Issue a tax invoice when you are a regular GST-registered seller making a taxable sale; it shows GST separately and lets a registered buyer claim input tax credit. Issue a bill of supply when you are a composition dealer, or when the goods or services you are selling are exempt from GST. A bill of supply shows no tax, and the buyer cannot claim input tax credit on it.
The difference at a glance
| Point | Tax invoice | Bill of supply |
|---|---|---|
| Who issues it | Regular GST-registered seller making a taxable supply | Composition dealer, or a registered seller of exempt goods or services |
| Is GST shown? | Yes. Rate and amount of CGST, SGST or IGST | No. No tax is charged or shown |
| Input tax credit for the buyer | Available to a registered buyer, subject to the usual conditions | Not available |
| Rule that lists the contents | Rule 46 of the CGST Rules | Rule 49 of the CGST Rules |
When a tax invoice is used
A seller registered under the regular scheme issues a tax invoice for every taxable sale of goods or services. The full list of fields is in our guide to the mandatory fields on a GST invoice.
When a bill of supply is used
Section 31(3)(c) of the CGST Act says a bill of supply is issued instead of a tax invoice in two cases:
- Composition dealers. A person paying tax under Section 10 (the composition scheme) cannot collect GST from customers, so every sale goes on a bill of supply.
- Exempt supplies. A registered person selling goods or services that are exempt from GST issues a bill of supply for those sales.
What a bill of supply must contain
Rule 49 lists the contents:
- Name, address and GSTIN of the supplier
- A consecutive serial number of not more than 16 characters, unique for the financial year
- Date of issue
- Name, address and GSTIN or UIN of the buyer, if the buyer is registered
- HSN code for goods or service accounting code for services
- Description of the goods or services
- Value of the supply, after any discount or abatement
- Signature or digital signature of the supplier or an authorised person
There is no tax rate or tax amount on a bill of supply.
Extra rules for composition dealers
- Write the words "composition taxable person, not eligible to collect tax on supplies" at the top of every bill of supply.
- Do not charge GST to the customer. You pay tax on your turnover at the composition rate out of your own pocket.
- You cannot claim input tax credit on your purchases, so the GST you pay to suppliers becomes part of your cost.
- Display "composition taxable person" on the signboard at your place of business.
The composition scheme has a turnover limit and conditions, and they have changed over time. Check the current limit and whether your business qualifies on the GST portal or with your CA before you opt in.
If you sell both taxable and exempt goods
Many shops sell a mix, for example loose unpacked grains that are exempt and packaged goods that are taxable. Rule 46A allows a registered person selling both taxable and exempt goods or services to an unregistered buyer to issue a single invoice-cum-bill of supply for the whole sale, instead of two separate documents.
Small sales below ₹200
As with a tax invoice, a separate bill of supply is not required for a sale below ₹200 to an unregistered buyer who does not ask for one. A consolidated bill of supply is prepared at the end of the day for such sales.
How FundRaksha Book handles the two schemes
When you set up FundRaksha Book you choose regular or composition. Under the regular scheme, GST is shown and charged separately on every bill. Under the composition scheme, no separate GST is charged on the bill, and the GST you paid on purchases is built into your selling price so that your margin stays right. See how pricing works under composition or start free.
Frequently asked questions
Can a composition dealer charge GST on a bill?
No. A composition dealer cannot collect GST from customers and must issue a bill of supply, not a tax invoice.
Can the buyer claim input tax credit on a bill of supply?
No. A bill of supply has no tax on it, so there is nothing to claim as input tax credit.
Does a bill of supply need an HSN code?
Rule 49 lists the HSN code of goods or the accounting code of services among the contents of a bill of supply. The relaxations by turnover that apply to tax invoices are applied to it in the same way; confirm with your CA what applies to you.
What is an invoice-cum-bill of supply?
It is a single document that a registered person may issue to an unregistered buyer when the sale includes both taxable and exempt goods or services. It is allowed by Rule 46A of the CGST Rules.
I am not registered under GST. Which one do I issue?
Neither. An unregistered seller cannot charge GST and issues an ordinary bill or cash memo. Tax invoices and bills of supply are documents for GST-registered persons.
This guide is general information for Indian businesses, not tax advice for your specific case. GST rules, limits and dates change; confirm the current position with your CA or on the GST portal (gst.gov.in) before acting.
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