Goods and Services Tax is India’s uniform tax system, under the GST Act, which has replaced Value Added Tax system and established in place the concepts of State GST, Central GST and Integrated GST. As per the act, GST shall be applicable on supply of goods and services in a destination based manner. To prove the existence of supply of goods and services from one place to another, an evidence is required which can be procured in the form of a GST invoice. The invoice is a document issued as evidence which mentions the details of the supply and the good that has been supplied.
GST invoice is an essential part of the law and the trade as it is the focal point due to which tax is imposed and paid, resulting in a legal transaction. However, a GST invoice cannot be created on the whims and fancies of the seller or the buyer. There is a format of an invoice and the details that must be mentioned in a GST invoice are provided in the law, to ensure that it is an acceptable bill.
WHO NEEDS TO ISSUE A GST INVOICE?
A GST invoice needs to be issued by all registered sellers under the GST and the invoice should be GST-compliant, unless the goods supplied are exempt from tax under the current tax regime. In such a case, a bill of supply is issued as discussed below. For a dealer opting for composition scheme, both GST-compliant invoices and a bill of supply needs to be issued.
WHEN IS A GST INVOICE NEEDED?
A GST invoice needs to be issued at any time a sale of goods or service is made, however, if the same isn’t issued for a sale under Rs. 200 or if the buyer isn’t registered under GST, no penalty is attracted.
Below are some unusual instances when a GST invoice needs to be issued:-
- When advance payment is received from the buyer- A GST invoice still needs to be issued and if the transaction is cancelled, a return voucher is issued to cancel the GST invoice.
- When a registered person receives supplies from an unregistered dealer, then the supplier must issue a GST invoice.
- When the goods are transferred from one branch to another branch located in a different state, having a separate GSTIN, then a GST invoice needs to be issued.
TYPES OF GST INVOICE
A person registered under the Goods and Services Tax in the Regular Scheme is required to issue a tax invoice, as a GST invoice, whenever a supply of goods or services is made to the buyer. The tax invoice mentions several particulars of the transaction and is made to collect tax and allow the buyer, to whom the invoice is issued, to claim Input Tax Credit (ITC) while filing the return.
The following are the details mentioned in a tax invoice:-
- Invoice number (serially numbered)
- Date of making the invoice
- Name of Buyer
- GSTIN of Buyer
- Address of Shipping and Billing
- Place of Supply
- Specific Codes for Goods and Services (Eg. HSN/SAC code)
- Details of goods/services, quantity in units, taxable value, discount etc.
- Applicable rate of GST and amount of such tax bifurcated as CGST, SGST and IGST
For making a tax invoice, the term “Tax Invoice” should be written on top of the bill and if the invoice value is less than Rs. 200, such invoices should be consolidated day-wise and issued accordingly.
As per the GST Act, some suppliers of goods and services cannot charge or collect GST Tax. For such suppliers, a bill of supply needs to be issued to the buyer or recipient.
A Bill of Supply shall be issued in the following cases:-
- The registered supplier is supplying goods or services that are exempted under GST.
- The registered supplier opts for the Composition Scheme instead of the Regular scheme.
Since, in the above cases, GST cannot be collected from the buyer by the seller, no Input Tax Credit claim is available to the buyers. The words “Bill of Supply” should be clearly written on the top of the invoice document. If a bill of supply is for a supply valuing less than Rs. 200, then the supplier need not issue a bill at all.
- INVOICE-CUM-BILL OF SUPPLY
In a situation where a registered supplier supplies both exempt and taxable goods and services in a single invoice, then the invoice-cum-bill of supply comes into picture. As per the notification no. 45/2-17, issued by the GST authority, a supplier can issue a single invoice titled invoice-cum-bill of supply and mention the particulars of both taxable and exempt goods explicitly for the brevity of the buyer and the tax authority.
When a registered supplier gets an advance from the buyer, he can pay issue a single receipt voucher to make it easier for the buyer to claim input tax credit.
Once a receipt voucher is issued and the supplier doesn’t fulfill the supply requirement of the good or service promised, then the supplier issues a refund voucher which deals with the refund of the amount received in advance.
In a case where the supplier is unregistered under the GST portal and the goods or services are supplied to a registered buyer, then, if the goods are subject to reverse charge, the buyer has to issue a payment voucher in favour of the unregistered dealer or supplier.
- SUPPLEMENTARY TAX INVOICE
A supplementary tax invoice is issued when a registered supplier supplies the goods at a wrongly charged GST rate. In this case, either the buyer is charged at an amount excess of actual GST tax amount or less than the GST tax amount. This can be in the form of a credit note or a debit note.
A credit note is issued by the supplier to the buyer in an event where the goods are returned by the buyer, there is a decrease in the value/prices of the goods/services dealt with or when discounts are given. These credit notes are reflected in the GST returns to show a decreased GST tax liability. The time limit within which a credit note can be issued at the earliest of two days; either in the month of September after the end of the financial year or up to filing the GST annual return.
A debit note is issued by the supplier to the buyer when such supplier charges a price in the original invoice which is less than the actual value of the good or service supplied. The debit notes are shown in GST returns to increase the tax liability.
Previously, the supplier had to show the credit notes and the debit notes separately on the GST portal, i.e. separate from the original invoice in each case. Then, there had to be a clear link between the credit or debit note and the original invoice. However, considering the numerous difficulties faced by suppliers due to the previous rules, an amendment was brought in the GST Act on 14th September 2020 allowing the credit or debit note to be combined with the original invoice without the need of mentioning the date.
MANDATORY FIELDS OF A GST INVOICE
The main purpose of a GST invoice is to charge tax and pass on the input tax credit to the buyer. Every GST invoice should compulsorily have the following fields:-
- Invoice Number
- Date of issue of Invoice
- Customer Name
- Shipping and billing address
- Customer and Taxpayer’s GSTIN (only if registered)
- Place of supply
- HSN code/SAC code
- Item details, i.e. description, quantity in units, total taxable value, total value, discounts, etc.
- Rate and amount of taxes applicable bifurcated into CGST, SGST and IGST
- Whether GST payable on reverse charge basis or not
- Signature of supplier
Note: In case the recipient of the goods or services is not registered and the value of the goods or services supplied exceeds Rs. 50,000, then the invoice should carry the following details:-
1. Name and address of recipient
2. Address of delivery
3. State Name and state code
HOW TO CREATE A GST INVOICE
As mentioned above, a GST invoice includes all the details of the supply of goods or services and the applicable rate of GST along with discounts. The creation of a GST invoice can be done manually or through a computer software. Several accounting softwares are available in the market allowing generation of GST invoice but all of them follow the same steps given below:-
- Selecting the option ‘Invoice’ and choosing the relevant branch out of the multiple branches that will issue the GST invoice. If there is no branch, the option won’t appear.
- The date of invoice needs to be added and one can also feed the date of payment if supply outwards is made on credit basis. If the payment is received on the same date when invoice is made, then the same shall be the date of the payment.
- Choosing the debtor/customer from the list of the customers available to be added to the invoice. If the desired customer’s data isn’t already there, then the option of ‘Create Debtor/Customer’ should be used.
- Choosing place of supply is an essential requirement for ascertaining the type of GST tax applicable: IGST, CGST or SGST. The place will be selected as per the delivery address entered and if the same is unknown, then it would be deemed to the the state where the supplier is registered.
- Feeding the details of goods or services supplied and adding the quantity, units and incentives/discounts. This way, the code number/HSN number of the good can be easily found and the CGST tax rate would be auto-populated.
- Generating the GST invoice after filing in all the above details, printing it and signing it.
It must be noted that a GST tax Invoice is for taxpayers under the Regular Scheme. For taxpayers under the composition scheme, a bill of supply is generated which shall be made as explained above and shall include all the details mentioned above. The only exception in a Bill of Supply is that GST cannot be charged in a bill of supply.
E-INVOICING
With the increased use of technology in financial sector, there has been an introduction of a new concept of streamlining the supply process. Here, the Business2Business invoices undergo electronic authentication by GSTN and then such authenticated e-invoices are passed on to the GST portal where they are reflected in the GSTR-1 returns. This method will stop the manual data entries on GSTR-1 and the e-way bills will be automatically generated. The Invoice Registration Postal will issue a unique identification number for every invoice generated online.
The applicability of e-invoicing would be made effective in three stages:-
- For all the registered dealers having an aggregate turnover over Rs. 500 Crore in any financial year, e-invoicing was applicable from 01.10.2020.
- For all the registered dealers with aggregate turnover exceeding Rs. 500 crore in any preceding financial years, the e-invoicing shall take effect from 01.01.2021.
- For all registered dealers having aggregate turnover above Rs. 50 Crore in any preceeding financial years, the e-invoicing shall be applicable from 01.04.2021.
GST invoices act as primary source of evidence of transaction and should be prepared carefully and strictly as per the provisions of the GST Act. An incorrect GST invoice attracts penalty and the Input Tax Credit availed against an incorrect GST invoice might be disallowed.
BY WHEN THE INVOICES NEED TO BE ISSUED
The GST act defines the time limit during which a GST invoice, revised GST invoice, a debit note or a credit note can be issued to a customer. The following are the details of the dates:-
- Goods in Normal Case: On or Before date of removal/delivery
- Goods in case of Continuous Supply: On or before date of issue of account statement/payment
- Services in General Case: Within 30 days of supply of services.
- Services in case of Banking and Non-Banking Financial Institutions: Within 45 days of supply of services
CONCLUSION
A GST invoice is an integral part of the GST tax regime as all the details mentioned in the invoice become the proof of the transfer of goods or services and the same is considered while computing tax and while claiming the Input Tax Credit.
It is very important to maintain a sound and appropriate GST invoice in order to ensure smooth transition from the VAT to GST system and to ensure smooth payment of tax and claiming of benefits like the Input Tax Credit.
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