Tax Invoice vs Bill of Supply: Difference, GST Rules & When to Use

Not sure which GST document to issue?

Are you a regular taxpayer charging GST?

If yes, generally issue a Tax Invoice with tax splits.

Are you under Composition or making Exempt Supply?

If yes, generally issue a Bill of Supply without tax amounts.

Is Reverse Charge or E-invoice involved?

Verify specific reporting rules and turnover limits before final issue.

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Tax Invoice

GST is charged and collected
Used for taxable supplies
Buyer can generally claim ITC
Used by regular GST taxpayers

Bill of Supply

GST is not charged
Used for exempt/composition supplies
Buyer generally cannot claim ITC
No GST amount shown on document

What is a tax invoice?

A tax invoice is a document generally issued by a registered supplier when they supply taxable goods or services and charge GST from the recipient. It is the primary document used by a buyer to claim Input Tax Credit (ITC).

View Tax Invoice format

What is a bill of supply?

A bill of supply is a document generally issued when a supplier cannot charge GSTto their customer. This occurs in two main scenarios: when a registered person makes a supply of exempt goods or services, or when the supplier is registered under the Composition Scheme.

Side-by-side comparison

Feature	Tax Invoice	Bill of Supply
Is GST Charged?	Yes (at applicable slab)	No (GST is not collected)
Issuer Type	Regular GST Taxpayers	Composition Dealers / Exempt Suppliers
Supply Type	Taxable Goods & Services	Exempted / Nil-rated supplies
GST Rate Shown?	Mandatory (5%, 12%, 18%, 28%)	Not shown on the document
ITC Benefit?	Yes — buyer may claim ITC	No — buyer generally cannot claim
GSTR-1 Impact	B2B/B2C Table details required	Aggregate summary in Table 8

When to issue Tax Invoice

You are a Regular GST registered taxpayer.
The goods or services supplied are taxable.
You are collecting GST from the buyer.
Buyer needs ITC (B2B supply).
Aggregate turnover threshold for e-invoice is met.

Tax Invoice Helper

When to issue Bill of Supply

You are a registered Composition Taxpayer.
You are supplying GST-exempt goods or services.
You are making a non-taxable supply.
No tax is being collected from the recipient.
You are not charging GST because the supply is exempt/nil-rated, or another specific non-taxable treatment applies after verification.

Check Composition Status

ITC impact & buyer visibility

The document type directly affects the buyer's ability to reduce their tax liability. Issuing a Bill of Supply when a Tax Invoice was expected can cause reconciliation errors in the buyer's GSTR-2B.

Validate Buyer GSTIN

Ensure the GSTIN is active and matches the filing type.

Reconcile ITC

Check if your invoices reflect correctly in buyer's GSTR-2B.

Practical examples

"Regular Registered Seller selling Mobile Phones"

Tax Invoice (GST is charged)

"Composition Dealer selling Garments"

Bill of Supply (GST not charged)

"Healthcare Center providing Medical Services"

Bill of Supply (Exempt supply)

"Software Consultant billing a US Client"

Export invoice treatment — verify LUT/payment-of-tax route

"Milk Supplier (Fresh/Unbranded)"

Bill of Supply (Exempt supply)

"Chartered Accountant billing local client"

Tax Invoice (Standard 18% GST)

Common billing mistakes

Composition Dealer charging GST

A composition taxpayer generally cannot collect GST separately from customers. Charging GST on a bill of supply can create compliance risk.

Regular Taxpayer using Bill of Supply

Using a bill of supply for a taxable supply when GST should be charged can create tax mismatch and audit risk.

Claiming ITC from Bill of Supply

Buyers attempting to take ITC from a bill of supply may face reconciliation issues or ITC reversal.

Wrong HSN/SAC Classification

Misclassifying a taxable supply as exempt to issue a bill of supply.

Frequently asked questions

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

A tax invoice is issued for taxable supplies where GST is charged and collected from the buyer. A bill of supply is issued for exempt supplies or by composition dealers where no tax is charged to the buyer.

Can Input Tax Credit (ITC) be claimed on a bill of supply?

No. Generally, ITC cannot be claimed based on a bill of supply because no tax is charged or shown on the document. ITC is only available on valid Tax Invoices.

Can a composition dealer issue a tax invoice?

No. Composition dealers are not allowed to collect GST from their customers. They must issue a Bill of Supply and clearly state "composition taxable person, not eligible to collect tax on supplies" on the document.

Can a regular GST taxpayer issue a bill of supply?

Yes. If a regular taxpayer makes a supply of exempt goods or services, or non-taxable goods (like alcoholic liquor), they must issue a Bill of Supply instead of a Tax Invoice.

Does a bill of supply show the GST amount?

No. A bill of supply should not show any GST rate or tax amount line items, as it is used for transactions where no tax is collected from the recipient.

Is GSTIN required on a bill of supply?

Yes, the supplier's GSTIN must be mentioned. For B2B supplies, mentioning the recipient's GSTIN is also best practice, even though ITC isn't available.

Is e-invoice required for a bill of supply?

Generally, e-invoicing thresholds apply to Tax Invoices, Credit Notes, and Debit Notes. However, businesses should verify the latest CBIC notifications regarding e-invoice applicability for exempt supplies.

What happens if I issue the wrong document?

Issuing a Tax Invoice when a Bill of Supply was required (or vice versa) can lead to tax mismatches, wrong ITC claims by the buyer, and potential interest or penalties during audits.

Can a bill of supply be converted to a tax invoice?

No. They are two distinct documents for different types of transactions. If a transaction type changes (e.g., from exempt to taxable), a fresh Tax Invoice must be issued.

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Prepare draft tax invoices or bill of supply summaries in under 60 seconds with our compliant format helper.

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Sources & Methodology

Comparison is based on the definitions of "Tax Invoice" and "Bill of Supply" provided under Section 31 of the CGST Act and Rule 46/49 of the CGST Rules. Final determination depends on the supplier's registration type and the taxability of the specific supply. Always verify invoicing rules via theGST Portaland CBIC.

Review our Accuracy Policy,Disclaimer,GST Invoice Guide,GST Quotation Guide, and Proforma Guidebefore finalizing business documents.