GST Invoice Rules for Small Businesses: Tax Invoice vs Bill of Supply

If you run a shop, distribution business or small service firm in India, the invoice you hand to a customer is also a legal document under GST. Getting the format wrong can block your buyer's input tax credit and create problems during return filing. This guide covers the basics every small business should know.

Note: GST rules and thresholds change from time to time. Always confirm the current rules on the official GST portal (gst.gov.in) or with your tax adviser before acting.

Tax invoice vs bill of supply

Which document you issue depends on how you are registered:

• Tax invoice — issued by a regular GST-registered business when supplying taxable goods or services. It shows GST separately, and your buyer can use it to claim input tax credit.
• Bill of supply — issued instead of a tax invoice when no GST can be charged on the document. The two common cases are composition scheme dealers and supplies of exempted goods or services. A bill of supply never shows tax as a separate line.

If you are on the composition scheme, you must also print "composition taxable person, not eligible to collect tax on supplies" on every bill of supply.

What a tax invoice must contain

Rule 46 of the CGST Rules lists the mandatory fields. In practice your invoice needs:

1. Your legal name, address and GSTIN
2. A consecutive serial number, unique for the financial year
3. Date of issue
4. The buyer's name, address and GSTIN (if they are registered)
5. HSN code for goods or SAC for services (the number of digits required depends on your turnover)
6. Description, quantity and unit of the goods or services
7. Total value, taxable value, and any discount shown
8. Tax rate and tax amount, split into CGST and SGST for sales within your state, or IGST for inter-state sales
9. Place of supply (important for inter-state sales)
10. Whether tax is payable on reverse charge
11. Signature or digital signature of the supplier or an authorised person

Most billing software fills these automatically once your business profile and item masters are set up — which is one of the strongest practical reasons to stop writing invoices by hand.

Small-value sales to consumers

For retail counters, GST law gives some relief: if a buyer is unregistered and the invoice value is below the prescribed limit, you can issue a consolidated tax invoice at the end of the day for all such sales instead of a separate invoice for each customer — unless the customer asks for one. Check the current limit on the GST portal, since it has been revised in the past.

When does e-invoicing apply?

E-invoicing means reporting your B2B invoices to the government's Invoice Registration Portal (IRP), which returns a signed invoice with a unique IRN and QR code. It applies once your aggregate turnover crosses the notified threshold — the threshold has been lowered repeatedly over the years, so verify the current figure before assuming you are exempt.

Key points if it applies to you:

• It covers B2B invoices, not B2C retail sales
• The QR code and IRN must appear on the invoice you give the buyer
• Invoices not registered on the IRP, when required, are not valid invoices

Practical checklist

• Use a continuous, financial-year-wise invoice number series — gaps and duplicates are a common audit query
• Capture the buyer's GSTIN correctly; a wrong GSTIN means their credit will not match in GSTR-2B
• Keep HSN/SAC codes in your item master so they print automatically
• Issue credit notes (not edited invoices) for returns and corrections
• Reconcile invoice totals with your GSTR-1 before filing each period

A billing system that validates GSTINs, manages serial numbers and prepares GSTR-1 data as you bill removes most of these failure points. That is exactly the workflow Katixo is built around — but whichever tool you use, the rules above are the foundation.