INFORMATIVE DETAIL ABOUT INVOICE

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GST Invoice is nothing but a business instrument issued by a supplier or a seller to the recipient or the buyer of goods and services. Such a document indicates the names of the parties involved as well as the details of goods or services supplied under a given transaction. These details include the:

  • product name
  • description
  • quantity of goods or services sold
  • details of the supplier and the purchaser
  • terms of supply
  • date of supply
  • price of each good sold or service rendered
  • discount

Thus, an invoice is a document based on which the supplier asks for payment. Furthermore, when such a payment is made, it serves as a document of title to the buyer. Under the GST regime, it is mandatory to issue invoices whenever there is a supply of goods or services.

However, issuing invoices only on behalf of the person supplying such goods or services is not mandatory. As per GST law, any registered person who purchases goods or services from an unregistered person is required to issue both payment vouchers and GST invoices for such transactions.

In addition, there are various types of GST invoices. The type of invoice to be issued depends on the type of registered person who is supplying.

For example, if a registered person supplies or purchases goods from an unregistered person, a GST challan should be issued by such registered person. However, if a person registered under GST is supplying exempted goods or registered under composition scheme, he is required to issue a bill of supply in such a case.

Finally, the registered person is not required to issue an invoice or bill of supply if the value of the supply is less than Rs 200.

Why is it important to issue challans under GST?

Issuing invoices under GST is extremely important for various reasons.

  1. proof of supply
    The challan serves as proof of supply of goods and services by a registered person under GST. It forms the basis on which a supplier can demand payment from the buyer of such goods and services.
  2. Claiming ITC
    Challan is important under GST as it is a document based on which the recipient claims ITC for the input purchased by him. This means that a recipient cannot claim ITC unless he has a tax invoice or debit note.
  3. Supply Time
    An invoice is issued at the time of supply of goods or services. GST is charged at the time of supply of goods or services. In addition, an invoice is issued at the time of supply of goods or services. This is one of the factors that indicate the timing of supply. This is because the time of supply is nothing but the date on which the invoice is issued or the date on which payment is received, whichever is earlier.

Tax invoice
An invoice is a commercial document that issues a supplier of goods or services to the recipient in a given transaction. Such a document indicates details of the goods or services supplied as well as the names of the parties involved under the given transaction. These details include:

  • Product name
  • description
  • Quantity of goods or services sold
  • Supplier and Buyer Details
  • Terms of supply
  • Supply date
  • Price of each good sale or service provided
  • concession
  1. Bill of Supply
    Bill of supply is a type of invoice that is issued by a registered person under the composition scheme in GST along with the goods issued by a registered person. As per the CGST Act, 2017, every registered person supplying exempted goods or services or paying taxes under the exemption scheme is required to issue a bill of supply in place of the tax invoice.
  1. Receipt voucher / refund voucher in case of receipt of advance payment.
    By law, any registered person who receives an advance payment for the supply of goods or services must issue a receipt voucher. This is nothing but a document which is a proof of receipt of such advance payment. Receipt vouchers include details that are set out in the invoice rules under the law.

In addition, say that the supplier does not supply goods or services against receipt vouchers issued later. In this case, such a registered supplier, who has already received advance payment, is required to issue a refund voucher for such payment receipt.

At the time of receiving the advance payment, as per the invoice rules, further:

  • Tax rate is not fixed, tax is paid at the rate of 18%
  • Nature of supply is not determined, it will be taken as inter-state supply
  1. Invoices and payment vouchers are required to pay tax on a reverse charge basis to be issued by the person
    By law, any registered person who receives an advance payment for the supply of goods or services must issue a receipt voucher. This is nothing but a document which is a proof of receipt of such advance payment. Receipt vouchers include details that are set out in the invoice rules under the law.

Furthermore, say that the supplier does not supply the goods or services against the receipt vouchers issued later. In this case, such a registered supplier, who has already received advance payment, is required to issue a refund voucher for such payment receipt.

At the time of receiving the advance payment, as per the invoice rules, further:

  • Tax rate is not fixed, tax is paid at the rate of 18%
  • Nature of supply is not determined, it will be taken as inter-state supply
  1. Invoices in case of continuous supply of goods and services
    There are cases where goods are supplied on an ongoing basis. Such continuous supply of goods includes frequent statements of accounts or frequent payments. In these cases, each such statement is issued once or once or each such payment is received by the supplier.

In case of continuous supply of services:

  • An invoice is issued on or before the due date of payment. Provided that such due date can be determined from the contract.
  • An invoice is issued by the supplier at the time of receipt of payment for the services rendered. Provided that the due date of payment cannot be ascertained from the contract.
  • The challan is issued on or before the completion date. Provided payment is associated with completion of work.
  1. Issue of invoices in cases where the supply of services ceases
    Invoices in the case where the supply of services terminates under a contract before the actual fulfillment of the supply.

There are cases where the supply of services terminates under a contract before the actual termination of such supply. In such situations, the invoice should be issued at a time when such supply is exhausted. In addition, an invoice is issued for the period for which services were rendered prior to such termination.

Here is an infographic that explains the types of invoices in GST in a very simple way.

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