A Bill of supply is an invoice that is issued when no tax is to be charged on supplies made or where tax is charged but no ITC can be passed on to the recipient.
Here in this article, we have explained in detail situations where this bill is to be issued, its contents, and how it differs from a tax invoice.
What Is A Bill Of Supply?
When a business is part of the GST system, they provide the buyer with a tax invoice, explicitly stating the GST rate applied to the goods or services sold.
However, certain GST-registered businesses are in a position where they don’t apply any tax to the invoice they issue. In such cases, these businesses are required to issue what’s called a Bill of Supply.
This document comes into play when GST doesn’t apply to a transaction or when the business opts not to recover GST from the customers.
In essence, it’s a way for businesses to transparently communicate the absence of GST in certain transactions, ensuring compliance with the GST regulations.
Here Is The List Of The Supplier Who Is Required To Issue The Bill Of Supply
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- Composition scheme dealer-
The taxable person who opts to pay under the composition scheme shall issue the document. The rate at which GST is charged by the dealer is 2% or 5% which is less than what other normal registered charges the GST. Thus they are not allowed to pass on the credit nor they can use the input tax credit while making the payment of GST liability.
- Composition scheme dealer-
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- Exporters-
The exports made are considered to be zero-rated supplies and thus bill of supply is issued. The dealer has to mention the following in their bill-
– Supply Meant For Export On Payment Of IGST- here he can claim the refund of IGST paid on goods or services or both
– Supply Meant For Export Under Bond Or Letter Of Undertaking Without Payment Of IGST– here he does not pay IGST so no question arises of issuing tax invoice.
- Exporters-
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- Supplier supplying exempted goods or services-
The registered supplier supplying exempted goods or services shall issue the bill of supply as no tax is been charged on such supplies.
- Supplier supplying exempted goods or services-
The Contents of the Bill of Supply
The bill issued by the supplier shall contain the following details, namely,-
- Name, address, and GSTIN of the supplier
- A consecutive serial number (generated consecutively, unique for the financial year)
- Date of its issue
- Name, address,s and GST, GSTIN if registered, of the recipient
- HSN(for goods) and SAC (for service)
- Description of goods or services or both
- Value of supply of goods or services after discount or abatement, if any
- Signature or digital signature of the supplier or his authorized representative
The number of digits to be mentioned HSN code is based on turnover as follows-
- Turnover less than Rs.1.5 crores- HSN code is not required
- Turnover between Rs.1.5 – 5 crores- 2-digit HSN code
- Turnover above 5 crores – 4-digit HSN code
In the following two cases, a bill of supply is required to be issued-
- GST law does not apply to the unregistered person and thus he is not required to issue the bill of supply. He can opt to issue it voluntarily. If the invoice value is less than Rs.200, a consolidated Bill of Supply could be prepared at the close of each day, covering all supplies where an individual bill was not issued.
The Major Difference Between The Bill of Supply And Tax Invoice
A bill of supply is a transaction document that doesn’t show any tax amount on it. It is issued when the registered person cannot pass on the tax credit or no GST can be levied on such supplies. A tax invoice is issued by the registered person to charge the tax and pass on the credit to the customer.
The Proforma Of This Invoice
(source: ClearTax)
Frequently Asked Questions (FAQs)
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- Who is required to issue the bill of supply?
Composition scheme dealer, Exporte,r, and the registered supplier supplying exempted goods or services.
- Who is required to issue the bill of supply?
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- Whether the non-registered person is required to issue it?
No, but he can voluntarily issue the bill of supply.
- Whether the non-registered person is required to issue it?
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- What is zero-rated supply?
Zero-rated supplies mean the export of goods or services or both or
supply of goods or services or both to a Special Economic Zone developer or a Special Economic Zone unit.
- What is zero-rated supply?
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- When is the tax invoice issued and how it is different from the bill of supply?
A registered person under GST issues the tax invoice to the buyer for the goods/services sold. Such invoice has GST rate mentioned on it. However, the registered person supplying exempted supplies or the exporter or the composition dealer issues a bill of supplies. The bill of supply may have the tax mentioned on it but ITC for the same could not be claimed or no tax will be mentioned(exempted supplies).
- When is the tax invoice issued and how it is different from the bill of supply?
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- How are these invoices numbered?
There must be a unique series of numbers which is to be followed for each financial year and they should be consecutively numbered.
- How are these invoices numbered?
Conclusion
In conclusion, understanding the nuances of the bill of supply is imperative for businesses navigating the intricate terrain of Goods and Services Tax (GST) compliance.
Whether you’re a composition scheme dealer, an exporter, or a registered supplier dealing with exempted goods or services, the bill of supply plays a pivotal role in documenting transactions where tax credits cannot be passed on. The meticulous details required in a bill of supply, from GSTINs to HSN codes, underscore the precision demanded by GST regulations.
Efficient inventory management, coupled with a sound grasp of billing protocols, is essential for businesses to thrive in the contemporary economic landscape.
Leveraging specialized inventory management software is a strategic move that not only streamlines operations but also positions your business for sustainable growth.
As businesses evolve, recognizing the significance of timely implementation and adherence to these practices can pave the way for a robust and compliant financial future.