Bill of Supply vs Tax Invoice: When a GST-Registered Business Issues Which
If you're GST-registered, you don't always issue a tax invoice. Which document you issue depends on whether GST is actually being charged on that particular sale — and getting this backwards is one of the quieter GST mistakes, because both documents look almost identical.
The core difference
A tax invoice is issued when GST is charged — it shows the taxable value and the tax amount separately, and your customer can use it to claim input tax credit. A bill of supply is issued when no GST is charged at all — for exempt goods or services, or by a supplier under the composition scheme, who is legally barred from charging GST on an invoice.
When you must issue a bill of supply instead
- You're registered under the composition scheme — composition dealers cannot charge GST to customers at all, so every sale gets a bill of supply, never a tax invoice.
- You're selling an exempt good or service — no tax means no tax invoice, by definition.
- You're a regular taxpayer making a mix of taxable and exempt supplies — you can issue one combined "invoice-cum-bill of supply" for both, provided it's clearly marked which lines are taxable.
Why the distinction actually matters
A customer who receives a bill of supply has no GST amount to claim as input tax credit — there isn't one. If you mistakenly issue a tax invoice showing GST for an exempt sale (or as a composition dealer), you've created a document you're not legally allowed to issue, and the "tax" shown on it isn't a legitimate credit for anyone to claim. Going the other way — issuing a bill of supply when you should have charged GST — simply means you've undercharged and still owe that tax to the government regardless of what the document says.
If you're not sure whether registering as a composition dealer even makes sense for your business, start with GST registration thresholds explained.