- The amount of tax is mentioned on a tax invoice, but the bill of supply doesn’t mention it.
- The rate of tax is mentioned in a tax invoice and isn’t mentioned on the bill of supply.
- A composition dealer can’t issue a tax invoice, but a composition dealer is required to for a bill of supply.
- If a recipient is unregistered, a tax invoice requires information like the name and address of the recipient, the delivery address, name of the state, state code, etc. However, this information isn’t needed for a bill of supply.
Conclusion
Although the information on both of these forms is nearly identical, they serve different purposes. The consumer should be sent an accurate invoice before the sale of goods or services.
All taxable sales, whether local or central, need the use of a Tax Invoice, whereas sales by composition dealers or those that are exempt from taxation require the use of a Bill of Supply.
Both local and central sales can be the subject of a Tax Invoice, of course. A Composition dealer, on the other hand, can only issue a Bill of Supply for local sales.
References
- https://journalissues.org/wp-content/uploads/2014/12/Alappatt-and-Shaikh.pdf
- http://eparliamentresource.gov.vu/jspui/bitstream/1/857/1/Bill%20for%20the%20Value%20Added%20Tax%20%28AMENDMENT%29%20Act%20No.28%20of%202002.pdf