All about Commercial Invoice

Often, international shipping consists of heavy documentation. Documents are necessary at practically every stage for verification and clearance purposes. Commercial invoices are to be produced while shipping goods to international clients.

Meaning and Importance of a Commercial Invoice

In simple words, a commercial invoice is an export document that serves as legal evidence of a sale transaction between the buyer and the seller. It is mainly used for clearance purposes with regard to customs and helps in the determination and assessment of duties and taxes payable. It contains the full description of goods sold, their quantities, and value as previously agreed upon by the parties.

The importance of a commercial invoice can be seen in the following manner-

• Helps in maintaining records

Commercial invoices are a mandatory document in the import and export procedures and constitute an important part of the paper trail for transactions relating to exports and imports.

• Proof of sale

Since a commercial invoice contains all the transaction details, including the details of the buyer, seller, and description and value of goods, it constitutes an essential part of the evidence that the sale transaction has taken place.

• Guarantees payment

A commercial invoice is a legal document evidencing a sale transaction and therefore plays a vital role in ensuring payment for the same.

• Assistance in verification

The description of goods in terms of quality, quantity and price enables the importer to cross-check and verify the contents of the shipment to see if they correspond to the contents mentioned in the commercial invoice. 

• Can serve as a notice for payment due

The commercial invoice contains all the details of a regular invoice and can be used as a reminder for payments due. It is an efficient tool to maintain customer relationships.

• Ensures no one gets fleeced

Since the commercial invoice is relatively detailed and can be used as proof, there is no way the buyer can escape payment of the same.

Indian Laws on Commercial Invoices

The CBIC requires certain mandatory documents to be submitted as part of the import or export procedures. One among them is the commercial invoice. As per Circular No. 01/15-Customs,

If submitted, a commercial invoice cum packing list would fulfil the criteria required by the Customs authorities for proper import or export procedures since both documents were found to have similar fields.

As per the Foreign Trade Policy, to carry out import and export activities, the following documents are mandatory:-

• Airway bill/bill of lading
• Commercial invoice cum packing list
• Shipping bill

Time Limit for Raising a Commercial Invoice Under Indian Law

As per the GST laws, a registered taxable person who supplies goods subject to taxes must mandatorily issue an invoice depicting the nature, quantity, and value of goods, the tax chargeable on those goods, and additional information may be necessary.

If the supply involves the movement of goods, the invoice has to be raised on or before the removal of goods for supply from the location of the supplier to the buyer. In other words, the invoice shall be issued on or before the dispatch date of such goods.

Contents of a Commercial Invoice

A commercial invoice does not carry the title or ownership of the goods. It merely functions as a proof of sale between the buyer and the seller. A commercial invoice contains the following information-

• Information regarding the buyer and seller
  • Name, address, tax information, and contact details of the buyer
  • Name, address, tax information, and contact details of the seller

• Information regarding the transaction
  • Date of the invoice
  • Invoice number
  • Order number
  • Description of the goods
  • Quantity and value of the goods
  • Mode of payment and related instructions
  • IEC Code and GSTIN
  • Country of origin

• Shipping related information
  • Freight charges
  • Export route
  • Date of shipment
  • Gross weight
  • Number of packages
  • Insurance charges

Sample Format of a Commercial Invoice

How is Packing & Shipping dealt with in a Commercial Invoice?

In accordance with the earlier mentioned customs circular, a commercial invoice cum packing list may be prepared where packing and shipping details will be included with the regular commercial invoice fields. The packing and shipping details may consist of-

• Country of origin
• Final destination
• Gross weight
• Number of packages
• Export route/carrier
• Loading port
• Discharge port
• Marks and number

This ensures that there is ease of doing business and trade-related activities.

FAQs on Commercial Invoice

Difference between customs invoice and commercial invoice

Commercial invoices are commonly used by small businesses that sell products to consumers. Therefore, they are used in cases where the payment has already been made for the goods. It serves as documentation for customs purposes.
On the other hand, large volume importers and exporters who usually deal with other businesses are used customs invoices. Just as a commercial invoice, the customs invoices contain all the details necessary to sort out the customs formalities.

Who issues a commercial invoice?

The seller or the exporter issues commercial invoices to the buyer or the importer. The invoice acts as proof of sale.

What does HS mean on a commercial invoice?

The Harmonized System is a method of classifying traded products used by customs authorities all around the world. This enables them to assess the duties and taxes leviable on products and services.

What should be on a commercial export invoice?

Full details of the seller and the buyer, details of the goods supplied (quantity, price per unit, total amount), shipping details (country of origin and country of destination) should be included in a commercial export invoice.

Do all countries require a commercial invoice?

Shipments of any kind outside the European Union require a commercial invoice. It is a customs declaration provided by the exporter. Countries within the European Union do not require a commercial invoice.