In the context of Goods and Services Tax (GST) law as applicable in India, a tax invoice is a document issued by a supplier to a buyer that provides details about the sale of goods and/or services and the applicable GST.
In GST, every transaction should be supported by at least one of the documents as specified in Goods and Services Tax law.
Tax invoice issued by the supplier serves as a proof of the transaction for GST compliance. Tax invoice is the basic document for the movement of goods.
All registered persons other than the supplier of exempted goods and/or services and composition dealer shall issue a tax invoice for making taxable supply of goods and/or services.
Tax invoice works as evidence of supply of taxable goods and/or services. It’s also required to claim input tax credit and for claiming refund. A tax invoice should contain various particulars as per GST law.
Here are the key elements a GST tax Invoice should have for better compliance;
- Supplier’s trade name, registered office address, and GSTIN (Goods and Services Tax Identification Number).
- Recipient’s trade name, registered office address, and GSTIN if registered.
- A unique number for the tax invoice for tracking purposes.
- The date when the invoice is issued.
- Description of Goods and/or Services.
- Quantity and Unit.
- Taxable value before applying GST.
- Applicable GST rates on the goods and/or services.
- GST charged, broken down into IGST or CGST, SGST, or UTGST, depending on the location of the transaction.
- Total invoice value including the GST.
- Any other details required by law.
Time of the supply and tax invoice
Time of the supply is the point when the taxable event triggers the liability to pay tax on the taxable person. Time of supply on goods under forward charge mechanism is the earlier of followings;
- Date of issue of invoice by the supplier,
- Date on which supplier receives the payment, and
- Last date on which invoice required to be issued by the supplier.
Therefore, the issue of the tax invoice is one of the factors to determine the time of supply under GST.
In the case of services, time of supply under forward charge is the earlier of followings;
- Date of invoice, if invoice issued within 30 days / 45 days, otherwise date of provision of service,
- Date on which supplier receives the payment
If date cannot be determined as above, then date of entry in books of account of the recipient of services is considered as time of supply.
In case of a banking company, insurer, financial institution including a non banking financial company (NBFC), the time limit for issuing invoice is 45 days instead of 30 days.
When to issue a tax invoice?
Tax invoice under GST law should be issued before or at the time of removal of goods.
In case of continuous supply of goods, tax invoice should be issued either when each statement is issued or when each such payment is received, whichever is earlier.
If any goods are sent on approval basis for sale or return, then the tax invoice should be issued either when it becomes known that supply has taken place or six months from the date of removal, whichever is earlier.
When initial transportation of goods is for reasons other than by way of supply, instead of a tax invoice, a delivery challan can be issued. Invoice can be issued after delivery of goods.
In the case of reverse charge, a tax invoice needs to be issued by the recipient in case the supplier is not registered in GST. In this case a tax invoice should be issued on the date of receipt of goods. In this case, the tax invoice raised by the recipient is referred to as “Self-generated Tax Invoice” or “Self Invoice”.
When to issue tax invoices for services?
A registered person supplying taxable services can issue a tax invoice as per GST law before or after the provisions of services but within 30 days from the date of supply of services.
In case of continuous supply of services, tax invoices should typically be issued based on the frequency agreed upon in the service contract.
If the service is billed monthly, issue the invoice at the end of each month for services rendered during that period.
In cases where services are delivered in phases or milestones, you need to issue an invoice upon the completion of each milestone.
For longer-term services, you might issue tax invoices under GST quarterly or annually, depending on the agreement.
Some agreements allow for invoices to be issued upon the client’s request, even for continuous services.
Make sure to follow these regulations regarding invoice issuance and timing. Always clarify the invoicing schedule in your service agreement to avoid confusion.
Also Read: Types of invoices issued under Goods and Services Tax (GST) law.
