Are you starting a business? Good for you. Have you ever heard of what Tax Invoice is? No, then read this to know more.
Tax Invoice is nothing but a taxable statement that contains all the details of the transactions including the details of the taxes between the seller and the buyer. To understand this in an easy manner, let me give you an example. If you go to a shop and purchase a good then before payment of that good you receive an invoice from the shopkeeper containing all the details such as value of the good, how much tax are you paying on that good etc. That invoice is caller “Retail Invoice”. In the same manner when the transaction takes place between two dealers of any goods or services, then the supplier among them issues a “Tax Invoice” to the buyer and it contains all the relevant details of the transaction including the taxes paid by the buyer. Other details that it contains are quantity of goods, types of goods, description, value of goods or services, taxes charged thereon, Tax information number of recipient and supplier, address of supplier and buyer, discounts, name and other details of both the dealers, signature of supplier and other items, etc.
Why is it required ?
It is a very useful tool under GST to avail the benefits of input tax credit. When the buyer(dealer) buys any goods or services from the seller, he pays taxes on the goods or services he bought. So to claim the benefit of tax credit, he has to furnish these invoices to the concerned officials while filing annual returns. On the basis of these invoices, he receives the ITC(Input Tax Credit).
It also helps the tax officials to check the tax evasion which further contributes to the revenue of the country.
When it is issued?
In case, transaction include goods that need movement of goods from one place to other then, it should be issued either before or at the time of removal of goods from the seller’s place otherwise it should be issued at the time of delivery of goods to the recipient if movement of goods is not required.
In case of services, it is issued either before or after provision of services as per the convenience of the parties. However, there is a time limit of 30 days if it is issued after the provision of services.
Other terms associated with Tax Invoice that one should be familiar with: –
- Bill of supply: – It’s also a kind of invoice which is issued for those goods and services, that does not come under the preview of taxable goods and services. Likewise, it also contains details such as quantity of goods, it’s description, value of goods or services and other things, etc.
- Debit Note: – It is issued by the seller to buyer when the taxable value is higher in amount than mentioned in invoice. For eg. Seller has issued the buyer an invoice for certain delivery of goods/services, later it finds that the value of goods or services as, the case may be, has increased or wrongly mentioned in the previous invoice them it has the liberty to issue a debit note to the buyer claiming the remaining amount. In the case of debit note, there is no time limit for it’s issuance.
- Credit Note: – It is issued by the seller when the taxable value is lower in amount than mentioned in the invoice or when the buyer returns the goods to the supplier or when the buyer finds the services to be deficient, then also credit note is issued by the seller. In this case, there is a time limit. The supplier must issue this before the filing of annual return or before the date of 30th September in the subsequent year, whichever is earlier.
Note: – Linking of debit/credit note to the original invoice is very much required and the same should be declared in the filing of returns by the taxable person.
How many copies of Tax invoice need to be generated?
It is different for goods and services. For goods, 3 copies of invoices need to be generated. One is for recipient(buyer), second for Transporter and third for the supplier himself.
For services, only 2 copies are required. One for the recipient and other for the supplier.