The importance of including all of the required elements on a bill of supply

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Published Date:  27-12-2023   Author:   shraddha-vaviya
the importance of including all of the required elements on a bill of supply

Whenever a registered dealer sells products or services to a client not qualified to claim input tax credit, the dealer will issue a document known as a Bill of Supply instead of a tax invoice. When conducting transactions of this kind, companies in India registered under the Goods and Services Tax (GST) system must provide their consumers with a Bill of Supply. The structure of a bill of supply will be the subject of discussion in this blog.

What is the purpose of a Bill of Supply?

In cases when the vendor is selling products or services that are not subject to GST, they are not required to provide a tax invoice.

If the provider is part of the composition system, he can avoid paying taxes on his supply.

What time does a Bill of Supply come out?

When a company offers GST-exempt products and services, it often produces a bill of supply. If you were to buy fruit from an outside seller, instead of a standard Tax Invoice, you would receive a Bill of Supply.   

The Composition method does not allow businesses to charge GST on sales transactions; thus, they should only provide Bills of Supply to their customers instead of Tax Invoices. 

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The contents of the supply bill.

A Bill of Supply must include the details mandated by the Goods and Services Tax legislation. A Bill of Supply needs to contain the following information:

  • Supplier contact info and GSTIN.
  • Each Bill of Supply will have its distinct number for that financial year; this number must not be more than 16 characters long and must be created in a sequential fashion.
  • The date of release.
  • Enter the recipient’s name, address, and GSTIN if they are a registered user.
  • Accounting Code for services or HSN Code for products. 

Here is the breakdown of the necessary numbers based on turnover in the previous fiscal year:

Turnover Digits of HSN
Under 1.5 crores in turnover No HSN code needed
Turnover: 1.5-5 crores 2-digit HSN code
Turnover is over 5 crores must use a 4-digit HSN code
  • Product or service description.
  • The final value of the products or services after accounting for any reductions or discounts
  • The distributor’s signature or electronic signature Using ClearTax GST Software, you can quickly and simply generate and print a Bill of Supply that complies with GST regulations.

Important Notes.

When issuing a Bill of Supply, there are a few important things that companies need to bear in mind with regard to the following.

  • It is only possible to issue a Bill of Supply in the event that a customer purchases a product or service that does not qualify for an input tax credit.
  • However, the Bill of Supply should have all of the necessary information, even though its structure could be slightly different depending on the type of business and the standards it must fulfill.
  • There must be no duplicates of the serial number on the Bill of Supply, and it must be sequential.
  • The Bill of Supply is required to be issued at the time when the products are delivered, or the services are being completed.
  • It is necessary for the supplier to make a declaration on the Bill of Supply that all of the particulars are accurate and truthful.

Benefits of complete bill of supply

There are several benefits of complete bill of supply. Benefits of complete bill of supply that come with issuing for businesses, some of which are as follows:

  • Legal conformity with GST regulations

Businesses can avoid fines for non-compliance with the Goods and Services Tax (GST) legislation by issuing a Bill of Supply to guarantee that they comply with the laws.

  • Easy maintenance of records

Businesses have the ability to readily track their sales to clients who are not entitled to claim input tax credits if they keep a record of their bills of supply.

  • Documentation of tax returns made easier.

If companies keep correct records of their bills of supply, they will have an easier time filing their GST returns and claiming the input tax credit on purchases qualified for the credit.

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  • A higher level of credibility

The issuance of a Bill of Supply enhances the company’s reputation and fosters trustworthy relationships with the clientele.

Suggestions for the Process of Issuing a Bill of Supply

During the process of issuing a Bill of Supply, the following are some guidelines that companies can follow:

Use a standard format.

When drafting their Bill of Supply, companies should adhere to a standard format to guarantee that all of the necessary information is included and that the document is presented professionally.

Verify that all of the information is correct.

Before releasing the Bill of Supply, companies should ensure that all of the information is factually correct and comprehensive by doing a second round of checks.

Be sure to keep an accurate document.

In order to comply with regulations, companies must keep in-depth documentation of all the Bills of Supply that they issue. This record must include the date of issuance, the serial number, and any other pertinent information.

Automated billing software may assist organizations in several ways, including the speedy and correct issuance of bills of supply, the maintenance of records, and the simplification of the process of submitting tax returns.

Following taxpayers must issue a Bill of Supply

Distributor of Exempt Products and Services 

Any registered entity providing products and services that fall under the authority of GST but are not subject to taxation due to their exemption.

Instead of a tax invoice, a registered person can submit a bill of supply to prove the sale in this situation.

Exporter

A bill of supply can be given instead of a tax invoice if goods or services are exported, or both, because supplies for export are considered zero-rated supplies. 

When preparing a bill of supply for export, make sure to include the following information:

  • The recipient’s name and address
  • Delivery location
  • Destination Country

Dealer in Composition

If a taxpayer meets the requirements for the composition scheme and chooses to use it, they will not be able to charge GST on their invoices or collect the tax from their customers.

If that’s the case, rather than a tax invoice, the taxpayer should produce a bill of supply.

Consequences of incomplete bill of supply

The consequences of incomplete bill of supply that is not full go beyond the financial penalties and regulations currently in existence. They have the potential to penetrate numerous elements of corporate operations, which may impact relationships with customers and suppliers as well as the general prosperity of the company. 

For the purpose of limiting the effects of these possible issues, it is important to implement comprehensive billing procedures and to make investments in accurate invoicing systems.

How to avoid incomplete bill of supply

Businesses can stick to the following Best practices for complete bill of supply to prevent an incomplete Bill of Supply (BoS) and to guarantee proper billing.

  • Making Invoices More Precise
  • Streamlining Operations Using automation
  • Integration of Technology
  • Efficient Billing Platforms
  • Guaranteeing Accuracy
  • Comprehensive Billing Procedures
  • Procedures for Ensuring Quality
  • Communication transparency and customer review protocols
  • Integrating Data in Real Time and Managing It Centrally
  • Management of Supplier Relationships

Wrapping It Up

A Bill of Supply is required when a business sells to customers that aren’t eligible for input tax credits. By creating a Bill of Supply in the correct format, businesses may ensure they are in compliance with the Goods and Services Tax (GST) laws and prevent fines for failing to comply. It is critical that a Bill of Supply has all the required information, even if its structure may vary slightly from one firm to another based on the type of business and the needs.

FAQs

  • What is a Bill of Supply?

Businesses in India must submit a Bill of Supply to customers who do not qualify for input tax credits under the Goods and Services Tax (GST) system. 

  • When will I get my Bill of Supply?

A Bill of Supply is a legal document that confirms a purchase from a customer who does not qualify for an input tax credit.

  • Could you tell me how a bill of supply is structured?

The specifics of the company and the requirements it must meet dictate the format that a Bill of Supply should take. In contrast, it has to describe the goods or services, provide tax information, and include the names and addresses of the supplier and the recipient.

  • To what extent is a bill of supply required?

To address your problem, in order for consumers to be qualified for an input tax credit, businesses must file a Bill of Supply whenever they sell their products or services.

  • Can zero-rated suppliers have a Bill of Supply?

It is not possible to issue a Bill of Supply for zero-rated supplies. As an obligation, companies are required to provide tax invoices for zero-rated supplies.

  • Why are Bills of Supply and tax invoices different?

An invoice without taxes is different from a bill of supply. Tax invoices include sales tax.

  • Is it possible to make changes to or cancel a bill of supply?

Yes, it is possible to make changes to or cancel a Bill of Supply as long as the process is completed within the time frame stipulated by the GST regulations.

  • What is the proper way to assign numbers to a bill of supply?

It is important that a Bill of Supply be numbered in a unique and sequential manner. Maintaining the serial number throughout each year’s revenue is a must.

  • If there is no Bill of Supply, what will happen?

Failure to provide a Bill of Supply might result in a penalty under India’s GST law.

  • Can exempted supplies have a Bill of Supply?

Bills of Supply for exempt supplies are impossible. Companies don’t need to invoice exempted supplies.

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Shraddha Vaviya

With several years of experience, I am deeply passionate about writing and enjoy creating content on topics such as GST, tax and various finance-related subjects. My goal is to make complex financial matters understandable for readers by simplifying them.

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