If you’re registered under GST, the difference between issuing a Tax Invoice and a Bill of Supply is not optional — it’s a statutory obligation, and getting it wrong invites scrutiny. This guide explains exactly when each applies, the mandatory fields per the Rules, and walks through five common scenarios.
The short answer
Issue a Tax Invoice when you make a taxable supply and you must charge GST on it.
Issue a Bill of Supply when you cannot charge GST — either because the supply is exempt, you’re under composition scheme, or you’re an unregistered dealer.
The two documents look superficially similar but serve different statutory purposes. Confusing them is one of the most common errors small CAs see in their clients’ books.
Tax Invoice — Section 31 + Rule 46
A Tax Invoice is mandatory for every taxable supply of goods or services made by a registered person. The legal foundation is Section 31 of the CGST Act read with Rule 46 of the CGST Rules.
Mandatory fields per Rule 46
- Name, address, and GSTIN of the supplier
- A consecutive serial number, unique for the financial year, not exceeding 16 characters
- Date of issue
- Name, address, and GSTIN (if registered) of the recipient
- Address of delivery, along with state name and code (if delivery address differs from buyer address)
- HSN code of goods or SAC code of services
- Description of goods or services
- Quantity (for goods) and unit
- Total value, taxable value (after discount)
- Rate of tax (CGST + SGST or IGST or UTGST)
- Amount of tax charged
- Place of supply along with the name of the state (in case of inter-state supply)
- Whether tax is payable on reverse charge basis
- Signature or digital signature of the supplier
When CGST + SGST vs IGST
- Intra-state supply (supplier and place of supply in same state) → CGST + SGST
- Inter-state supply (different states) → IGST
- Place of Supply for goods is generally the location of delivery; for services, it depends on Section 12/13 of IGST Act
Bill of Supply — Section 31(3)(c) + Rule 49
A Bill of Supply is mandatory when a registered person supplies:
- Exempt goods or services (e.g., agricultural produce, healthcare, educational services in certain cases)
- Under the composition scheme (Section 10 of CGST Act)
The legal foundation is Section 31(3)(c) of the CGST Act read with Rule 49 of the CGST Rules.
Mandatory fields per Rule 49
- Name, address, and GSTIN of the supplier
- A consecutive serial number, unique for the financial year, not exceeding 16 characters
- Date of issue
- Name, address, and GSTIN (if registered) of the recipient
- HSN code of goods or SAC code of services
- Description of goods or services
- Value of supply (no tax breakup)
- Signature of the supplier
Critical difference: No tax rate, no tax amount, no place of supply. The Bill of Supply does not collect GST.
Five common scenarios
Scenario 1: Software development service to a US client
You’re a freelancer registered under GST in Karnataka, providing software development to a client in San Francisco. Foreign exchange received.
Document: Tax Invoice (Export Invoice format) under LUT, with declaration of Section 16(3)(a) IGST Act. Why: Export of services is taxable but zero-rated under LUT. Tax invoice is required, but no IGST is charged.
Scenario 2: Yoga instructor with composition scheme
You’re a yoga instructor in Mumbai, registered under composition scheme (turnover under ₹50 lakh, services threshold).
Document: Bill of Supply. Why: Composition scheme dealers cannot charge GST. They pay a flat rate (5% for services) on aggregate turnover and issue Bill of Supply for each transaction.
Scenario 3: Medical equipment dealer selling to hospital
You sell medical equipment (taxable goods) to a hospital in your state.
Document: Tax Invoice with CGST + SGST. Why: Sale of medical equipment is taxable. Hospital being your buyer doesn’t make the supply exempt — the supply itself must be exempt for Bill of Supply.
Scenario 4: Educational institute providing certified courses
A registered educational institute provides courses that are exempt under Notification 12/2017-CT(R).
Document: Bill of Supply. Why: The supply itself is exempt from GST.
Scenario 5: Mixed supply — taxable services + exempt training
A management consultant provides consulting (taxable) and free workshops (exempt training) to the same client.
Document: Tax Invoice for the consulting; separate Bill of Supply if the training is invoiced. Consolidated invoice is also permitted under Rule 46A — clearly demarcating the taxable and exempt portions.
What if you issue the wrong document
Issuing Bill of Supply for a taxable supply — you’ve under-collected tax. The buyer cannot claim ITC. The GST department will eventually demand the tax with interest and penalty (potentially 100% of tax under Section 74 if treated as suppression).
Issuing Tax Invoice for an exempt supply — you’ve over-collected tax. You’ll need to refund or adjust via credit note. Buyer cannot claim ITC against an exempt supply even if the invoice shows tax.
Frequently asked questions
Q: Can I use the same invoice template for both? A: No. The mandatory fields differ. Bill of Supply must NOT show tax rate or amount.
Q: Do I need a separate serial number series for Bill of Supply? A: Best practice — yes. Many CAs use a separate prefix (BOS-2026-001 vs INV-2026-001). It makes audits cleaner.
Q: I’m registered under composition for goods. Do I issue Bill of Supply? A: Yes. Composition dealers (whether for goods or services) issue Bill of Supply.
Q: What if I provide both taxable and exempt services in one invoice? A: You can issue a consolidated Tax Invoice that clearly demarcates the taxable portion (with tax) and the exempt portion (without tax) — this is permitted under Rule 46A.
Q: For B2C exempt supplies, is Bill of Supply still mandatory? A: Yes — the document is mandatory regardless of whether the recipient is registered. However, for low-value B2C transactions (under ₹200 per invoice), consolidated daily Bill of Supply is permitted.
Generate the right document
For GST-charged supplies, use our Tax Invoice Generator — built around Section 31 + Rule 46 mandatory fields:
For exempt supplies, composition scheme, or unregistered businesses, use our Non-GST Bill Generator which produces a clean Bill of Supply per Rule 49 and Section 31(3)(c):
—
Last updated: April 2026. Reviewed by Practising Chartered Accountants. This guide is for general information only and does not constitute professional advice. For your specific situation, consult a qualified Chartered Accountant.