Tax Invoice vs Bill of Supply
4 min read
By
TranZact Solutions Team
· Published
A tax invoice is issued for a regular taxable GST supply and shows the tax charged: CGST plus SGST/UTGST, or IGST. A bill of supply is issued when no GST applies, under the Composition Scheme or on an exempt supply, and never shows a tax amount. Using the wrong one is a compliance error.
This guide covers when a tax invoice is required versus a bill of supply, and what each must and must not show. It also explains why only one supports an input tax credit claim.
What Is a Tax Invoice and What Is a Bill of Supply?
A tax invoice is the document a regular GST-registered supplier issues for a taxable sale. It shows the GST charged: CGST plus SGST/UTGST for an intra-state sale, or IGST for an inter-state sale.
A bill of supply is issued when no GST is charged on the transaction. Either the supplier is registered under the Composition Scheme, which cannot charge GST separately, or the goods or services are exempt from GST altogether.
The two are not interchangeable formats for the same transaction. Which one applies depends entirely on whether GST is actually chargeable on that specific supply.
Tax Invoice vs Bill of Supply: Side by Side
The two documents differ on four points that determine which one applies:
Tax charged. A tax invoice shows CGST plus SGST/UTGST, or IGST; a bill of supply shows no tax amount at all.
Who issues it. A tax invoice is issued by a regular registered taxpayer on a taxable supply. A bill of supply is issued by a Composition Scheme dealer or on an exempt supply.
Input tax credit. A buyer can claim ITC against a valid tax invoice; a bill of supply carries no ITC, since no tax was charged.
Legal basis. Both are governed by Section 31 of the CGST Act, tax invoice for taxable supply, bill of supply specifically for composition or exempt cases.
Which GST document to issue
Check your GST registration type
Composition dealer: issue a bill of supply
Exempt supply: issue a bill of supply
Taxable supply: issue a tax invoice
Registered buyer, mixed items: issue both documents
Where Businesses Get This Wrong
The same compliance mistakes show up repeatedly:
Composition dealers charging GST on an invoice. A dealer under the Composition Scheme cannot separately charge GST at all. Doing so on what should be a bill of supply is a direct compliance violation.
Issuing a tax invoice for an exempt supply. Charging GST on goods or services that are actually exempt overstates tax liability and confuses the buyer’s own filings.
Buyers trying to claim ITC on a bill of supply. Since no tax was charged, there is nothing to claim credit against. Attempting it gets flagged in GST return reconciliation.
Not tracking the exemption or composition status correctly. A supplier’s registration type or an item’s exemption status can change, and invoicing software that is not updated keeps issuing the wrong document type.
Mixing taxable and exempt items on one document. A combined invoice-cum-bill of supply is allowed only when the buyer is unregistered, under Rule 46A of the CGST Rules. For a registered buyer, issue a tax invoice for the taxable items and a separate bill of supply for the exempt ones.
TranZact's sales module covers enquiry, quotation, order timeline, dispatch, e-invoicing and payment.
Tax Invoice vs Bill of Supply vs Delivery Challan
Tax charged: a tax invoice shows GST, and a bill of supply shows none. A delivery challan records movement and shows tax only when the movement is for a supply.
Purpose: a tax invoice and bill of supply both document a completed supply. A delivery challan documents movement of goods, which may not be a supply at all.
Who uses a bill of supply: composition dealers and exempt-supply sellers, regardless of whether goods are moving or already delivered.
Who uses a delivery challan: any GST-registered business moving goods for job work, transfer or return, not tied to composition or exemption status.
Manufacturer relevance: knowing which of the three applies to a given transaction is what keeps GST returns and ITC claims accurate on both sides.
How TranZact Helps With GST Invoicing
TranZact generates the e-way bill from the GST invoice, with the e-invoice (IRN) in the same flow. This is available on all plans.
Accounting stays in Tally, and operations run in TranZact. A one-way sync passes the data across with no double entry.
If your business is under the Composition Scheme or sells mainly exempt goods, confirm your invoicing setup with your GST consultant. That changes which document applies.
Want to see the invoice, e-way bill and Tally sync work on your own orders? Book a short walkthrough with our team.
