A tax invoice is a standard format invoice required by the GST system. Inability to issue correct Tax Invoices could result in a penalty and fine or imprisonment for not more than two years or both.
A company registered under GST must possess an official Tax receipt from the vendor to recover the GST they paid for the purchase of their business. Tax invoices are the most important evidence for the Input Tax Credit claim.
Temporary Invoices or Sale invoices don’t have permission for use by authorised companies.
Did You Know?
The bill of supply and the tax invoice is actually different. A Tax Invoice is for all sorts of taxable sales, no matter local/central, whereas a Bill of Supply is meant for all sorts of sales by composition dealers or exempt sales.
When Should You Issue Tax Invoices?
Tax invoices are due within 21 days of the date of supply (means the date on which services are performed or goods were delivered).
Tax invoices aren't mandatory for the supply of Zero-Rate Supply. The Indian Government issues tax invoices in the case of supplies and services imported or second-hand items
Specifics to be displayed on the tax invoice include:
- Invoice serial number
- The words' Tax Invoice" must be clearly stated
- Date of invoice
- Address and name of the client
- Name, address and The GST registration number for the registered company.
- A detailed description of the products or services provided
- Discount, if any
- Quantity of the products or services on offer
- Total sale amount before GST
- GST total per transaction
- Rate of tax (6%)
- Total sale amount, including GST
Director-General Customs may, on request, permit the invoice to differ from what is stated above, either it is in terms of the specifics on the invoice or in the issuance or other kind of invoicing, e.g. an invoice for simplified tax.
How Does an Export Tax Invoice Look? What Are the Contents of Tax Invoice?
The invoice should state if GST was due on those exports for exports of goods or services. Let's make it clear:
If you pay IGST on exports, "Supply meant for export on payment of IGST." If IGST is not received: "Supply meant for export under bond/letter of undertaking without payment of IGST." In addition, when preparing exported invoices, the details regarding the recipient needs to be provided:
- Delivery address and the country
- Address and name of the recipient
- Date and number of the request for the removal of items to be exported
Also, check this guide to download a tax invoice sample. Before starting a business and making investments in it, we suggest you write a robust business to increase the chances of success.
Specific Formats of Tax Invoice: Step-By-Step Procedure
There is the various format in which tax invoices can be introduced. Additionally, there is software you can use to create an invoice.
One way is to create a tax invoice format in excel
Another way is to create a tax invoice format in word.
1) Contact Details for the Invoice Sender
The sender's name and contact details should be on the top of the invoice beneath the logo. Typically, they are placed towards the left. The sender's name (which is typically an acronym for your company or representative from your company) is followed by the company's address, email, and contact number. The sender may have to include additional details by the jurisdiction or country, e.g. the VAT code.
2) Logo for Invoices
It's pretty simple! The top portion of your invoice must display your logo and your company's name. It makes your invoice appear elegant (it is something professional). It makes it simpler for the customer to recognise who you are.
Be sure that the logo you put on your invoice is good quality and not too small. It shouldn't be tough to identify your logo. You can place the logo to the right (if the language used on an invoice's writing is left to right, like English) or at the centre.
3) Client Contact Information (Payer/Invoice Receiver)
The client's contact details are correlated with the sender's contact information. The information could appear under the contact information for the sender or just beside it on the right-hand side of an invoice.
The information should include the company's email address, address and phone number or the person invoicing. Note that if you are invoicing a firm that has multiple offices and representatives, you must indicate the name of the person or department the invoice is for.
Herrick James Potter
Surrey, 4 Privet Drive, England
4) Itemised Breakdown of Services
This is the section of the invoice that contains the goods/services provided in addition to their costs and any other pertinent information. You must list the items as concisely as possible to ensure no confusion. The most common GST invoice format is as the table, containing many columns, each with a row for each separate service:
- Services: The service you provided or the product you offered to the customer. You should also mention the nature of the service/product or model, the model's name, size, colour, number and size, etc. Any other information is crucial for you to keep track of to ensure inventory.
- Quantity: This should indicate the amount that the client paid for the service in question, i.e., therapy sessions offered, the number of phone calls purchased etc.
- Rate: It is the amount you charge for the product or service.
- Subtotal: The column below provides the subtotal of each item which is the product number multiplied by the rate.
5) Invoice Number and Date
When preparing an invoice, it is important to not forget to include the invoice number and the date. These are crucial because they minimise the risk of an invoice being lost or a miscommunication from the customer about the due date for payment.
- Invoice Date: When you pay an invoice, the invoice date is the date that the invoice was sent. It is usually the date that the product/services were bought. Even when the invoice number is a part of dates, the date of the invoice must be written on an additional line.
- Invoice Number: The invoice number serves as the unique ID for communicating with the customer or various other relevant entities. Certain companies only use numbers (00768946); however, others include letters in the numbers for easier reference, e.g. the month, the name of the client and so on. (2021-9-WAL-004 ).
- Due Date: This is the day when payment has to be made. Both parties can decide the period of payment in advance. In case there isn't any agreement, it is common to decide the due date according to the norms in your industry. Pay-by periods typically range from 15, 30, 60, or 45 days.
6) Invoice Terms
The final part of the invoice should state which payment methods your company accepts, such as PayPal, check, money transfer, credit card, etc. Also, give additional information in case they're necessary. Also, you can include any other information you think is important, including how you handle returns, the penalty for late payments, etc.
7) Invoice Summary
The invoice summary should be displayed below the breakdown of services itemised. It should include the total of all the items. So, it should begin with a line named "Subtotal". Under the subtotal, the " Tax " line will specify the amount of tax added.
The last section of an invoice summary is for the total sum, and you should name it appropriately "Total". The total is the amount that the client has to pay. Therefore it is crucial to double-check the invoice and ensure that there's no error in calculating the various services you offer and the taxes you have added.
In the case of supplying goods from one place to the other, the tax invoice must be issued before the transfer time. If the transaction does not involve the transfer of goods from one location to another, the provider can issue a tax bill when the items are delivered to the buyer.
You must deliver the tax invoices within 30 days of the date of the supply. If the provider is an insurance firm, the invoice should arrive within 45 calendar days from the date of the supply.