A bill of supply is an essential document in the tax system that complies with GST. Some registered organisations are forbidden from including GST on tax bills they issue. This is because they are either delivering goods or services that are exempt from the GST or are otherwise unable to charge customers GST, in accordance with Section 10 of the CGST Act of 2017.
Therefore, under GST, such businesses are required to provide a Bill of Supply as opposed to a Tax Invoice.
What is a Bill of Supply?
A Bill of Supply is a document prepared by a seller to a buyer when the seller cannot impose GST or the nature of the transaction does not trigger GST. This indicates that there is no tax included in a bill of supply.
However, subject to certain criteria, if the value of the supply is less than Rs. 200, a Bill of Supply is not necessary to be generated.
According to section 31(3) of the CGST Act, 2017, a registered taxable person must issue a Bill of Supply instead of a tax invoice when providing GST-exempt goods or services or when paying lesser tax under the Composition Scheme as per section 10 of the Act.
Similar to the Tax Invoice, this bill serves as a record of the sale made by the registered taxpayer and includes information such as the nature and cost of the supply.
However, a tax invoice is generated whenever a registered taxpayer provides goods or services for which the GST is applicable, and this tax information is included in the tax invoice. In contrast, a Bill of Supply is generated when the registered supplier supplies the recipient with products or services for which GST is not applicable.
When is a bill of supply required?
A bill of supply is required in the following cases
- When a registered taxable person supplies goods or services that are exempt from GST, he must issue a bill of supply instead of a tax invoice.
- When a registered taxable person supplies goods or services to an unregistered person, he must issue a bill of supply.
- In the case of a composite supply where only part of the supply is taxable, the bill of supply must show the value of the exempt portion separately.
- When a registered taxable person supplies goods or services to another registered taxable person in a different state or union territory, and such supply is not liable to tax under GST, a bill of supply must be issued.
Understanding the components of a bill of supply
A bill of supply is a document used in GST compliance to record exempt supplies of goods or services.
The following are the components that typically make up a bill of supply
- The name, address, and GSTIN (Goods and Services Tax Identification Number) of the supplier must be clearly mentioned on the bill of supply.
- The date on which the bill of supply is issued must be clearly indicated.
- The bill of supply must provide a detailed description of the goods or services being supplied, including the quantity and value.
- If applicable, the bill of supply must include the HSN (Harmonized System of Nomenclature) code of the goods or services being supplied.
- The words “Bill of Supply” must be prominently displayed on the document to distinguish it from a tax invoice.
- The bill must be signed by the supplier or a person authorized by the supplier.
Notably, a bill of supply must only be used for exempt supplies, and cannot be used for supplies that are subject to the reverse charge mechanism or for supplies of goods or services that are not exempt from GST. You can also automate the process of tracking all your bills by using suitable softwares.
The Role of Bill of supply in GST compliance
The bill of supply is a critical document in GST (Goods and Services Tax) compliance, as it provides evidence of exempt supplies made by a registered taxable person.
Here are the details of the role of the bill of supply in GST compliance
Input Tax Credit
The bill of supply is used by the recipient of the supply to claim input tax credit. Input tax credit refers to the credit that a registered taxable person can claim for the GST paid on inputs (goods or services) used in the course of making taxable supplies. To claim ITC, the recipient must have a valid bill of supply or tax invoice from the supplier.
Record-keeping
The bill of supply serves as a record of exempt supplies made by the supplier. As per GST regulations, the supplier must maintain records of all supplies made, including exempt supplies, for a minimum of five years from the date of supply. The bill of supply is an important document in this regard, as it provides evidence of exempt supplies and helps to maintain accurate records.
Tax liability
The bill of supply is used to determine the tax liability of the supplier for exempt supplies. GST is levied on taxable supplies, and exempt supplies are not subject to GST. By issuing a bill of supply, the supplier is able to demonstrate that the supply is exempt from GST and is therefore not subject to tax.
Audit
The bill of supply may be used by the tax authorities during an audit to verify the exempt supplies made by the supplier. The bill of supply serves as evidence of exempt supplies and helps to demonstrate compliance with GST regulations.
Compliance with GST regulations
Issuing a bill of supply is a requirement under GST regulations for exempt supplies. The bill of supply must contain certain specified information, including the supplier’s details, a description of the goods or services supplied, and the words “Bill of Supply”. Failure to issue a bill of supply or to comply with the regulations can result in penalties and fines.
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