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Why GST compliant invoice is important?

  • Aug 6, 2020 | Divita S Gupta

Why GST compliant invoice is important?

It’s nearly three years to the implementation of the indirect tax that revolutionized the way people see tax in the country. The Goods and Services Tax replaced the otherwise cumbersome VAT system in India and brought with a number of norms and regulations. One of these regulations is the GST invoice. This article outlines why a GST invoice is important for smooth and successful tax operations.

Let’s begin with understanding what a GST invoice is.

As per Section 31 of the CGST Act, 2017 GST invoice or a GST bill must be generated by taxpayers registered under the GST Act. This GST invoice is an important document required to act as an evidence of the supply of goods or/and services and is crucial for availing input tax credit. Depending on the category of the taxpayer, a GST invoice can be a commercial invoice, a consular invoice, customs invoice, and proforma invoice.

Why is the GST invoice important?
There are a number of factors that make the GST invoice extremely significant to smoother filing of returns and reduced reconciliation.

For starters, a GST invoice is black and white proof of a valid transaction. A valid transaction is mandatory while filing GST returns as it will contain all details including information about the transacting parties, whether the transacting parties are registered under the GST framework, date of raising the invoice, details of goods or services supplied or received etc.

An invoice is used to compare with transactions mentioned by other parties to verify if the details of the transaction are accurate. It is only when the invoice details are correctly matched, that the taxpayer’s returns go through and the output tax liability is calculated. More importantly, this will determine the amount of input tax credit that can be claimed by the taxpayer, which brings us to our next important factor validating the need for invoicing under GST - availing Input Tax Credit.

In a nutshell, input tax credit is the refund on tax you have already paid on a transaction. This can only be claimed if the invoices have met with all GST compliance requirements. If the taxpayer doesn’t have proof of a valid transaction, the input tax credit is likely to be reversed and added to the taxpayer’s output tax liability.

Finally, a GST invoice ensures that taxpayers don’t miss their deadlines for filing returns. A GST invoice, like we mentioned earlier, is a record of all transactions that were carried out during a month. So when a taxpayer files monthly returns, the GST invoice serves as a record to determine the amounts of GST a taxpayer must pay and the due date for the same.

Generating a GST invoice is not difficult at all especially if you use GST billing software. Find out how tax technology can ease your GST experience.

Avalara helps businesses of all sizes get GST return filing, e-way bill generation and e-invoicing right with cloud-based GST compliance solutions in India. Goods and Services Tax (GST) rates, rules, and regulations change frequently. Although we hope you'll find this information helpful, this blog is for informational purposes only and does not provide legal or tax advice.
Avalara Author
Divita S Gupta
Avalara Author Divita S Gupta
Divita has served as a writer and editor for top financial services organizations in India. She has written on topics like mutual funds, insurance, taxes, SME financing for globally recognized banking and financial organizations including ICICI, Aditya Birla Group, News Corp. With a Masters in Business Administration from Symbiosis International University, she currently owns a small business in Mumbai.

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