What Is a Bill of Supply?

The Bill of Supply is a document that is specifically used when a transaction is exempt from GST or when the business is not required to recover GST from its customers. Unlike regular invoices, the bill of supply does not display any tax amount, rendering it ineligible for input tax charges.

Under the Goods and Services Tax (GST), businesses are required to issue tax invoices to buyers, outlining the applicable GST rate on the goods and services provided. However, certain GST-registered businesses find themselves in unique situations where they cannot charge any tax on the invoices they issue. In such cases, these businesses must utilize a different document known as a "Bill of Supply."

Who Should Issue Bill of Supply?

The following people must issue a bill of supply format document:

Composition Scheme Dealers:

Taxpayers with an annual turnover of less than INR 75 lakh can opt for the GST composition scheme. Under this scheme, dealers must pay the GST out of their own pockets rather than collecting it from their buyers. Consequently, they must issue a bill of supply instead of a tax invoice.

The bill of supply for composition dealers must prominently display the phrase "Composition taxable person not eligible to collect taxes on supplies." This provision ensures compliance and distinguishes their invoices from those of regular taxpayers.

Exempted Goods Supplier:

Registered dealers who supply exempt goods or services, such as unprocessed agricultural products, must issue a bill of supply rather than a tax invoice. It ensures compliance with the exemption provisions.

Exporters:

Export supplies are categorized as zero-rated under GST, meaning no GST is charged to them. Instead, they issue a bill of supply. For export transactions, the bill of supply should mention either "Supply meant for export on payment of IGST" or "Supply meant for export under bond or letter of undertaking without payment of IGST."

Components of a Bill of Supply Format

Here are the main components of the format of the bill of supply under GST:

Supplier Information

The bill of supply should clearly state the supplier's information.

Bill of Supply Number

Each bill of supply must have a unique number generated for the respective financial year.

Date of Issue

The bill should prominently display the issue date, providing a reference point for the transaction.

Recipient Information (If Registered)

In the case of a registered recipient, the Bill of Supply should include their information.

HSN Code or SAC Code

The bill of supply must specify the appropriate Harmonized System of Nomenclature (HSN) code for goods or the Service Accounting Code (SAC) for services.

Description of Goods or Services

A clear and concise description of the goods or services should be provided.

Value of Goods or Services

The bill of supply should indicate the value of the goods or services after adjusting any discounts or reductions.

Supplier's Signature

To authenticate the document, the bill of supply should bear the supplier's signature.

Benefits of Using a Bill of Supply Format

Compliance with GST Regulations

The bill of supply ensures compliance with GST regulations, particularly when tax cannot be charged or is exempted. Businesses can avoid penalties and legal complications by using the appropriate document for such transactions.

Accurate Record-Keeping

The bill of supply serves as a comprehensive record of transactions that do not involve tax collection. Maintaining a proper record of these transactions allows businesses to easily reconcile their financial statements, track sales, and demonstrate transparency during audits or inspections.

Distinction from Tax Invoices

Businesses can differentiate between taxable and non-taxable transactions using a bill of supply instead of a tax invoice. This distinction is crucial for accurate reporting and ensuring the correct treatment of supplies in financial statements.

Simplified Invoicing Process

The bill of supply format provides a streamlined and simplified invoicing process, particularly for composition scheme dealers, exporters, and exempt goods or services suppliers. It eliminates the complexities associated with tax inclusions.

Common Mistakes to Avoid on Bill of Supply

Here are some common mistakes to avoid in the bill of supply format:

Incorrect or Missing Vendor or Buyer Details

Failing to provide accurate vendor or buyer information on the bill of supply can lead to confusion and difficulties in identifying the parties involved. Ensure that the information is correct.

Inaccurate Description of Goods or Services

Providing an inaccurate description of the goods or services being supplied can lead to misunderstandings and disputes. It's crucial to describe the items concisely.

Improper Calculation of Taxes

Incorrectly calculating taxes or failing to include the appropriate tax rates can result in compliance issues and potential financial discrepancies. Double-check all tax calculations.

Lack of Clarity in Payment Terms

Failure to clearly state the payment terms on the bill of supply can lead to disputes and delays in payment. Specify the agreed-upon payment terms clearly.

FAQs on Bill of Supply Format

What is the purpose of a bill of supply?

The purpose of a bill of supply is to document transactions where tax invoices are not applicable or when the supplier is not required to charge tax.

Is the Bill of Supply and Invoice the same?

No, a bill of supply and an invoice are not the same. While both documents serve as transaction records, the bill of supply is issued in cases where tax invoices are not applicable, whereas an invoice includes the tax amount charged on the goods or services.

Is the HSN code mandatory for the bill of supply?

The requirement of mentioning the HSN code on a bill of supply depends on the business's turnover. The HSN code is not mandatory for turnover less than INR 1.5 Crores.

Who will issue the bill of supply?

The supplier is responsible for providing a valid bill of supply when tax invoices are not applicable or when tax is not charged on the transaction.

Is a bill of supply mandatory for all businesses?

No, a bill of supply is not mandatory for all businesses. It is specifically required in certain situations, such as when a company is registered under the composition scheme for exporters and suppliers of exempt goods or services.