Bill of Supply

A bill of supply is a document issued by a GST-registered business in place of a tax invoice when it is not allowed to charge GST on its sales. This happens in two main situations: when the goods or services being sold are exempt from GST, or when the supplier is registered under the GST composition scheme. Under Section 31(3)(c) of the CGST Act 2017, issuing a bill of supply in these situations is mandatory, not optional. Unlike a tax invoice, a bill of supply shows no GST amount because no tax is being collected from the buyer.

Quick reference

Also known as	Supply bill, exempt supply invoice
Used instead of	Tax invoice
Issued by	Composition scheme dealers and suppliers of exempt goods or services
GST shown on it	No, zero tax amount
ITC claimable by buyer	No
Governing section	Section 31(3)(c) of CGST Act 2017
Mandatory declaration	"Tax not payable under Section 10 or exempt supply as per GST law"
Bill number limit	Maximum 16 characters, consecutive for each financial year

How a bill of supply works

Here is how the bill of supply flows between a supplier and buyer in a typical Indian scenario:

1. You identify that GST cannot be charged. A vegetable wholesaler registered under GST supplies fresh vegetables to a retailer. Fresh vegetables are exempt from GST. A regular tax invoice cannot be issued because there is no GST to charge.

2. You raise a bill of supply. The wholesaler creates a bill of supply with the transaction details, the value of goods, and the mandatory declaration that no tax is applicable. No GST column appears on this document.

3. The buyer receives the document. The retailer receives the bill of supply as proof of purchase. Unlike a tax invoice, the buyer cannot use this document to claim Input Tax Credit because no GST was paid.

4. You record it in your GST returns. Supplies made on a bill of supply are reported as exempt or nil-rated supplies in your GSTR-1 and GSTR-3B under the relevant columns for exempt outward supplies.

5. You maintain the record. Both the supplier and buyer keep the bill of supply as a legal proof of the transaction for their books of accounts.

Bill of supply example for Indian businesses

Arjun runs a small organic farm in Nashik and is registered under GST. He supplies fresh tomatoes and onions to supermarkets across Maharashtra. Since fresh vegetables are exempt from GST, Arjun cannot raise a tax invoice.

Instead, he raises a bill of supply for Rs. 18,000 worth of vegetables supplied to a Mumbai supermarket. The document lists the items, quantities, rates, and total value of Rs. 18,000. There is no GST column because no tax applies. The mandatory declaration at the bottom reads: "Exempt supply as per GST law."

The supermarket records this as a purchase but cannot claim any ITC from it since no GST was paid. Arjun reports this Rs. 18,000 as an exempt outward supply in his GSTR-3B.

Who must issue a bill of supply in India

Composition scheme dealers

Businesses registered under the GST composition scheme pay tax at a fixed percentage of their turnover directly to the government. They are not allowed to collect GST from customers. Since they cannot show any GST on an invoice, they must issue a bill of supply for every sale. The bill must carry the words "Composition taxable person, not eligible to collect tax on supplies."

Suppliers of exempt goods or services

If your business deals in goods or services that are wholly exempt from GST, you must issue a bill of supply instead of a tax invoice. Common examples include:

• Fresh fruits and vegetables
• Unprocessed food grains
• Educational services at school level
• Healthcare and medical services
• Books and newspapers
• Services provided by a religious institution

Exporters under LUT or bond

Exporters who export goods or services without paying IGST, by filing a Letter of Undertaking (LUT), must issue a bill of supply. The document must carry one of the following declarations:

• "Supply Meant For Export Under Bond/Letter Of Undertaking Without Payment Of IGST"
• "Supply Meant For Export On Payment Of IGST" (if IGST has been paid)

Important note: If you are a composition dealer and you issue a regular tax invoice instead of a bill of supply, or if you collect GST from your customers, you are in direct violation of the GST Act. This can lead to cancellation of your composition scheme registration and a penalty.

What a bill of supply must contain

Under Rule 49 of the CGST Rules 2017, every bill of supply must include the following details:

• Name, address, and GSTIN of the supplier
• A consecutive serial number not exceeding 16 characters, unique for the financial year
• Date of issue
• Name, address, and GSTIN of the recipient (if registered)
• HSN code for goods or SAC code for services
• Description of goods or services
• Total value of the supply
• Signature or digital signature of the supplier

There is no column for GST rate, CGST, SGST, or IGST because this document is used specifically when no tax is charged.

Bill of supply vs tax invoice

	Bill of supply	Tax invoice
When issued	Exempt supplies, composition dealers, exporters under LUT	Taxable supplies by regular GST dealers
GST shown	No	Yes
Buyer can claim ITC	No	Yes
Used by	Composition dealers, exempt suppliers, certain exporters	All regular GST taxpayers
Section	31(3)(c) CGST Act 2017	31(1) CGST Act 2017

Special types of bill of supply

Invoice cum bill of supply

When a business supplies both taxable and exempt goods or services to an unregistered buyer in a single transaction, it can issue a combined document called an invoice cum bill of supply. This avoids having to raise two separate documents. For example, a stationery shop selling GST-applicable notebooks and GST-exempt books to a school can issue one combined document.

Consolidated bill of supply

If the value of a single supply is less than Rs. 200 and the buyer is unregistered and does not ask for a document, a separate bill of supply does not need to be issued for that transaction. Instead, all such small supplies in a day can be combined into one consolidated bill of supply issued at the end of the day.

Deemed bill of supply

For supplies that fall completely outside the GST framework, such as petrol or alcoholic beverages which are not yet notified under GST, any invoice or document issued under another applicable law is treated as a deemed bill of supply for record-keeping purposes.

Common mistakes Indian businesses make with bills of supply

• Issuing a tax invoice for exempt supplies. A GST-registered business selling exempt goods should not raise a tax invoice showing zero GST. The correct document is a bill of supply. Raising a tax invoice for exempt supplies creates confusion in your GSTR-1 filing and can trigger notices.

• Composition dealers accidentally charging GST. Some composition dealers are unaware that they cannot collect GST from buyers. If a composition dealer charges 18% GST on a sale, the buyer cannot claim ITC on it, and the dealer is violating the composition scheme rules.

• Missing the mandatory declaration. Every bill of supply must carry the specific declaration text as per Rule 49 of the CGST Rules. Missing this text makes the document non-compliant, even if all other details are correct.

• Not reporting exempt supplies in GSTR returns. Many small businesses think that because there is no tax on exempt supplies, they do not need to report them. This is incorrect. Exempt outward supplies must still be declared in Table 8 of GSTR-1 and in GSTR-3B.

Frequently asked questions

What is the difference between a bill of supply and a tax invoice?

A tax invoice is raised when GST is charged on a sale and the buyer can use it to claim Input Tax Credit. A bill of supply is raised when no GST is charged, either because the supply is exempt or the supplier is under the composition scheme. The buyer cannot claim ITC from a bill of supply.

Can a composition dealer issue a tax invoice?

No. A composition dealer is specifically prohibited from issuing a tax invoice or collecting GST from customers. They must issue a bill of supply for all their sales. If they do collect GST, they are in violation of the GST composition scheme rules and risk losing their composition registration.

Is Input Tax Credit available on a bill of supply?

No. Since no GST is charged or collected in a bill of supply transaction, there is no tax for the buyer to claim as ITC. ITC can only be claimed on valid tax invoices where CGST, SGST, or IGST has been charged and paid.

Is a bill of supply needed for sales below Rs. 200?

No. If the value of supply is less than Rs. 200, the buyer is unregistered, and the buyer does not ask for a document, you do not need to issue a separate bill of supply for that transaction. You can issue a consolidated bill of supply for all such small transactions at the end of the day.

What happens if I do not issue a bill of supply when required?

Failing to issue a bill of supply when legally required is a violation under the CGST Act and can attract a penalty of Rs. 10,000 or an amount equal to the tax involved in the supply, whichever is higher, under Section 122 of the CGST Act 2017.

Related terms

GST Invoice · Tax Invoice · Composition Scheme · Input Tax Credit · Proforma Invoice · Credit Note · Exempt Supply

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