Tax Invoice and Other Such Instruments in GST

Introduction

The seller issues a commercial instrument invoice to the buyer during a supply transaction. The invoice is an official request for the money to be paid to the supplier. It is also a valid document proof of the supply transaction. The invoice contains details about all the parties involved in the transaction and the description and quantity of items sold. It will also include discounts and other specific payment terms. The supplier also lists delivery details in the invoice.

In India’s GST system, one document reigns supreme: the tax invoice. Acting as a crucial gateway for buyers to claim the Input Tax Credit (ITC), it also guarantees suppliers their rightful payment. Under the GST regime, GST must be paid only at the time of supply, so it is an essential instrument. Due to increased GST compliance, GST revenue collected in March 2023 reached 1,60,122 crore.

In this blog, we will explore the importance of a GST tax invoice and other instruments.

What are Tax Invoices and Other Instruments in GST?

A GST-registered supplier must issue a GST-compliant tax invoice to the buyer at the time of supply or at the time of removal of goods from the supplier warehouse for delivery to the buyer. You must issue a tax invoice for the supply of taxable goods and services. As per the GST framework, the supplier must issue the invoice within 30 days of supply. The buyer can claim ITC to offset GST paid against purchases only with a GST invoice from the supplier.

The different types of commercial instruments under GST are:

• Tax invoice
• Advance payment receipt voucher
• Advance payment refund voucher
• Invoice in case of continuous supply of goods and services
• Invoice in case of service termination 
• Bill of supply

Each of these commercial instruments serves different purposes under the GST framework. The supplier must understand the differences and ensure they issue the correct type of invoice for any particular transaction. Issuing erroneous invoices is considered a GST offense, and it can result in heavy fines and penalties.

What are the Components of Tax Invoices in GST?

The invoice format is standardised, as specific fields must be in the GST tax invoice. However, businesses can customise this invoice format and create an invoice template with their business name and logo as per their choice. Suppliers are responsible for issuing GST invoices if they are a registered vendor. Otherwise, the invoice will be considered invalid. As per the new rules of GST, the supplier must also generate an e-invoice using the e-invoicing portal and issue the e-invoice in place of the GST tax invoice.

The following information must be mandatorily present in a GST invoice:

• Name, address, and GSTIN of supplier
• Consecutive serial number of the invoice (it must contain alphabets, numerals, and special characters like hyphen, dash, or slash, and it must be unique for a financial year)
• Date of invoice issue
• Name, address, and GSTIN of the recipient (UIN for the unregistered recipient)
• Address of delivery location with state name and code
• HSN code of goods
• Description of supplied goods or services
• Quantity of supply 
• Total value of goods or services or both
• Taxable value of goods or services or both
• GST rate (IGST, CGST, SGST)
• GST tax amount
• Place of supply with the name of the state
• Whether tax is payable on a reverse charge basis
• A signature or digital signature of the supplier or an authorised representative

Also Read: Tax Invoice For Services: Essential Components And Legal Obligations

Is an Invoice an Instrument?

In the legal context, an instrument is a legal document that transfers rights or obligations. For example, contracts, bonds, and promissory notes are instruments. Within the GST framework, an invoice is a commercial instrument. It is a legally required document issued for the specific purpose of a supply transaction. It is also a demand of payment for the supplier and crucial for the recipient to claim ITC. The GST tax invoice is the proof of supply document and a validation that the purchase transaction has occurred. It is also an essential tool of communication and necessary for tax compliance. 

What is the Difference Between a Tax Invoice and a Bill of Supply Under GST?

At the time of supply, the supplier must issue a GST-compliant invoice. However, a tax invoice is not always required in all cases. Knowing which type of commercial instrument to issue is essential for GST compliance. The differences are stated below:

Also Read: Tax Invoice Vs Bill Of Supply: Understanding The Distinction

What is the Difference Between a Tax Invoice and a Regular Invoice?

An invoice bill is a regular invoice that the supplier sends to the buyer with details, including goods or services purchased and the total amount due. A GST tax invoice is essential for suppliers supplying goods and services that incur GST tax. The regular invoice will not contain tax information even though the goods may be taxable. However, a supplier must always submit a GST tax invoice or bill of supply wherever applicable for GST compliance. A regular invoice is not a commercial instrument as per the GST framework. A GST invoice is necessary for B2B transactions, and a regular invoice can be used for B2C transactions, but it may not contain GSTIN details.

What is the Difference Between a Tax Invoice and a Bill?

A bill is a generic term for a document that shows the total amount a customer must pay the vendor. An invoice is a specific commercial instrument that a supplier issues for supplying goods and services. For example, restaurants, shops, supermarkets, etc, issue bills to a customer who pays for the purchase before collecting the goods. The following table shows the differences:

Also Read: What Is The Difference Between Billing And Invoicing?

Conclusion

GST compliance requirements expect businesses to maintain accurate records of all business transactions. All GST-registered companies must issue the correct type of instrument for all supply transactions. These bills, invoices, and other GST instruments must be uploaded to the GST portal for filing GST returns. Wrong, missing, or incorrect details in these bills and invoices can result in heavy penalties and fines. Also, businesses must issue bills and invoices in a timely manner to avoid late fees.

CaptainBiz empowers you to navigate the GST compliance maze without manual errors and time-consuming processes. The automated invoicing, seamless return filing, and effortless tax tracking help you to stay on top of your tax obligations. Explore our cloud-based intuitive platform and get expert CaptainBiz support to simplify business finances.

FAQs

• Is a tax invoice mandatory?

Yes, GST-registered businesses are mandatorily required to issue a tax invoice. If the companies meet the annual turnover threshold, they must issue an e-invoice. The e-invoice is automatically generated by the e-invoicing portal using the tax invoice.

• Who must issue a tax invoice?

All GST-registered businesses supplying taxable goods and services to customers must issue a tax invoice. This must include the GST rate, GST amount, and GST details of the customer.

• What happens if I forgot to mention GSTIN?

A GST tax invoice without GSTIN details is considered invalid. GST-registered businesses that issue a wrong invoice must face penalties and non-compliance charges. An automated billing solution like CaptainBiz will auto-populate the GST details so you will never miss including the mandatory information.

• What is a revised invoice?

Despite being careful, you could make errors in generating an invoice. Every invoice generated during the return period must be uploaded to the GST portal. However, if you find any discrepancies, you can issue a revised invoice to correct the details.

• What is the time limit for issuing tax invoices?

Suppliers must issue a tax invoice within 30 days of the supply transaction. Otherwise, the recipient cannot claim ITC for the goods purchased during the return period.

• How long must I maintain records of GST invoices and bills?

GST compliance requires businesses to maintain accurate records of invoices, bills, and other accounting documents for at least 7 years from the date of issue.

• Is a tax invoice needed to supply to non-registered customers?

Non-registered customers cannot claim ITC but must pay GST if they receive taxable goods and services. The supplier is required to pay GST tax to the government for supplying taxable goods and services. For all supply transactions valued at more than Rs.200, the GST-registered supplier must issue a tax invoice for all customers.

• What happens if I deliver goods or services without a tax invoice?

If GST-registered businesses fail to supply tax invoices for GST-applicable goods supply, the transaction will be considered fraudulent. Road authorities may confiscate the goods delivered without a valid tax invoice. It will also result in GST penalties and other charges. The supplier may even be prosecuted for producing high-value goods without a tax invoice.

• How can I know the correct type of instrument to issue under GST?

In digitally connected India, suppliers must empower themselves with information regarding the GST framework and compliance requirements. Issuing the wrong type of commercial instrument under GST will result in hefty fines and penalties.

• Can I generate a single invoice for the supply of goods with different tax rates?

Yes, you must include the right GST rate for each goods and services. The tax invoice must clearly mention the total taxable value and total GST tax amount.

Niharika Kapoor Content Writer

Niharika is a Freelance Content Writer and Translator with a Master of Arts in Literature. She has 5+ years of working in the same and has worked in different industries.

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