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Bill of Supply in GST- What Business Owners Should Know

Businesses that have registered for GST may issue bills of supply rather than tax invoices. It is used by companies that deal with composition taxpayers and exempt goods. It is legally mandated for a registered supplier to provide a tax invoice to the buyer for each supply of taxable goods or services. The invoice contains the tax rate that is applicable to the particular transaction in addition to the cost of the goods or services, the supplier's name, the GSTIN, and other information. On the other hand, several businesses are prohibited from including taxes on their invoices. Thus, they need to offer a bill of supply so that the transaction may be verified. In this article, we will explain the concept of a bill of supply in GST in detail. 

 

Table of Contents:

 

What is a Bill of Supply under GST?

A GST-registered firm is often required to provide the buyer with a GST tax invoice. This type of invoice details the GST rate applied to the products and services provided; the seller can use it to deduct ITC from the GST paid to his suppliers and to collect GST from his customers. A tax invoice, however, cannot be produced in the case of composite dealers, as they are not permitted to claim ITC or collect tax under GST rates. The bill of supplies is the substitute for that. In summary, where GST is not applicable to a transaction or is not to be collected from the consumer, a bill of supply is produced.


Who Needs to Issue Bill of Supply

A bill of Supply has to be issued by the following business owners:

  • Composition Dealer

A taxpayer may choose to use the composition plan if their annual revenue is less than Rs 1.5 crores (Rs. 75 lakhs for Uttarakhand and the northeastern states). If a dealer chooses the composition system, they are not permitted to collect any taxes from their buyers and must deposit tax on their own receipts. The composition dealer is required to pay the GST out of pocket. GST cannot be included in the invoice. Therefore, rather than raising a tax invoice, a composition dealer must raise a Bill of Supply. On the Bill of Supply, the composition dealer must state that the supplier is a "composition taxable person not eligible to collect taxes on supplies.

  • Exporters

An exporter is not obliged to include GST in their invoice. This is a result of zero-rated export supply. Therefore, a Bill of Supply may be issued by a taxpayer who exports products in lieu of a tax invoice. The following must be stated by the dealer in their Bill of Supply: "Supply Meant For Export Under Bond/ Letter Of Undertaking Without Payment Of IGST" and "Supply Meant For Export On Payment Of IGST."

  • Exempted Goods Supplier

A Bill of Supply must be provided by a registered dealer if the dealer provides exempt goods or services. For instance, a registered taxpayer must have a Bill of Supply at hand rather than a tax invoice when supplying raw agricultural products.


GST Bill of Supply Format

A Bill of Supply must contain specific information as required by the GST law. The information that a Bill of Supply must have includes: 

  • Supplier's name, address, and GSTIN

  • Bill of Supply number, which should be generated consecutively and not exceed 16 characters

  • Date of issue

  • Name, address, and GSTIN of the recipient if they are registered

  • HSN code for goods or the Accounting code for services:  According to the turnover in the previous fiscal year, the following number of numbers must be mentioned: 

Turnover 

No. of HSN digits

Less than 1.5 crores

HSN code is not needed

Between 1.5 -5 crores

2-digit HSN code

Above 5 crores

4-digit HSN code  


  • Description of goods or services

  • Value of the products or services after deducting any rebate or discount

  • The supplier's signature or digital signature With ClearTax GST Software, you can quickly and simply prepare a Bill of Supply that complies with GST in less than a minute


Bill of Supply vs. Tax Invoice

Tax Invoice

Bill of supply

Issued for taxable supply.

Issued for exempt supply.

The amount and rate of tax are mentioned on Tax Invoice


The amount and rate of tax are not mentioned 

Input Tax Credit can be issued on its basis

Input Tax credit cannot be claimed  on its basis

Composition dealer cannot issue it

Composition dealer can issue it

If the recipient is unregistered and the value of the supply exceeds Rs. 50,000, the following information is mandatory:

  • Name and address of the recipient

  • Name of state and its code

  • Address of delivery


No such information is required 


Relaxation in case of Bill of Supply

The following are the cases when relaxations are allowed for a bill of supply:

  • Value less than Rs. 200- No bill of supply needs to be given if the value of the goods, services, or both is less than Rs. 200.

  • Digital signatures or signatures not required- When issuing a bill of supply digitally or electronically, no signature or digital signature is required. We frequently come across statements attached to bills. This invoice was produced by a computer. No signature is necessary. 

  • Relaxation of the customer's address and serial number- The banking, insurance, and passenger transportation companies have large transaction volumes, thus taxpayers are not needed to maintain track of customer addresses and serial numbers.

  • Consolidated bill of supply- When the value of the goods or services provided is less than Rs. 1200, a separate bill of supply is not required if the buyer does not request one. A combined bill of supply may be given to each receiver individually at the end of each day. 

  • Deemed bill of supply- Tax invoices or other documents generated under any other statute shall be considered bills of supply for non-taxable supplies (such as petrol and alcoholic drinks).

  • Invoice-cum-bill of supply- When a registered person provides taxable and exempt goods or services, they might issue a single invoice cum bill of supply.

  • Relaxation about the HSN or SAC codes- HSN codes have eight digits, whereas SAC codes have six digits. The HSN code indicated below will receive a relaxation in the number of digits.


Conclusion

When providing exempted goods or services or registering under the composition system, firms must issue a bill of supply. It contains crucial information including the name and address of the recipient, the date of the transaction, and the cost of the products or services rendered. It is regarded as proof of transaction. To prevent fines and legal repercussions, businesses must make sure the bill of supplies they produce complies with the regulations set forth by the GST laws.


FAQ

Q1. What is a bill of supply?

If taxes cannot be collected on the products or services sold, a GST-registered business will issue a bill of supply instead of a tax invoice. Composition sellers and companies that deal with exempt items use it. Since a bill of supply does not have to contain the tax information, the issuer will not be able to claim any ITC.


Q2. When is a bill of supply issued?

When a company offers products and services that are considered to be GST-exempt or if it is registered under the composition scheme, a bill of supply is produced. 


Q3. What is the link between an input tax credit and a GST bill of supply?

There is no relation between them since ITC cannot be claimed on the basis of a bill of supply. 


Q4. Is the HSN code mandatory for a bill of supply in GST?

Yes, HSN is mandatory for a bill of supply apart from some exceptions. 


Q5. What is the difference between an invoice and a bill of supply?

When a company offers products and services that are considered to be GST-exempt or if it is registered under the composition scheme, a bill of supply is produced. 


Q6. What is the composition scheme?

A GST facility called the composition plan is available to small enterprises having a combined revenue of less than Rs. 1.5 crore (or less than Rs. 75 lakhs in the case of the Northeastern states). Compared to ordinary taxpayers, the business owners registered under this scheme—known as composition vendors—pay less tax and have fewer returns to file. Only local sales within a state may use the composition system.


Q7. Is an e-invoice required for a bill of supply?

No, NIL-rated or completely exempt supplies do not need to use e-Invoices. In those circumstances, a bill of supply rather than a tax invoice is provided.


Q8. Why is the bill of supply important?

By precisely recording transactions that are exempt from taxation or fall under the composition system, Bills of Supply help businesses stay compliant with the GST regime.


Q9. Can input tax credit (ITC) be claimed on a Bill of Supply?

No, recipients cannot claim input tax credit (ITC) for the GST paid on purchases against a Bill of Supply since it is issued for exempted supplies or composition scheme transactions.


Q10. What information should a Bill of Supply include?

It should include details such as the name, address, and GSTIN of the supplier, a consecutive serial number, date of issue, description, value, and tax details of the goods or services supplied.


Q11. Is a Bill of Supply mandatory for all transactions under GST?

No, it is mandatory only for transactions involving exempted goods or services or when the supplier opts for the composition scheme. For taxable supplies, a tax invoice is required.


Q12. Can a Bill of Supply be revised or canceled?

Yes, similar to tax invoices, a Bill of Supply can be revised or canceled within a specified time frame and under certain conditions as prescribed under the GST law.


Q13. Is there a specific format for a Bill of Supply under GST?

Yes, although there's no prescribed format by the GST law, it should contain certain mandatory details as per the GST rules.


Q14. Who should issue a Bill of Supply under GST?

Registered taxpayers who deal with exempted supplies or opt for the composition scheme should issue a Bill of Supply instead of a tax invoice.


Q15. What are the implications of issuing an incorrect Bill of Supply?

Issuing an incorrect Bill of Supply may lead to non-compliance with GST regulations, potentially resulting in penalties or other legal consequences. It's crucial to ensure accuracy and compliance when issuing such documents.



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