Bill of Supply vs Tax Invoice Under GST

Short answer: A Tax Invoice is issued by a GST-registered business for taxable goods or services, showing the GST charged, which allows the buyer to claim Input Tax Credit (ITC). A Bill of Supply is issued for exempt supplies or by businesses under the composition scheme. It does not charge GST, and consequently, the recipient cannot claim any ITC based on it. The choice between the two depends entirely on the nature of the supply and the supplier's GST registration status.

What is a Tax Invoice under GST?

A Tax Invoice is a formal document issued by a GST-registered supplier when they provide taxable goods or services. As mandated by Section 31 of the Central Goods and Services Tax (CGST) Act, 2017, this document is the primary evidence for the recipient to claim Input Tax Credit (ITC). It must contain specific details, including the GSTIN of the supplier and recipient, a unique invoice number, date, description of goods/services, HSN/SAC codes, value, applicable GST rates (CGST, SGST, IGST), and the tax amount.

What is a Bill of Supply under GST?

A Bill of Supply is a simpler document issued in place of a tax invoice in specific situations where the supplier cannot or is not required to charge GST. It serves as proof of the transaction but does not carry any tax component. Therefore, the recipient cannot claim any Input Tax Credit on the basis of a Bill of Supply. Its format is simpler than a tax invoice but still requires certain mandatory fields as per GST rules.

Who should issue a Bill of Supply?

A registered person must issue a Bill of Supply in two primary scenarios:

1. Supplier of Exempted Goods or Services: When a business supplies goods or services that are wholly exempt from GST or are non-taxable (like petrol or alcohol for human consumption), they issue a Bill of Supply.
2. Composition Scheme Dealer: A taxpayer who has opted for the GST Composition Scheme pays tax at a fixed, lower rate on their turnover and is barred from collecting tax from their customers. Therefore, they must issue a Bill of Supply for all their supplies.

Can a business issue both a Tax Invoice and a Bill of Supply?

Yes, a GST-registered business can, and in some cases must, issue both types of documents. This happens when the business supplies both taxable and exempt goods or services. For all taxable supplies, they will issue a Tax Invoice. For all exempt supplies, they will issue a Bill of Supply. It is crucial to use the correct document for each type of transaction to ensure proper compliance.

What are the key differences between a Tax Invoice and a Bill of Supply?

The primary distinction lies in their purpose, the ability to charge tax, and the eligibility for Input Tax Credit. Understanding these differences is fundamental for GST compliance.

Feature	Tax Invoice	Bill of Supply
Purpose	To charge tax on taxable supplies.	To document a supply where no tax is charged.
Issued By	A regular GST-registered taxpayer.	A composition dealer or a supplier of exempt goods/services.
GST Charged	GST (CGST/SGST/IGST) is charged separately.	No GST is charged.
Input Tax Credit (ITC)	The recipient can claim ITC based on this document.	The recipient cannot claim ITC.
Declaration	No specific declaration is required.	Must contain the declaration: "Composition taxable person, not eligible to collect tax on supplies" OR "Supplier of exempt goods/services".
Governing Section	Section 31 of the CGST Act, 2017.	Proviso to Section 31(3)(c) of the CGST Act, 2017.

What are the mandatory fields for a Bill of Supply?

As per Rule 49 of the CGST Rules, a Bill of Supply must contain the following details:

• Supplier's name, address, and GSTIN.
• A consecutive serial number (unique for the financial year).
• Date of issue.
• Recipient's name, address, and GSTIN (if registered).
• HSN Code for goods or SAC for services.
• Description of goods or services.
• Value of supply, after any discounts.
• A signature or digital signature of the supplier.
• The mandatory declaration stating why tax is not being collected.

Worked example

Let's consider 'Creative Canvas', a Bengaluru-based graphic design studio registered under the GST composition scheme. They provide a branding package to a new restaurant, 'Bengaluru Bites'.

• Service: Graphic design and branding package.
• Supplier: Creative Canvas (Composition Dealer).
• Recipient: Bengaluru Bites (Regular GST taxpayer).
• Value of Service: ₹50,000.

Step 1: Identify the Correct Document Since Creative Canvas is registered under the composition scheme, it cannot collect GST from its clients. Therefore, it must issue a Bill of Supply, not a Tax Invoice.

Step 2: Prepare the Bill of Supply The Bill of Supply will be for the full value of the service, which is ₹50,000. No GST will be added.

Step 3: Include Mandatory Details The document will include:

• Creative Canvas's Name, Address, and GSTIN.
• Bill of Supply No: CC/2026-27/045
• Date: 25 September 2026
• Recipient Details: Bengaluru Bites, their address, and GSTIN.
• SAC: 9983 (Design services).
• Description: Branding Package (Logo, Menu Design, Social Media Kit).
• Total Value: ₹50,000.
• Declaration: "Composition taxable person, not eligible to collect tax on supplies".

Step 4: ITC Implications Bengaluru Bites will pay ₹50,000 to Creative Canvas. Since they received a Bill of Supply, they cannot claim the ₹50,000 or any tax component as Input Tax Credit against their own GST liability.

Common mistakes

1. Issuing the Wrong Document: Composition dealers mistakenly issuing a tax invoice, or regular taxpayers issuing a bill of supply for taxable goods. This is a serious compliance failure.
2. Charging Tax on a Bill of Supply: A Bill of Supply can never show a GST amount. Collecting tax without the authority to do so is a legal offense.
3. Attempting to Claim ITC: A buyer trying to claim ITC based on a Bill of Supply is incorrect and will lead to reversal of credit along with interest and penalties.
4. Omitting the Declaration: Forgetting to mention the mandatory declaration on the Bill of Supply (e.g., "Composition taxable person...") makes the document incomplete and non-compliant.
5. Incorrect Serial Numbering: Failing to maintain a unique, consecutive serial number for each financial year can cause issues during audits and for record-keeping.

How SP & SC helps

Navigating the nuances of GST invoicing can be complex. At SP & SC, we ensure our clients' invoicing systems are fully compliant, whether they need to issue Tax Invoices, Bills of Supply, or both. We assist in setting up accounting software, training staff on correct documentation, and managing all aspects of GST return filing. Our goal is to make your GST journey seamless, preventing costly errors and ensuring you can focus on your core business.

Frequently asked questions

Can I issue a single 'invoice-cum-bill of supply'?

Yes. A registered person supplying both taxable and exempt goods/services to an unregistered person can issue a single 'invoice-cum-bill of supply' for all such supplies, as per the proviso to Rule 46A of the CGST Rules.

What if my turnover is below the GST registration threshold?

If you are not registered under GST, the concepts of Tax Invoice and Bill of Supply do not apply to you. You should issue a standard commercial invoice for your transactions. You cannot mention GSTIN or charge GST.

Is e-invoicing applicable to a Bill of Supply?

No. The requirement for e-invoicing under GST applies only to Tax Invoices, credit notes, and debit notes issued by notified taxpayers. It does not apply to Bills of Supply or delivery challans.

Can I issue a consolidated Bill of Supply?

A supplier can issue a consolidated Bill of Supply at the end of each day for all supplies where the individual value is less than ₹200 and the recipient is unregistered.

Do I need to report Bills of Supply in my GSTR-1?

Yes, details of documents issued, which include Bills of Supply, need to be reported in Table 13 of the GSTR-1 return. You must report the serial numbers issued during the tax period and the total count.

Get a fixed-fee quote

Dealing with GST invoicing, returns, and compliance can be time-consuming. Let our expert team handle it for you. Share your documents with us for a confidential review, and we will provide a written fixed-fee quote for our services. We manage all GST matters from registration and invoicing setup to return filing and responding to notices, end to end. Contact SP & SC today or WhatsApp us at +91 90356 74566 to ensure your business is fully compliant.