Bill of Supply: Key Components, Format, and Legal Provisions

Table of contents:

• Introduction
• What is Bill of Supply?
• Who Should Issue a Bill of Supply?
• When to Issue a Bill of Supply?
• Key Components of Bill of Supply
• Format of a Bill of Supply
• Legal Provisions of Bill of Supply
• Penalties for Non-Compliance
• Amendments and Cancellations
• Conclusion

A Bill of Supply is an essential document under the Goods and Services Tax (GST) framework in India. It serves as proof of a transaction where GST is not applicable, such as exempt supplies or sales made by composition scheme taxpayers. Unlike a tax invoice, It is issued without charging GST, making it a crucial tool for businesses to maintain compliance with GST regulations.

This document simplifies compliance processes for businesses by providing a clear record of exempt or non-taxable transactions. For small and large businesses alike, understanding the purpose and proper issuance of the Bill of Supply is vital for avoiding legal complications and ensuring smooth operations under the GST framework.

In this guide, we will explore its concept, format, key components, legal provisions, and scenarios in which it is required, helping businesses comply seamlessly with GST compliances.

What is a Bill of Supply?

A registered supplier under the Goods and Services Tax (GST) framework in India issues a Bill of Supply as a commercial document. Suppliers use it for transactions where GST is not charged. They issue this document for specific types of supplies, such as exempt goods and services or transactions made by taxpayers registered under the composition scheme.

The primary purpose is to serve as proof of sale without including tax details, ensuring compliance with GST laws for non-taxable transactions. Unlike a tax invoice, which includes GST rates and amounts, it excludes such details.

A small business operating under the composition scheme or a supplier dealing in exempt goods, like fresh fruits or certain healthcare services, is required to issue a Bill of Supply for their sales.

Key Highlights of a Bill of Supply:

• It does not contain any GST rates or amounts.
• It applies to exempt supplies, composition scheme taxpayers, and zero-rated exports (without ITC claims).
• It ensures proper documentation and compliance under GST regulations.

By providing clarity and legal compliance, it plays a critical role in India’s tax framework, particularly for businesses dealing with exempt or non-taxable transactions.

Who Should Issue a Bill of Supply?

Specific categories of taxpayers or suppliers under the GST framework in India issue a Bill of Supply. They use this mandatory document for transactions where GST is not charged, ensuring legal compliance and transparency. The entities and scenarios requiring its issuance are outlined below:

Composition Scheme Taxpayers

Taxpayers registered under the composition scheme cannot charge GST on their supplies. They are required to issue a Bill of Supply instead of a tax invoice for all their sales, as per GST regulations.

Must read: New GST Invoice Management System (IMS) applicable from April 2025

Suppliers of Exempt Goods and Services

Businesses dealing in goods or services classified as exempt under GST must issue a Bill of Supply. For example, suppliers of agricultural produce, educational services, or healthcare services fall under this category.

Exporters of Zero-Rated Supplies (Without ITC Claims)

Exporters who choose not to claim input tax credit (ITC) must issue a Bill of Supply for zero-rated supplies instead of a tax invoice.

Unregistered Dealers in Specific Cases

Unregistered dealers engaged in supplying exempt goods or services, where GST is not applicable, may issue a Bill of Supply to maintain proper documentation.

Government-Notified Scenarios

In some instances, the government may specify certain goods or services for which a Bill of Supply is mandatory, irrespective of the supplier’s registration status or tax liability.

When to Issue a Bill of Supply?

A Bill of Supply is issued in specific situations under the GST framework where tax is not charged on the transaction. It serves as a formal document to record sales of exempt goods or services and transactions made by certain taxpayers. Below are the key scenarios where issuing a Bill of Supply is mandatory:

Sales of Exempt Goods and Services: Suppliers must issue a Bill of Supply for transactions involving goods or services classified as exempt under GST, such as sales of agricultural produce, healthcare services, or education-related supplies.

Transactions by Composition Scheme Taxpayers: Businesses registered under the composition scheme issue a Bill of Supply for all their sales because they are prohibited from charging GST.

Zero-Rated Supplies Without ITC Claims:  Exporters who opt not to claim input tax credit (ITC) for their zero-rated supplies must issue a Bill of Supply instead of a tax invoice.

Non-GST Supply Transactions: Businesses may issue a Bill of Supply to document transactions for supplies that fall outside the GST scope, such as petroleum products or alcoholic liquor for human consumption.

Government-Specified Transactions: The requirement mandates that businesses retain Bills of Supply for at least six years from the end of the financial year in which the transaction occurs.

As per GST regulations, the Bill of Supply must be issued at the time of or before the supply of goods or services. Adhering to this timeline ensures compliance and avoids potential penalties or disputes during audits.

Must read: GST Invoice Format in Excel: Types and Download Samples

Key Components of Bill of Supply

The Bill of Supply must include certain mandatory details to ensure compliance with GST regulations. These components help maintain transparency and facilitate audits or record-keeping. Below are the key components:

Supplier and Recipient Details

• Supplier Information: The supplier must clearly mention their name, address, and GSTIN (Goods and Services Tax Identification Number).
• Recipient Information: If applicable, include the name and address of the recipient, along with their GSTIN (if registered).

Unique Serial Number for Each Bill

• Every Bill of Supply must have a unique serial number.
• The serial number should be alphanumeric and consecutive to ensure proper tracking.
• It must be consistent with GST rules for invoicing.

Invoice Date

• The date of issuance is a mandatory detail on the Bill of Supply.
• This ensures clarity on when the transaction occurred and aids in timely compliance with GST timelines.

Description of Goods/Services

• A detailed description of the goods or services being supplied must be included.
• This helps in identifying the nature of the transaction for both the supplier and recipient.

HSN/SAC Codes for Classification

• HSN (Harmonized System of Nomenclature) Code: Used for goods to classify them under GST.
• SAC (Services Accounting Code): Used for services to categorize them appropriately.
• These codes help in standardizing and streamlining the tax reporting process.

Must Read: GST e-Invoice: Meaning, eligibility, format, limit

Format of a Bill of Supply

A Bill of Supply must follow a structured format to ensure compliance with GST regulations. While the government has not prescribed a standard template, the document must include all mandatory details as specified under GST laws.

Download Bill of Supply Template in Excel
Mandatory Details in the Format

1. Header Information:
   • Title: “Bill of Supply.”
   • Business logo (optional).
2. Supplier Details:
   • Name of the supplier.
   • Address.
   • GSTIN (Goods and Services Tax Identification Number).
3. Bill Details:
   • Unique serial number for the bill.
   • Date of issue.
4. Recipient Details (if applicable):
   • Name of the recipient.
   • Address.
   • GSTIN (if the recipient is registered).
5. Transaction Details:
   • Description of goods or services.
   • Quantity (for goods).
   • Unit price or rate.
   • Total value of goods or services.
   • HSN (Harmonized System of Nomenclature) code for goods or SAC (Services Accounting Code) for services.
6. Declaration:
   • A statement declaring that no tax is charged on the invoice due to exemption or composition scheme.
7. Signature:
   • Authorized signatory with designation (can be digital or physical).

Types of Formats

1. Digital Format:
   • Issued using GST-compliant billing software.
   • Easier for record-keeping and sharing.
2. Printed Format:
   • Physical copy provided to the recipient.
   • Signed manually or pre-printed.

Must Read: New GST Invoice Management System (IMS) applicable from April 2025

Legal Provisions of Bill of Supply

The Bill of Supply is governed by specific provisions under the Goods and Services Tax (GST) framework in India. These legal requirements ensure uniformity, compliance, and accountability for businesses engaged in exempt or composition transactions. Below are the key legal provisions:

Key GST Section – Covering Bills of Supply

• Section 31 (3) (c) of the CGST Act, 2017: Mandates the issuance of a Bill of Supply for exempt supplies or supplies by composition scheme taxpayers.
• Rule 49 of the CGST Rules, 2017: Specifies the details required in a Bill of Supply, such as supplier and recipient information, unique serial number, and description of goods or services.

Compliance Obligations for Businesses

• Registered businesses must issue a Bill of Supply for exempt supplies and transactions under the composition scheme.
• The document must include all mandatory fields, as per GST rules, to avoid penalties.
• Businesses must retain Bills of Supply for at least six years from the end of the financial year in which the transaction occurs.

Regulations for Composition Dealers and Exempt Supplies

• Composition taxpayers cannot issue a tax invoice or charge GST on their supplies; instead, they must issue a Bill of Supply.
• Healthcare and education providers, as suppliers of exempt goods or services, must issue a Bill of Supply for their transactions to document compliance.

Audit and Inspection Guidelines

• GST audits may require businesses to provide Bills of Supply as proof of exempt or non-taxable transactions.
• Missing or incorrectly issued Bills of Supply can lead to additional scrutiny during audits or inspections.
• Properly maintained Bills of Supply help businesses avoid disputes or penalties during GST assessments.

Impact of Non-Compliance

• Failure to issue a Bill of Supply when required can result in penalties under Section 122 of the CGST Act, 2017, with fines up to ₹25,000.
• Incomplete or incorrect details on the Bill of Supply can lead to legal complications, including audit failures and potential financial repercussions.
• Non-compliance undermines the credibility of the business and may lead to legal action by tax authorities.

Must read: Section 122 of GST Act: Penalties for Tax Evasion and Willful Offenses

Penalties for Non-Compliance

Failure to comply with the regulations governing the issuance of a Bill of Supply can lead to significant penalties and other consequences under the GST framework. Businesses must understand the repercussions of non-compliance to avoid fines and maintain proper tax compliance. Below are the key aspects related to penalties for non-compliance:

Fines for Failing to Issue a Bill of Supply

• As per Section 122 of the CGST Act, 2017, failing to issue a Bill of Supply when required can result in a penalty of up to ₹25,000.
• The fine applies to both unintentional and intentional lapses, making it critical for businesses to issue this document wherever applicable.

Legal Ramifications for GST Violations

• Non-compliance with GST regulations, including failure to issue a Bill of Supply, can attract legal notices from tax authorities.
• Repeated violations or non-issuance of Bills of Supply may lead to audits, investigations, and possible legal action under the GST framework.

Financial Impact of Incorrect Documentation

• Errors in a Bill of Supply, such as missing mandatory details or incorrect serial numbers, can result in penalties and rejection during audits.
• Inaccurate documentation may also delay refunds or export benefits for zero-rated supplies, impacting the business’s cash flow.

Audit-Related Repercussions

• GST audits require businesses to present accurate and complete Bills of Supply for exempt or composition transactions.
• Missing or incomplete documents during an audit can lead to penalties, additional scrutiny, and even reassessments of tax liability.
• Non-compliance may also attract interest on tax dues if discrepancies are identified.

Common Compliance Errors to Avoid

• Failing to issue a Bill of Supply: Not providing the document for exempt or composition transactions.
• Missing mandatory details: Omitting supplier or recipient information, invoice date, or unique serial number.
• Issuing a Tax Invoice instead: Mistakenly issuing a Tax Invoice when a Bill of Supply is required.
• Incorrect classification of goods/services: Misusing HSN/SAC codes or providing incorrect descriptions.

Amendments and Cancellations

Errors or changes in details after issuance may require amending or canceling. GST regulations provide guidelines to handle these processes correctly and transparently. Below are the key aspects related to amendments and cancellations:

Steps to Amend an Issued Bill of Supply

• Identify the Error: Check the issued Bill of Supply for incorrect details such as recipient name, HSN/SAC codes, or transaction value.
• Create an amendment document: GST rules require issuing an updated or amended version with corrected details.
• Reference the Original: The amended Bill of Supply must include a reference to the original document number and date.
• Notify the Recipient: Ensure that the corrected document is shared with the recipient promptly.

Guidelines for Cancellations

• Valid Reason: One can only cancel it if there is a valid reason, such as the transaction being voided or issued incorrectly.
• Cancellation Process:
  1. Create a cancellation note that references the original Supply bill.
  2. Maintain both the original and cancellation note in your records.
• Notify Stakeholders: Inform the recipient about the cancellation to ensure consistency in their records.

Timeline for Making Corrections

• Amendments should ideally be made within the same financial year of issuance to align with GST reporting.
• Corrections beyond the financial year may require additional documentation and approval, depending on GST audit guidelines.

Record Maintenance for Amended Bills

• Retain both the original and amended versions of the Bill of Supply for six years, as per GST record-keeping requirements.
• Maintain a clear audit trail linking the original document to the amendment or cancellation note to avoid compliance issues.

Real-Life Examples of Corrections

• Example 1: A supplier issued a Bill of Supply with an incorrect HSN code. Upon realizing the error, they issued an amended Bill of Supply with the correct HSN code and referenced the original bill in the correction.
• Example 2: This was issued for a transaction that was later cancelled due to non-delivery of goods. The supplier issued a cancellation note referencing the original bill and recorded the transaction as void.

Conclusion

The Bill of Supply is a vital document under the GST framework in India, designed for transactions where GST is not applicable. It ensures proper documentation, compliance, and transparency for exempt supplies and transactions by composition taxpayers. Understanding the key components, format, and legal provisions surrounding. It helps businesses maintain error-free records and avoid penalties.

Issuing on appropriate time, adhering to the prescribed guidelines, and making timely amendments or cancellations when needed are essential for smooth GST compliance. Businesses that prioritize accuracy and compliance not only safeguard themselves from legal repercussions but also build trust with their customers and regulatory authorities.

By mastering the nuances, businesses can simplify their GST processes, reduce audit risks, and focus on growth without worrying about tax compliance challenges.

Disclaimer: This article is for informational purposes only and does not constitute legal or tax advice. For official and updated information, please refer to the Government of India GST Portal. 

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