An invoice is the primary document used to assess the levy of any tax related to the transfer of goods or services. Under the new Goods and Services Tax (GST) regime, government is implementing a new, comprehensive invoicing format that should facilitate the computation of taxes on invoiced goods or services.
There will be two types of invoices under the new regime: a tax invoice and a bill of supply. Let’s examine the differences between them:
A registered supplier must issue a tax invoice when supplying taxable goods or services. Specific rules regarding the use and contents of the invoice apply:
- Serial number of the invoice: Serial numbers are consecutive and consist of letters, numbers, special characters, or any combination thereof; they are unique for each financial year.
- State name and code: The state name and code are required if the recipient of goods/services is unregistered and the taxable value of goods or services supplied is Rs. 50,000 or more. For interstate supply, the state’s name and code is mandatory.
- GSTIN/unique ID: A GST identification number is required for the receiver. There are specific codes for UN bodies, embassies, or any other class of persons so notified.
- HSN code/accounting code: The notified person must include an HSN code for the goods and an accounting code for the services supplied. Refer to the following tax invoice sample.
Bill of supply
A registered supplier will issue a bill of supply when:
- The goods or services supplied are exempt
- The supplier opts to pay taxes under Composition Scheme
As per the rules governing the bill of supply:
- Serial number: The serial number should be a consecutive number consisting of letters and/or numbers and should be unique for one financial year.
- Details of receiver: Provide the name, address, and GSTIN/unique ID of the receiver only if the receiver is registered.
- Particulars of goods: For the supply value of goods or services, the term “value” is used instead of “taxable value,” as in the tax invoice.
If the value of the goods or services supplied is less than Rs. 100, there is no need to issue a bill of supply. Instead, the registered person must prepare a consolidated bill of supply for any such supplies transferred during the day.
Time limits for issuing the invoice
- Supply of goods: Where supply involves the movement of goods, the registered person must issue an invoice before or at the time goods are removed for supply. In other cases, the invoice should be issued before or at the time goods are delivered or made available to the customer.
- Supply of services: The tax invoice should be issued within 30 days from the date of supply of services unless the transaction involves banks or financial institutions, in which case the invoice should be issued within 45 days.
- Receipt voucher: A receipt voucher or other prescribed documents should be issued as an advance receipt on the supply of goods or services.
- Reverse charge mechanism: If goods and services are supplied by an unregistered person, the registered receiver must issue an invoice on the date of receipt of goods or services. The recipient, not the supplier, is liable for the tax.
- Continuous supply of goods: When goods and services are supplied — and payment is made — periodically, the registered supplier must issue an invoice along with each statement or payment.
Revising the value of an invoice
To revise the taxable value or GST charged on an invoice already issued, one may issue a debit note or credit note:
- Debit note: Issued when the taxable value and/or GST charged on the invoice must be increased.
- Credit note: Issued when the taxable value and/or GST charged on the invoice must be reduced.
A credit note related to an invoice of a financial year can be issued before September 30 following the end of the financial year or the date of filing of the relevant annual return, whichever is earlier. For example, Company A files its annual return for the financial year 2016-17 on May 31, 2017, and Company B files its annual return on December 1, 2017. Company A can issue a credit note pertaining to the supply made in FY 2016-17 by May 31, 2017, and Company B can issue a credit note by September 30, 2017.
Signing the invoice
The registered person or authorized representative of the registered person is required to sign the invoice either physically or digitally via Digital Signature Certificate.
All invoices must adhere to the rules framed under GST India to avoid penalties for non-compliance. Proper invoicing should enable the administration of the successful digital compliance under GST regime.
Avalara is an application service provider (ASP) partnering with licensed GST Suvidha Providers (GSPs). To understand how Avalara TrustFile GST can help you with GST compliance, contact us through https://www.avalara.com/in/products/gst-returns-filing.