Bill of Supply: Meaning, Format, & When to Use It

If you run a business and registered under GST in India, you’ve probably heard about the bill of supply. Business needs to issue this document when they are not allowed to charge GST on your goods or services. You generate and issue it when you sell GST-exempt items, such as fresh fruits or educational services, or when you opt for the Composition Scheme under GST. Under this scheme, you pay tax at a fixed rate as a supplier but can’t collect GST from your customers.

What is Bill of Supply in GST

A registered business can issue a bill of supply under India’s GST system when it is not allowed to charge GST on its goods or services. This happens when the business supplies exempt goods or services or registers under the Composition Scheme. Unlike a regular tax invoice, which includes GST charges, a bill of supply does not show any tax. The supplier is either not allowed to collect GST or the goods/services being sold are exempt from GST altogether. This document serves as proof of supply and is legally recognised under GST law.

A bill of supply looks similar to a tax invoice in layout but has no tax details like CGST, SGST, or IGST. It includes the basic transaction details such as the name of the buyer and seller, description of goods/services, value, and other prescribed fields, but it will not show any GST amount. 

When is a bill of supply used instead of a tax invoice?

Here are the common situations where a bill of supply replaces a tax invoice:

A supplier is registered under the composition scheme

Businesses under this scheme pay GST at a fixed rate on their turnover but cannot charge GST to their customers. For example, a small furniture maker who has opted for the Composition Scheme must issue a Bill of Supply for every sale made, without adding any GST.

The goods or services supplied are exempt from GST

Some goods and services are classified as exempt or nil-rated under GST law. This means they are not taxed at all. In such cases, even though the supplier is registered under GST, they must issue a Bill of Supply because no GST is being collected.
For example, if a registered farmer sells fresh vegetables (which are exempt), they must issue a Bill of Supply.

Exporting goods or services without claiming Input Tax Credit (ITC)

Some exporters choose not to claim ITC and export their goods or services without charging GST. In such cases, they must issue a bill of supply instead of a tax invoice.

Who should issue bill of supply and when?

Under GST in India, not all registered businesses are allowed to issue tax invoices. Some are required to issue a bill of supply instead, depending on the nature of their business or the type of goods and services they provide. Let’s understand who must issue a Bill of Supply and see a few examples to make it clear.

Composition scheme dealers

Businesses registered under the composition scheme are required to issue a bill of supply as they are not allowed to collect GST from customers. Instead, they pay GST at a fixed rate directly to the government based on their total turnover.

Suppose a small restaurant owner with an annual turnover under ₹1.5 crore has opted for the Composition Scheme. When they offer meals to customers, they cannot charge GST separately, so they must issue a bill of supply for each sale.

Suppliers of exempted goods or services

If a registered business deals only in exempt goods or services, it cannot issue a tax invoice because no GST is involved in the transaction. Hence, such businesses are required to issue a bill of supply.

Imagine a farmer selling fresh fruits or a coaching centre offering education up to the higher secondary level. Both fall under the GST-exempt categories. Even though they may be registered under GST, they must issue a bill of supply for their sales.

Bill of supply format under GST

A bill of supply under GST must follow a specific format laid out in the GST rules. While it may look similar to a regular invoice, it does not include any GST amounts. To be valid, it must contain certain mandatory details. These fields ensure that the document is compliant and can be used for official records, transport, and audits.

Here’s a list of key details that must be included in a Bill of Supply:

• Supplier details: Name, address, and Goods and Services Tax Identification Number of the supplier.
• Serial number: A consecutive serial number, not exceeding 16 characters. It should be unique for each financial year and can include letters, numbers, or special characters like hyphens or slashes.
• Date of issue: The exact date when the bill of supply is issued.
• Recipient details (if applicable): Name, address, and GSTIN or Unique Identity Number (UIN) of the recipient (if they are also registered under GST).
• HSN/SAC code: The HSN (Harmonised System of Nomenclature) code for goods or SAC (Service Accounting Code) for services. This is mandatory if the business's turnover exceeds prescribed limits under GST rules.
• Description of goods or services: Clear description of the goods or services being supplied.
• Value of supply: The total value of the goods or services supplied. This should take into account any discounts, if applicable.
• Signature: The signature or digital signature of the supplier or an authorised representative.

Legal provisions under GST

The use of a bill of supply is not optional. It is clearly defined and required under the GST law in India. The legal basis for issuing a Bill of Supply is found in Section 31 of the Central Goods and Services Tax (CGST) Act, 2017. This section states that a registered person supplying exempted goods or services, or a person paying tax under the Composition Scheme, shall issue a Bill of Supply instead of a tax invoice. This ensures that businesses do not wrongly charge or collect GST when they are not permitted to do so.

Bill of supply vs tax invoice

A bill of supply and a tax invoice may look similar in format, but they serve different purposes under GST law. Knowing which one to use depends on whether GST is charged on the transaction.

Here's a clear comparison to help understand the key differences:

A bill of supply is issued when the seller is not allowed to charge GST, such as when exempt supplies or composition scheme dealers are not allowed to charge. On the other hand, a Tax Invoice is used when GST is charged and collected from the buyer, allowing them to claim an Input Tax Credit. Both documents are essential under GST, and using the correct one ensures smooth compliance and transparent transactions.

Consequences of non-compliance

Failing to issue a bill of supply when it is required can lead to:

• Penalties under GST law: If a business issues a tax invoice instead of a bill of supply in exempted or composition cases, it may be seen as wrongly collecting tax. This can attract fines or demands from tax authorities.
• Mismatch in GST returns: Improper documentation can lead to errors while filing GST returns, possibly triggering audits or notices from the department.
• Rejection of records during audits: If a business is audited and is found to have issued the wrong type of document, its invoices could be disallowed for compliance, affecting record-keeping and reporting accuracy.

How TallyPrime helps with bill of supply?

If you're a small business owner, creating bills manually can take a lot of time and may lead to mistakes. That’s why  TallyPrime, a simple and smart accounting software that helps business with GST billing. With Tally, you don’t have to worry about whether to issue a tax invoice or a bill of supply. The software automatically chooses the correct type of document based on the kind of sale you're making. 

For example, if you’re a composition dealer or selling exempted goods, Tally will generate a bill of supply instead of a tax invoice. All the important details like your business name, GSTIN, customer information, product details, and value of supply are filled in correctly. The format also follows the rules of GST, so your bills are always legally compliant.

TallyPrime also lets you customise the look of your bill, you can add your logo, choose the layout, and print it easily. It saves your time, reduces paperwork, and helps you stay ready for GST returns or audits.

A bill of supply is an important document under GST, especially for businesses that do not charge GST, like composition dealers, exporters (without ITC), or those dealing in exempt goods or services. It replaces a tax invoice in such cases and helps ensure your billing is GST-compliant. Knowing when and how to issue a bill of supply keeps your business in line with GST rules and avoids penalties. And with tools like TallyPrime, creating a correct and professional bill of supply becomes quick and easy.

FAQs

What is a bill of supply in GST, and when is it required?

A bill of supply is a document issued when a registered seller is not allowed to charge GST on a sale. It is required in cases like exempt supplies or when the seller is under the GST Composition Scheme.

Who is eligible to issue a bill of supply under GST?

The following can issue a bill of supply:

• Dealers under the Composition Scheme
• Suppliers of exempted goods or services
• Exporters not claiming input tax credit

Can a composition dealer issue a tax invoice instead of a bill of supply?

No. Composition dealers are not allowed to issue tax invoices because they cannot collect GST from customers. They must issue a bill of supply.

What is the difference between a tax invoice and a bill of supply?

A tax invoice is used when GST is charged on the supply and the buyer can claim input tax credit. A bill of supply is used when GST is not charged, and the buyer cannot claim input tax credit.

Do I need to include the HSN code in a bill of supply?

Yes, if your business turnover exceeds the prescribed limit under GST, then mentioning the HSN code is mandatory.

Are there penalties for not issuing a bill of supply when required?

Yes. If you fail to issue a bill of supply when it's required, it may lead to penalties under GST law and problems during audits or return filing.

Bill of supply in GST to accompany transport of goods

Yes, the person-in-charge of the conveyance must carry a copy of the bill of supply.

What is tax invoice cum bill of supply in GST?

Where the registered person is engaged in effecting both taxable and exempt supplies, he may title the document ‘Tax invoice cum bill of supply’ instead of ‘tax invoice’, ONLY in respect of supplies effected to an unregistered person.

What is the relation between input tax credit and GST bill of supply

No relation, as it is not possible to take input tax credit based on the bill of supply.

Do provisions of E way bill apply to bill of supply under GST?

Yes, the provisions of E Way bill apply to a Bill of Supply in GST for consignment value exceeding Rs.50,000/-. Consignment value to mean value of supply as mentioned on the invoice including the applicable tax thereon.

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