A tax invoice charges GST and lets a registered buyer claim it back. A bill of supply charges no GST at all. Which one you issue depends on whether you're in the composition scheme and what you are selling. Getting it wrong is one of the most common mistakes small shops make.
The short answer
| You are… | Selling… | Issue |
|---|---|---|
| A regular GST dealer | Taxable goods or services | Tax invoice |
| A regular GST dealer | Exempt or nil-rated goods or services | Bill of supply |
| A regular GST dealer | Taxable and exempt items together to an unregistered buyer | One invoice-cum-bill of supply is allowed |
| A composition dealer | Anything | Bill of supply, always |
Why composition dealers can't issue a tax invoice
Under the composition scheme you pay GST as a small percentage of your turnover, from your own pocket. In return you may not collect GST from customers, so there is no tax to show on the bill. Your buyers, even registered ones, can't claim input tax credit on what they buy from you.
The declaration composition dealers must print
Every bill of supply issued by a composition dealer must carry these words at the top:
composition taxable person, not eligible to collect tax on supplies
You must also write "composition taxable person" on the signboard or notice displayed prominently at your shop, so customers know before they buy.
What a bill of supply must show
- Your name, address and GSTIN.
- A consecutive serial number of at most 16 characters, unique for the financial year (letters, digits,
-and/only). - The date of issue.
- The buyer's name, address and GSTIN, if the buyer is registered.
- The HSN code for goods or SAC for services.
- A description of the goods or services.
- The value of the supply, after any discount.
- Your signature or digital signature, or that of your authorised representative.
What it must not show is any GST amount or rate. Charging "GST" on a bill of supply means collecting tax you aren't allowed to collect.
Composition scheme rules that catch shops out
- Turnover limit: ₹1.5 crore a year for traders and manufacturers (₹75 lakh in some special category states). There is a separate scheme for service providers with a ₹50 lakh limit.
- Rates on turnover: 1% for traders and manufacturers, 5% for restaurants, 6% under the scheme for service providers. These are split equally between CGST and SGST.
- No sales to other states. A composition dealer can't make inter-state sales of goods. That includes orders from customers in other states through your own website. Keep online sales within your state.
- No input tax credit on your purchases.
- Some goods are excluded from the scheme altogether, such as ice cream, pan masala and tobacco products.
- Returns are different: instead of GSTR-1 and GSTR-3B, you file CMP-08 every quarter (by the 18th of the month after the quarter) and GSTR-4 once a year (by 30 April).
Bill of supply for regular dealers
A regular dealer issues a bill of supply for exempt or nil-rated goods or services, such as fresh vegetables or fresh milk. If a single sale mixes taxable and exempt items to an unregistered buyer, one combined invoice-cum-bill of supply can be issued instead of two documents. Exempt sales are still reported, in GSTR-1's nil-rated and exempt section.
For what a full tax invoice needs, see the GST invoice format checklist.
How InvenCore handles it
When you set up InvenCore you choose your GST type, Regular or Composite. Then:
- Regular dealers get tax invoices with the GST split.
- Composition dealers get bills of supply that show no tax.
- Reports switches to the returns you actually file: GSTR-1, GSTR-3B and GSTR-9 for regular dealers, CMP-08 and GSTR-4 for composition dealers.
This guide is general information, not tax or legal advice. GST rules change through notifications and circulars, so check the latest position on gst.gov.in and cbic-gst.gov.in, or ask your tax professional.