Bill of supply under GST: Its process, meaning and impact

Bill of supply is an official document. In the world of businesses, it is important for you to know the basics of business. Here, Goods and Services Tax (GST) is essential.

A bill of supply is issued under the GST regime. 

But you can ask a valid question here. What is the Bill of Supply under GST? Why is this so important? Is it similar to regular tax invoices?

If you are feeling confused and searching for answers to all these questions, let me tell you.

Your search ends here. Yes, that’s true.

This blog is your ultimate guide to know everything about the Bill of Supply. Sit tight and let’s explore together.

What does bill of supply mean?

To answer your question, what does bill of supply mean, I will tell you:

• Every business under GST registration issues a tax invoice to its buyers
• This invoice tells you the GST rate you have paid on the goods and services.
• However, there are some exceptions. Some businesses registered under GST cannot charge any tax.
• Yes, you are reading it right. These businesses cannot charge a tax on the invoice they are issuing.
• In this case, as a dealer, you need to issue this.
• It is issued on the transactions where GST does not apply
• Moreover, you can also issue a bill of supply when you can’t recover GST from the customers.

Sounds interesting, right? Here are some more facts about the bill of supply

(i) This document works as a proof.

(ii) It helps to understand that supply is legally recognised under the GST law

(iii) It might look similar to a tax invoice.

(iv) But, you need to remember this. It does not contain the details like CGST, IGST or SGST.

(v) Here, you can see the basic details of the transaction.

(vi) It includes your name (if you are the buyer), seller’s name, description of the goods and services

(vii)Moreover, it includes value and other prescribed fields.

(viii) Here, you will not see any GST amount

Who can issue a bill of supply under GST?

Not every dealer can issue a bill of supply under GST. It applies to you, if you are a:

Composition Dealer

(i) If you are a taxpayer and your turnover is less than 1.5 crore.

(ii) This limit is 75 lakhs INR for the North East states and Uttarakhand

(iii) In this case, a composition scheme applies to you

(iv) If you are opting for the composition scheme, you need to remember this.

(v) You have to deposit your tax receipts by yourself.

(vi) You are not allowed to collect any tax from your customers (buyers)

(vii) Here, you have to pay GST from your own account

(viii) As a dealer, you cannot charge GST on the invoice

So, if you are a composition dealer:

• You have to raise it.
• The tax invoice does not apply to you.
• Please keep this in mind. You have to mention these words:

‘Composition taxable person not eligible to collect taxes on supplies’ on the Bill of Supply. 

Here is a fact about the threshold limit I mentioned earlier. The CBIC has increased the limit to 1.5 crores. This has come to effect from 1st April, 2019.

Exporters

• If you are an exporter, you cannot charge GST on an invoice
• This is because export supplies are zero-rated.
• Thus, if you are a taxpayer and exporting goods, you can issue this.
• Here, the dealer needs to mention these statements in the Bill of Supply:

1. ‘Supply meant for export on payment of IGST’
2. ‘Supply meant for export under the Bond or Letter of Undertaking without payment of IGST’

Exempted Goods suppliers

(i) If you are a registered dealer who supplies exempted goods or services

(ii) You have to issue a Bill of Supply

(iii) For instance, if you are a registered taxpayer and you are selling unprocessed products for farming.

(iv) In this case, you have to issue this in place of a tax invoice

What does the bill of supply contain?

If you have never seen a bill of supply, it might be a little confusing for you.

You might not understand. What are the details you can see in a bill of supply? 

Here it is, simplified for you:

(i) The GST law mentions some particulars.

(ii) It needs to be mentioned in a Bill of Supply.

These are:

1. Your Name, GSTIN and Address (if you are the supplier)
2. The Bill of Supply number. It should not exceed 16 characters
3. It needs to be generated consecutively.
4. Each bill of supply will have a unique number for that financial year.
5. The date of issue
6. In case of registered recipients: Name, GSTIN and address of the recipient (If applicable)
7. HSN code of Goods
8. Accounting codes for services
9. Description of goods and services
10. Value of the goods or services. If you are adjusting the discount, it needs to be mentioned
11. Signature or digital signature of suppliers

Is there any relaxation in the Bill of Supply?

Yes, in case of the bill of supply, there are some relaxations:

• If the transaction is less than INR 200, you don’t need this
• You don’t need a signature. Yes, that’s true. It applies to electronic bills of supply and e-invoices
• A relaxation is there for some sectors. This includes high-volume sectors like banking, passenger transport
• Insurance is also included in this
• The above sectors have simplified the formats. This does not need the customers’ serial number or detailed address
• You don’t need documents like tax invoices issued under other laws
• In case of low value business to business transactions under 1200/-.
• Here, you can issue a daily consolidated bill
• If your business is taxable. Besides, if you are supplying exempt goods and services

What is the impact of GST on the Bill of Supply?

Yes, GST has an impact on the bill of supply. It is important for both the provider and the recipient of Goods and services. It helps in terms of

• GST Compliance

(i) If you are a licensed dealer, you need to issue a tax invoice

(ii) It applies to the taxable supplies

(iii) If you are not allowed to collect GST, you must issue a bill of supply

(iv) It helps you to comply with GST rules

(v) Moreover, you can avoid penalties in this way Maintaining Records

• Maintaining Record

• Gst mandates keeping accurate transaction records
• A bill of supply ensures proper documentation for your business
• It helps in adding essential information for accounting and audits

• Avoid disputes

(i) A bill of supply helps you to state where GST does not apply

(ii) It reduces the chances of disputes over tax

(iii) It helps you to maintain clear communication with the recipients

• Eligibility of ITC

• ITC or Input tax credit needs valid documents
• Here, tax invoices, Bills of supply are needed
• If you are an exempt supplier or a composition scheme supplier
• ITC cannot be claimed on a Bill of Supply. It’s allowed only on a valid tax invoice or debit note. Composition dealers cannot claim ITC at all. Exempt supplies do not generate ITC.

• Precise business operations

1. The bill of supply is simple and precise
2. This helps you to manage the issues easily
3. If you are a small business or a composition scheme dealer, it simplifies GST compliance

What is the difference between a bill of supply and a tax invoice?

The bill of supply might look similar in format to a tax invoice.

But it has a different purpose under the GST law.

You need to hear this.

The use of these two depends on the change in GST in transactions.

Here is how it works:

What are the consequences of non-compliance?

Yes, failing to issue this document can lead to negative consequences. These are listed below:

Penalties under the GST law

• If your business comes under the composition scheme, or you are an exempted goods supplier.
• In these cases, issuing tax invoices instead of a bill of supply will be seen as wrong
• You might have to give penalties

Mismatch in GST returns

• If your documents are not proper, it will lead to errors in GST return filing
• You might receive notices from the authorities

Rejection of records in audits

• In times of audit, the wrong documents can disallow compliance
• It affects record-keeping and reporting accuracy

Final thoughts

A bill of supply is an essential document for businesses. To sum up our discussion, I would say it is not complex. It serves an important function.

Understanding when to issue a bill of supply helps your business to grow.

So, what are you waiting for? Learn it now and stay protected.

FAQs

1. Can a Bill of supply used for taxable supplies?

No, it applies to exempted or zero-rated supplies.

2. Do I need to maintain a bill of supply for my records?

Yes, maintaining this document is necessary for GST compliance.

3. Is GST applicable to the Bill of Supply?

No, GST is not charged in this. It is meant for exempted supplies

4. Can a bill of supply be used in international transactions?

Yes, in case of goods or services exported under a zero-rated supply. You need to issue a bill of supply.

Disclaimer

This article is for informational purposes only and does not constitute legal advice. Online Legal India is a digital platform. If you require legal assistance, we strongly recommend consulting a qualified lawyer or law firm.