The Invoice System: Essential Rules on GST Invoice

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The Invoice System: Essential Rules on GST Invoice
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One of the most significant reforms taken by our country to date is the implementation of GST. Since then there have been a lot of discussions going around this topic. And the most prominent would be around GST invoices/ Tax invoices.

In this blog, we will go through the basic laws and principles that each business should follow while producing a GST invoice. So continue reading!

What is a GST invoice?

If you are a GST-registered business owner, you are already familiar with what a GST invoice is. But to all the clients that buy goods and/or services from GST-registered businesses, here you go!

A GST invoice or a tax invoice is an invoice issued by the seller to the buyer which contains all the tax details such as cGST, sGST, and iGST along with a list of goods and/or services purchased by the buyer.

Do All Businesses Need to Issue GST Invoices?

As per the government rule in India, all businesses with a registered GST number should issue a GST invoice to their clients. Any enterprise that isn’t a GST-registered business, need not have to issue GST invoices and can rather opt for regular invoices.

Here are a few things that you should include in a GST invoice

Things to Include in a GST Invoice

As per rule 54 of the cGST act of 2017, here are the mandatory items that should be included in a GST invoice:

  1. Name of the seller
  2. GSTIN
  3. the physical address of the seller
  4. Invoice number
  5. Date of issue of the invoice
  6. Invoice type (check out our blog for the different types of invoices that every business should know)
  7. Shipping and billing address of the customer
  8. Name of the customer
  9. GSTIN of the customer if they are registered too
  10. Details of products and services provided, including description, quantity, etc.
  11. SAC code or HSN code
  12. The rate of CGST, IGST, UTGST, and SGST charged
  13. Total tax amount and discounts, if any
  14. Reverse charge
  15. Signature of the invoice issuer

Now you know what are all the essential components of a GST invoice, let us now take a look at the rules to be followed while issuing an invoice

GST Tax Invoice Rules

✅GST Invoice Serial Number Rules

Following are the mandatory rules while providing serial numbers in an invoice:

  • The invoice numbers must be sequential or consecutive in chronological order.
  • The invoice number should be made up of numbers and letters and be unique for every financial year.
  • It should not exceed the 16-character limit.
  • The GST/tax amount should be divided into three parts: state GST, central GST, and international GST. It should not be mentioned as a whole.

An international GST is charged when the transactions are made internationally, a state GST when transactions are made across different states and a Central GST should be issued.

✅GST Invoice Signature Rules

Since the signature of the invoice issuer is a mandate in the GST invoice, here are a few rules that are related to the signature:

  • The invoice or bill can be signed either digitally or by hand.
  • The invoice should always be signed by the GST representative or an authorized person of the representative. The authorized person can either be a company secretary, practicing advocate, chartered accountant, a retired officer from the tax department, or an employee appearing on behalf of the seller.

✅GST Invoice Payment Rules

In case the supplier is an unregistered seller, here are a few that need to be followed. There can be two cases in this situation

  • Number 1, you buy from an unregistered buyer
  • You buy goods/services that are exempted from GST.
  • In case you, the registered buyer, buy from an unregistered seller, the buyer can issue a tax invoice
  • In the case of exempted goods or services, the seller has to issue a bill of supply instead of a tax invoice.

If you are wondering why all these rules are quite difficult to keep in mind and extensive to practice every time you issue an invoice, the government has also provided outlines regarding the time of issue of a GST invoice.

✅ When to issue a GST invoice?

Based on the goods or services that you sell, the time limit varies. Here’s a brief summary of the timeline.

i) For Goods

In the case of a normal supply of goods, it is mandatory to issue an invoice or bill after the item is purchased by the buyer or dispatched from the seller. The same is also defined under Section 2 (96) of the principal act. In case of a continuous supply of goods, an invoice should be issued before receiving the payment.

ii) For Services

  • For general services excluding financial services, the invoice should be issued within 30 days of rendering the service(s).
  • The invoice for financial services given by banks, NBFCs, and other financial institutions is valid for up to 45 days after the service(s) are provided.

✅ Reviewing invoices issued before GST

If you made an invoice with mistakes or typos, don't panic; the government has prepared procedures to handle such situations. When you apply to become a registered seller, you must first obtain provisional registration before receiving a permanent certificate. Sellers should issue a revised invoice for any original invoice after its issuance date. There is a one-month timeframe to issue this revised invoice, which must be clearly labeled as a “revised invoice” and comply with all mandatory details of a tax invoice as previously discussed.

✅ A Supplier should issue how many copies of an invoice?

It may sound simple, but there are also rules on the number of copies of the invoice to be issued. Here’s what you have to know about the number of copies of the invoice:

1. For goods

In case of goods being sold, the seller has to issue three copies of the invoice

  • One for the buyer
  • One for the seller
  • A duplicate that should be kept with the seller

2. For services

In the case of services being rendered by the seller, the seller has to issue two copies of the invoice.

  • One for the buyer
  • And one for the seller.

Conclusion:

If you haven't registered the business yet, now is the time to do so, as GST invoices provide tax benefits. For small business owners, registering as a business allows them to access a variety of government services. We provide an even easier option to ensure that you file and store all of your tax invoices securely. For secure invoice storage, try our end-to-end encrypted cloud-based software. You can also automate invoices so that your business's cash flow runs well. Check out our free invoice generator app today!