Tax Invoice, Credit & Debit Notes – May/Sep 25

C HAPTER 10

T AX I NVOICE , C REDIT & D EBIT N OTES

1. INTRODUCTION

▪ Section 31 mandates the issuance of an Invoice/ Tax Invoice or a Bill of Supply for every supply of
goods or services or both.
▪ Tax invoice is issued when a registered person makes taxable supply of goods or service or both.
▪ Tax invoice/ debit note is an evidence of supply & enables recipient to claim ITC on their inward supply.
▪ Time limit for issuance of tax invoice has already been covered under Chapter 6 – Time of Supply.
Supplying taxable goods / services → Tax invoice
▪ Registered supplier Supplying exempt goods/ services → Bill of supply
Paying GST under composition levy → Bill of supply
Supplying Goods/ services taxable under RCM → Bill of supply Tax Invoice

Points to Note
a) No fixed format has been prescribed for tax invoice. Only few mandatory fields are prescribed as
mandatory fields.
b) Invoice can be issued electronically or manually
Scanned copy of tax invoice is not required to be uploaded. Only prescribed details are to be furnished
on GST common portal in GSTR-1 or IFF.

2. P A R T I C U L A R S O F A T A X I N V O I C E [S EC 31(1) A N D (2) R / W R U L E 46]

i) Name, address and GSTIN of the supplier;

ii) A consecutive serial number not exceeding 16 characters, unique for a FY; (furnished in GSTR 1/ IFF)
iii) Date of its issue;
iv) If recipient is registered - Name, address and GSTIN or UIN of recipient
If recipient is unregistered
Particulars of invoice
v) & value of supply is
INR 50,000 or more Name & address of recipient; address of delivery, name of State & code
less than INR 50,000 Unregd. recipient may request the aforesaid details to be recorded in TI
In case of supply of online money gaming or where any taxable service is supplied by or through an
ECO to a unregistered recipient, irrespective of the value of such supply, tax invoice issued by the
registered person shall contain name of the State of the recipient and it shall be deemed to be the

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address of the recipient.
vii) HSN code for goods or services;
viii) Description of goods or services;
ix) Total value of supply of goods or services or both;
x) Taxable value of supply of goods or services or both taking into account discount, if any;
xi) Rate of tax (central tax, State tax, integrated tax, Union territory tax or cess);
xii) Amount of tax charged in respect of taxable goods or services (CGST, SGST/UTGST, IGST, Cess);
xiii) Place of supply along with the name of State, in case of inter-State supply;
xiv) Whether the tax is payable on reverse charge basis;
Signature or digital signature of the supplier or his authorized representative (not required in case of
xv)
issuance of an electronic invoice in accordance with provisions of Information Technology Act);
xvi) Quick Response code, having embedded Invoice Reference Number (IRN) in it, in case of e-invoice.

3. N U M B E R O F HSN D I G I T S R E Q U I R E D O N T A X I N V O I C E A N D C L A S S O F R EG I S T ER E D P ER S O N N O T
R E Q U I R E D T O M E N T I O N HSN

S. No. Aggregate Turnover (AT) in the preceding FY Number of digits of HSN code
1. AT upto INR 5 crores For B2B supply - 4
For B2C supply – 4 (optional)*
2. AT > INR 5 crores For B2B supply and B2C supply - 6
Note: A registered person having aggregate turnover up to INR 5 crores in the previous FY is exempted from
mentioning HSN Code in respect of supplies made to unregistered persons.
Note: HSN needs to be quoted in Tax invoice as well as Bill of supply.
For Service, 6-digit Service accounting code is used for classification of service. First2 digit is ‘99’.

4. M A N N E R O F I S S U I N G T A X I N V O I C E / B I L L O F S U P PL Y

Supply of goods Supply of services

Original for Recipient Duplicate copy
Triplicate copy Duplicate for Transporter
Triplicate for Supplier Original for Recipient Duplicate for Supplier

5. E- I N V O I C I N G

i) Logic Businesses use various accounting/billing software, each generating & storing invoices
in their own electronic formats. These different formats are neither understood by GST
System nor by the systems of suppliers and receivers.
Example: An invoice generated by SAP system cannot be read by a machine which is
using ‘Tally’ system, unless a connector is used. With more than 300 accounting/billing
software products, there was no way to have connectors for all.
‘E-invoicing’ was introduced to enable machine-readability & uniform interpretation.
To ensure this complete ‘inter-operability’ of e-invoices across entire GST eco-system,
an invoice standard is a must. By this, e-invoices generated by one software can be

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read by any other software, thereby eliminating the need of fresh/manual data entry.
This uniform standard format (containing specified fields) applicable across the
country is known as ‘e-invoice schema’. It is notified as Form GST INV-1.
ii) Meaning/ E-Invoicing is not generation of invoice on a Government portal. Taxpayers will
Procedure continue to create their GST invoices on their own Accounting/ Billing / ERP Systems.
The details of this invoice are uploaded/reported by the taxpayer to the Invoice
Registration Portal (IRP) in prescribed e-invoice schema in JSON format (JavaScript
Object Notation).
On uploading, IRP returns the e-invoice with a unique IRN after digitally signing the e-
invoice and adding a QR Code. Then, the supplier shares the e-invoice with the receiver
(along with QR Code).
Thus, businesses will continue to issue invoices as they were doing earlier. They need to
get the updated version of ERP/Accounting and Billing Software having this facility of
reporting of invoices to IRP and obtain IRN.
Note: Bulk uploading of invoices to IRP is also possible.
iii) Applicability All registered businesses with an
➢ aggregate turnover (based on PAN) in
➢ any preceding FY from 2017-18 onwards > 5 crores
➢ will be required to issue e-invoices in case of
a) B2B supplies or
b) for exports.
Points to Note:
a) If invoice is issued by a notified person w.r.t. supplies tax on which is payable
under RCM u/s 9(3), e-invoicing is applicable.
b) E-invoicing system is also available for ECO to report the invoices to IRP, generated
by them on behalf of the suppliers.
c) E-invoicing is not voluntary; only notified persons can report invoices on IRP.
d) Where e- invoicing is applicable, no need of issuing invoices in triplicate/duplicate.
e) Invoices, credit notes and debit notes, when issued by notified persons are together
referred as e-Invoicing for ease of reference.
Example
A firm of advocates having aggregate turnover in a FY of more than INR 5 crores is
supplying services to a company. This supply is taxable under RCM and Company will
be discharging tax liability as recipient under RCM.
In this case, notified person need to report such invoices to IRP.
iv) Transactions a) B2C invoices issued by notified person.
where E- b) Import of goods (Bills of Entry) or import of services.
Invoice is not
required c) Where specified category of supplies is received by notified person from the
unregistered persons attracting reverse charge u/s 9(4).
In above cases, notified person is not required to issue e-invoice.
v) Exemption Following entities are exempt from the mandatory requirement of e-invoicing:
from e- a) Special Economic Zone units (developer of SEZ is not exempt)
commerce
b) Insurer or banking company or financial institution including NBFC

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invoicing c) GTA supplying services w.r.t. transportation of goods by road in a goods carriage
d) Supplier of passenger transportation service
e) Person supplying services by way of admission to exhibition of cinematograph
films in multiplex screens.
f) Government Department and a local authority.
Thus, above mentioned entities are not required to issue e-invoices even if their
turnover exceeds INR 5 crores in the preceding FY from 2017-18 onwards.
Note: Such taxpayers are now required to provide a declaration on the tax invoice
stating that though their aggregate turnover exceeds the notified aggregate turnover
for e-invoicing, they are not required to prepare an e-invoice.
Note: Only SEZ units are exempt from issuing e- invoices and not SEZ developers. Thus,
SEZ developers whose turnover exceeds 5 crores in any preceding FY from 2017-18
onwards are mandatorily required to issue e-invoices.
Further, in case of supplies made by notified persons to SEZ units, e- invoices needs to
be issued.
Example
MPL has an SEZ unit and a regular DTA unit (both having same PAN). The aggregate
total turnover of MPL is more than 5 crores (considering both the GSTINs). However,
the turnover of DTA unit is below 5 crores for current FY.
In this scenario, SEZ unit is exempt from e-invoicing. However, e-invoicing will be
applicable to DTA Unit because aggregate turnover of the legal entity in this case > 5
crores. The eligibility is based on aggregate annual turnover on the common PAN.
Clarification 1: Issue: Whether the exemption from mandatory generation of e- invoices is available
for entity as whole, or whether in respect of certain supplies made by the said entity.
Clarification: Exemption from generation of e-invoices is for the entity as a whole and
is not restricted by the nature of supply being made by the said entity.
Example: A bank may also be involved in making supply of some goods. In this case,
bank is exempted from issuing e-invoice for all supplies of goods and services.
Clarification 2: Issue: Whether e-invoicing is applicable for supplies made by a notified person, to the
Government Departments or establishments/ Government agencies/ local authorities/
PSUs which are registered solely for the purpose of deduction of TDS u/s 51.
Clarification: The above entities who are required to deduct TDS u/s 51, are liable for
compulsory registration u/s 24.
Therefore, these entities are to be treated as registered persons under the GST law.
Accordingly, the notified person, whose turnover exceeds the prescribed threshold for
issuing e-invoice, is required to issue e-invoices for supplies made to such entities.
vi) Advantages of a) Auto-reporting of invoices into GSTR 1 of the supplier and GSTR 2B of the Recipient
e- invoicing along with auto-generation of EWB.
b) Substantial reduction in transcription errors as same data will get reported to tax
department as well as to the buyer to prepare his inward supplies register.
c) It facilitates standardization & interoperability leading to reduction of disputes
among transacting parties, improve payment cycles, reduction of processing costs
and thereby greatly improving overall business efficiency.
d) Complete trail of B2B invoices is available with the Department. It will enable the
system-level matching of ITC and output tax thereby reducing the tax evasion.
e) E- invoicing will eliminate the fake invoices.

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vii) Cancellation/ Where needed, the seller can cancel IRN for an e-invoice already reported by reporting
amendment it on IRP within specified time.
of reported Amendment of e-invoice already uploaded on IRP will be done only on GST portal
invoice (while filing GSTR-1). Amendment of invoices is not possible through the IRP.
Note: In case of issuance of e-invoice, no requirement to carry the physical copy of tax invoice. production
of the QR code having an embedded IRN electronically, for verification by the proper officer, would suffice.

5.1. I M P O R T A N T T E R M S

i) Invoice Refers to website for uploading/reporting of invoices by the notified persons.

Registration Example: www.einvoice1.gst.gov.in
Portal (IRP)
ii) Invoice Reference IRN is a unique reference number generated and returned by IRP, on successful
Number (IRN) registration of e-invoice.
IRN is embedded in the QR Code which shall be extracted and printed on the invoice.
IRN is different from invoice number.
iii) Quick Response Digitally signed QR code has a unique IRN which can be verified on the central portal
(QR) code as well as by an offline app by the officer.
This is helpful for tax officers checking the invoice offline using hand held devices
where internet may not be available. QR code consists of following details:
a) GSTIN of Supplier b) GSTIN of Recipient c) Invoice number
d) Date of generation of e) Invoice value (taxable f) Number of line items
invoice value and gross tax)
g) HSN code of main h) IRN (hash) i) Date of generation of
item (line item having IRN
highest taxable value)

Illustrations: Applicability of e-Invoice

i) Supply of goods and/or services to a registered person by notified person
ii) Exports by notified person
iii) Supply by a SEZ unit who is a notified person
iv) Supply by developer of SEZ who is a notified persons
v) Supply to SEZ unit by notified persons
vi) Supply of goods and/or services to a Govt entity registered u/s 51 by notified person
vii) B2C supplies by notified persons
viii) Supplies made by notified person, tax on which is payable under RCM u/s 9(3)
ix) Receipt of specified category of supplies by notified person from unregistered
persons [attracting reverse charge u/s 9(4)] or through import of services
x) Import of goods (Bills of Entry)

6. D Y N A M I C QR C O D E

Dynamic QR Code Static QR code

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Dynamic QR Code Static QR code

User specific. For each payer, new QR code is generated Common QR code for all. Can be used by anyone.
On scanning, Name of supplier & Amount is pre-filled. On scanning, only name of supplier appears.
Payer just needs to scan & use OTP/PIN to pay, thus Amount is typed by Payer & then payment made.
‘scan and pay’ is possible.

Objective
The purpose of this provision is to enable and encourage digital payments.
Dynamic QR Code will be generated by the seller himself either on the PoS machine or the invoice issued.
i) Applicability Supplier whose Agg. T/o > 500 crores in any FY w.e.f. FY 2017-18 & making B2C supplies
to unregistered recipient.
ii) Clarification Dynamic QR Code in case of an invoice, issued to person having a UIN.
Any person, who has obtained UIN, is not a “registered person”. Therefore, any invoice,
issued a UIN holder, shall be considered as invoice issued for a B2C supply and shall be
required to comply with the requirement of Dynamic QR Code.
iii) Not a) Insurer or banking company or financial institution including NBFC
Applicability b) Goods transport agency supplying services in relation to transportation of goods by
road in a goods carriage
c) Supplier of passenger transportation service
d) Person supplying services by way of admission to exhibition of cinematograph films
in multiplex screens
e) Supplier of online information and database access or retrieval (OIDAR) services.
Note: In case of exports, No Dynamic QR code, as e-invoicing is applicable in this case.
iv) Parameters/ 1. Supplier GSTIN number
details in 2. Supplier UPI ID
Dynamic QR
code 3. Payee’s Bank A/c number and IFSC
4. Invoice number & invoice date,
5. Total invoice value and
6. GST amount along with breakup i.e. CGST, SGST, IGST, Cess, etc.

6.1. C O M P L I A N C E W I T H T H E D Y N A M I C QR C O D E R EQ U I R E M EN TS (J U S T F O R R EF ER E N C E )

Payment made by Recipient Ok

through DQR code
Payment made by Recipient It shall be deemed that taxpayer has complied with requirements of QR
through any mode other than code,
DQR code If supplier provides the cross reference of such payment made without
use of Dynamic QR Code, on the invoice.
Note: Cross reference of payment means transaction id along with date, time amount & mode of payment.

7. R E V I S E D T A X I N V O I C E [31(3)(a)]

Tax invoice includes include any revised invoice issued by the supplier in respect of a supply made earlier.

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A registered person who has been granted registration with effect from a date earlier than the date of
issuance of certificate of registration, or in case of revocation of suspension of registration; he
➢ may issue Revised Tax Invoices
➢ w.r.t. invoices already issued during the said period
➢ within 1 month from the date of issuance of certificate of registration.
Example
Sarabhai Private Ltd. commenced business of supply of goods on 1st April in Delhi. Its turnover exceeded the
applicable threshold limit on 3rd September. Thus, it became liable to registration on 3rd September. It
applied for registration on 29th September and was granted registration certificate on 5th October.
Since it applied for registration within 30 days of becoming liable to registration, registration granted is
effective from 3rd September.
Sarabhai Private Ltd. may issue Revised Tax Invoices on or before 5th November in respect of taxable
supplies effected between 3rd September and 4th October.

7.1. Manner of Issuing Revised Tax Invoice: Depends on Nature of Supply, Recipient and VoS

B2B Transactions i.e. Supply to

Registered Recipient B2C Transactions i.e. Supply to Unregistered Recipient


Recipient shall claim ITC on basis of Inter-State Intra-State
“Revised Tax Invoice” 
 Upto 2,50,000 Exceeds 2,50,000 Consolidated Revised
Separate revised tax invoice for each   Tax Invoice
transaction/ supply. Consolidated Separate revised
revised tax invoice tax invoice
(state -wise)

Crux: Separate Revised Tax Invoice All B2B supplies + Inter-state B2C supply where VoS exceeds 2,50,000

8. C O N S O L I D A T E D T A X I N V O I C E / B O S B Y R E G I S TE R E D S U P P L I E R [31(3)(b)]

Conditions
1. Value of supply less than 200 (+) No need to issue tax invoice for each such supply.
2. Recipient is unregistered (+) Instead, “Consolidated tax invoice” may be issued for
3. Recipient do not demand tax invoice all such supplies at the end of the day.

If the first two conditions are satisfied, always assume that third condition is also satisfied.

Illustrations:
Value ₹ 120
1. Registered supplier Registered recipient u/s 9
Need to issue
Value ₹ 120
2. Registered supplier Composition dealer u/s 10
Need to issue
value = ₹ 200
3. Registered supplier Unregistered dealer
Need to issue

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value ₹ 199
4. Registered supplier Unregistered dealer
Need to issue
Hence in case of registered recipient (regular or composition), registered dealer/ supplier is mandatorily
required to issue tax invoice for each taxable supply.
Note – This option is not available to single screen or multiplex owners who are required to issue an
electronic ticket (deemed invoice) in all cases.
Note - Above provision is also applicable to Bill of Supply as well.

9. I N V O I C E - C U M -B I L L O F S U P P L Y : R E G I S T E R E D P E R S O N M A K I N G S U P PL I ES TO

Registered Recipient Unregistered recipient

Taxable Supply Exempt Supply Taxable Supply Exempt Supply

   
Issue Tax Invoice Issue Bill of Supply Issue Tax Invoice Issue Bill of Supply
If registered person makes both taxable & exempt If registered person makes both taxable & exempt
supply to registered recipient together, he needs to supply to unregistered recipient, he may issue
➢ issue separate tax invoice for taxable supply & ➢ single “Invoice -cum-bill of supply” for both
bill of supply for exempt supply. taxable & exempt supply.

10. K I N D S O F V O U C H E R S

10.1. Receipt Voucher and Refund Voucher

Advance money received from recipient

Issues Receipt voucher

Supplier Recipient

If supply is made, issue tax invoice

If supply is not made, need to refund advance &

Refund voucher is issued

Points to Note:
a) Receipt Voucher is a document evidencing receipt of advance payment.
b) If rate of GST is not known at the time of supply, assume it to be 18%.
c) If nature of supply is not known, assume it to be ‘Inter-state supply’.
Note: For particulars of Receipt Voucher & Refund Voucher, refer ICAI Study material.

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10.2. Invoice and Payment voucher in case of RCM
Supply under RCM u/s 9(3) or 9(4)

Supplier Recipient

GST
Pay + issue payment voucher at time of payment

Government

Who will issue Tax Invoice in case of RCM?

If supplier is registered → Supplier shall issue Tax Invoice.

If supplier is unregistered → Recipient shall issue Tax Invoice on the date of receipt of goods/services (31)
Thus, a recipient paying tax under RCM is required to issue invoice only when
supplier is unregistered.

Clarification on time limit u/s 16(4) in respect of RCM supplies received from unregistered person
In case supplier is unregistered and tax is payable by recipient under RCM and invoice is also required to be
issued by recipient,
➢ the relevant financial year for calculation of time limit for availment of input tax credit u/s 16(4)
➢ will be the financial year in which the invoice has been issued by the recipient as per section 31,
subject to payment of tax on the said supply by the recipient.
In case of delay in issue of invoice & payment of tax by recipient, the recipient will be required to pay
interest on such delayed payment of tax.
Further, he may also be liable to penal action in cases of such delayed issuance of invoice.

11. O P T I O N T O I S S U E A N Y D O C U M E N T S O T H ER T H A N T A X I N V O I C E – D E E M E D T A X I N V O I C E [S EC 31(2 )]

Optional for 4 class of suppliers:

1. Banking company/ NBFC/ ▪ Such document may not have serial no. and address of recipient.
Insurance company
▪ May issue consolidated invoice at end of the month.
▪ Signature or digital signature of the supplier/ his authorised
representative not required in case of consolidated tax invoice or any
other document in lieu thereof as per IT Act, 2000.
2. GTA supplying ▪ Consignment Note is deemed to be tax invoice.
transportation service w.r.t.
goods in a goods carriage ▪ Need to mention name of consignor, consignee, details of vehicle and
goods and gross weight of consignment
3. Supplier of passenger ▪ Ticket is deemed to be tax invoice
transportation service
▪ Such document may not have serial no. and address of recipient.
▪ Signature or digital signature of the supplier/his authorised
representative not required in case of ticket as per IT Act, 2000.
4. Multiplex or single screen ▪ Only electronic ticket is deemed to be tax invoice.
cinema hall

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▪ Details of recipient not required.

▪ Can’t issue consolidated invoice.

12. D E L I V E R Y C H A L L A N

It is a document accompanying a shipment of goods that contains description & quantity of goods to be
delivered
A copy of delivery challan singed by recipient is returned to seller as a proof of delivery.
Delivery challan is used at the time of removal of Goods where
a) goods are removed/ transferred for reason other than supply; or
b) quantity of goods being removed is known after removal of goods.
In such cases, invoice is issued after delivery of goods.
Issued in Triplicate
a) First copy → for Consignee
b) Second copy → for Transporter
c) Third copy → for Consignor
Must be declared in EWB

12.1. Cases where Goods can be removed on delivery challan:

a) Supply of liquid gas where the quantity at the time of removal from the place of business of the
supplier is not known.
b) Transportation of goods for job Work
c) Transportation of goods for reasons other than by way of supply
d) Such other Supplies as may be notified by the Central Board of Indirect Taxes and Customs (CBIC)

13. G O O D S T R A N S P O R T E D I N SKD/C KD C O N D I TI O N O R I N B A TC H ES O R L O TS

Tyre (+) certified copy of invoice (+) delivery challan

Body frame (+) certified copy of invoice (+) delivery challan

Supplier of Cycle Recipient

Other parts (+) original copy of invoice (+) delivery challan

an

▪ Tax invoice is issued before removal of “first consignment”.

▪ However, Original copy of Invoice is sent with “last consignment”
▪ For earlier consignment, Certified copy of tax invoice is sent.
▪ “Delivery challan” is issued for “all consignment”

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14. D E B I T N O T E A N D C R E D I T N O T E [S E C 34]

▪ Under GST law, cancellation of invoice is not allowed in case there is any change in VoS or tax amount.
▪ In such cases, rectification of under-billing or overbilling is done by issue of debit note & Credit note.
▪ Under GST, only supplier is allowed to issue credit note or debit note to recipient.
▪ If supplier needs to debit the recipient, he issues debit note. (increase in VoS or GST payable)
▪ If supplier needs to credit the recipient, he issues credit note. (decrease in VoS or GST payable)

Insurance of Credit Note under GST

Where a tax invoice has been issued for supply of goods/ services or both but

Value of supply in Value of supply

tax invoice (100) >
(Actual) (80) Where goods/services
When goods/ services found
supplied by supplier are
to be deficient
returned by Recipient
Tax charged in tax Actual tax
>
invoice (18%) payable (12%)

Issue Credit Note

Notes:
a) Issuance of a credit note reduces tax liability of supplier.
b) Credit Note u/s 34 is not allowed to be issued in case of secondary discount (as it doesn’t affect VOS)
However, financial credit note can be issued for accounting purpose.

Insurance of Debit Note under GST

Where a tax invoice has been issued for supply of Goods/ services or both (includes supplementary invoice)

Value of supply in tax invoice (100) > Value of supply (Actual) (120)
or
Tax charged in tax invoice (18%) > Actual tax payable (28%)
Supplier shall issue Debit Note

Issuance of a debit note/supplementary invoice creates additional tax liability for supplier. Treatment of a
debit note/ supplementary invoice is identical to the treatment of a tax invoice.

Notes:
1. Details of Debit Note/ Credit Note issued u/s 34 is declared in return as it affects VoS and tax liability..
2. Last date for issuance of credit note w.r.t. an invoice: Earlier of
a) 30th November following the end of relevant financial year; &
b) Date of filing Annual Return for relevant FY.
3. Consolidated debit note or credit note can be issued for multiple invoices issued in a FY without linking
it to individual invoices.

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15. P R O H I B I T I O N O F U N A U T H O R I S E D C O L L E C T I O N O F T A X [S EC T I O N 32]

Unregistered person shall not collect any amount by way of GST in respect of any supply of goods or
services or both.
Registered person shall not collect tax except as per provisions of this Act or the rules made thereunder.
Example:
Rujuta is engaged in providing grooming services. She is not registered under GST law as her turnover is
below the threshold limit. Rujuta cannot collect tax on the grooming services provided by her.

16. A M O U N T O F T A X T O B E I N D I C A T E D I N T A X I N V O I C E A N D O T H E R D O C U M EN TS [S EC T I O N 33]

Where any supply is made for a consideration, every person who is liable to pay tax for such supply shall
➢ prominently indicate in all documents relating to assessment, tax invoice and other like documents,
➢ the amount of tax which shall form part of the price at which such supply is made.

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