What is a Tax Invoice?

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Section 31 of the CGST Act has made it mandatory for every registered supplier to issue a tax invoice for every supply of goods or services. If the supplier is unregistered, the buyer needs to issue a payment voucher and a tax invoice.

Meaning of a tax invoice

All registered taxpayers are required to issue a tax invoice to their customers. A tax invoice primarily contains details of goods sold, quantity, taxes charged, and taxable value. It is primary evidence based on which a customer can claim an input tax credit. 

Contents and format of a tax invoice

A tax invoice should ideally contain the below details:

  1. Supplier name and contact 
  2. Customer name and contact
  3. Tax invoice number
  4. PAN and GSTIN of the supplier and customer
  5. Date of issue of invoice
  6. Place of supply of goods
  7. Tax rate, HSN code and tax amount
  8. Description of goods sold
  9. The taxable amount, along with the gross value of goods sold
  10. Discount given
  11. Applicability of RCM
  12. Signature of supplier or his authorised representative

There are various templates available in the market for issuing a tax invoice. A taxpayer can use these templates and customise the same based on its business and industry needs. This will help to build brand image. An invoicing generating tool can also be used to create invoices. This reduces manual entry and, in turn, improves efficiency. Refer to this page for detailed formats of a tax invoice.

Why is it necessary to use a tax invoice?

Issuance of tax invoices is essential to evidence the supply of goods or services. A tax invoice should be issued at the time of supply by all registered GST taxpayers. From a buyer’s point of view, receipt of tax invoice for goods purchased or services availed is essential to claim the input tax credit. Further, a tax invoice is also essential for various financial reporting purposes.

Also, under GST, tax is charged at the time of supply. Thus, the date of issue of the invoice is an important indicator of the time of supply. Time of supply of goods is the date of invoice or receipt of payment, whichever is earlier.

What is considered a tax invoice in India?

A tax invoice is considered a legal document in India that the supplier should issue to the customer on the sale of goods. Here, the buyer is not the consumer. Hence, a tax invoice is issued and not a retail invoice. It should contain all the details as mentioned in the above section. 

Comparison between tax invoice and receipts

The supplier issues both tax invoices and receipts to the customer. An invoice is sent to demand payment for goods sold or services rendered. In contrast, a receipt is issued as evidence of payment made. Both invoice and a receipt usually contain the same data.

Time limit to issue a tax invoice

The time limit for issuing an invoice depends upon the type of supply that is whether it is a supply of goods or supply of services:

For supply of goods

For the supply of goods from one place to another, a tax invoice shall be issued on or before the time of transfer. If it does not involve a transfer of goods from one place to another, the supplier can issue a tax invoice when the goods are delivered to the recipient.

For supply of services

A tax invoice shall be issued within 30 days from the date of supply. If the supplier is a bank or an insurance company, then the invoice must be issued within 45 days from the date of supply.

How many copies of the tax invoice are to be issued?

For supply of goods

  1. Original invoice- It is sent to the customer and is marked as “original for the recipient.”
  2. Duplicate copy- This is sent to the transporter and is marked as “duplicate for transporter”. A transporter is required to show this invoice as evidence during the transport of goods.
  3. Triplicate copy- The supplier keeps this copy for its use and is marked as “triplicate for supplier”.

For supply of services

  1. Original invoice- It is sent to the customer and is marked as “original for the recipient.” 
  2. Duplicate copy- The supplier keeps this copy for its use and is marked as “duplicate for supplier”.

ClearOne software can be used to create GST compliant tax invoices. It facilitates fast-tracking of invoices and also payments due. By using the same mobile number for mobile apps and the web, all the data will be synced, which increases efficiency.