One of the most notable refinements processed by our country is the implementation of Goods and Services Tax (GST). After this implementation, its impact on the invoices is massive, as every invoice has been transformed into GST invoices.
The rollout of GST came into progress in the year 2017, and this GST has replaced the several other taxes levied by the government. This blog outlines the essential elements and facts about the GST invoices for small business.
What is a GST Invoice?
For the small business owners and clients, a simple explanation is here for the GST invoice.
A GST invoice is a tax invoice issued by a seller to a buyer that includes the basic details about the brand, client, payment terms, description details, and the price, including the tax details. The tax details include Central Goods and Services Tax (CGST), State Goods and Services Tax (SGST), and Integrated Goods and Services Tax (IGST).
Do All Businesses Need to Issue GST Invoices?
This doubt is commonly raised by both business owners as well as the clients. Here is the explanation:
According to the rule, the business or company with a registered GST number should issue the GST invoice. Any business that is not GST registered need not issue GST invoices, and they can go for regular invoices.
Essential Elements to be Added in a GST Invoice:
The obligatory attributes that must be added in GST invoices are
1. Invoice Number: The invoice number should not exceed 16 characters.
2. Details of the Seller: It is the details of the particular brand that sells the product to the consumer. These details include name, physical address, and contact details.
3. Invoice Date and Due Date: The invoice date is the date on which the invoice is issued, and the due date is the date on which the customer must make the payment.
4. Client Details: The details include client name, address of delivery, contact details, and place of supply.
5. Seller’s GSTIN: It is the Goods and Services Tax Identification Number of the seller that must be included in the GST invoices.
6. Client’s GSTIN: If the client also has any registered GSTIN, it should be also included in the GST invoice.
7. Description of the Products: The clear description of the product must be included in the GST invoice.
8. HSN Code: The Harmonized System of Nomenclature (HSN) code must be included in the GST invoices for the correct tax rate of the products.
9. SAC: The Service Accounting Code is a six-digit code for authorizing international trade.
10. Quantity of the Number and its Unit: The quantity of the products purchased and its units like kilogram, meter, liter etc. should be appended to the GST invoice.
11. Total Value of the Products: The total value of the products without the breakdown of charges must be added to the GST invoice.
12. GST Values: The GST values inclusive of Central Goods and Services Tax (CGST), State Goods and Services Tax (SGST), Integrated Goods and Services tax (IGST), and Union Territory Goods and Services Tax (UTGST) must be included in the invoice.
13. Bank Details: Clear bank account details such as bank name, branch name, bank account number, and bank IFSC code.
14. Authorized Signature: The authorized signature of the company or business concerned.
15. Terms and Conditions: The terms and conditions are the essential aspect of every invoice and GST invoices are not an exemption to it. The clear terms and conditions should be mentioned in the invoices for the welfare of the client.
16. Reverse Charge Statement: The GST invoice must include the Reverse Charge Statement in case of any reverse charges applicable.
Rules of GST Tax Invoice:
Invoice Number Rules:
Since the invoice number is essential for every invoice, the GST invoice number must be unique and should be sequential. It must not exceed 16 characters.
Signature Rules:
Signature is mandatory for the GST invoice. The signature may be digital or handwritten. But there must be the signature of the GST representative or the authorised person.
Payment Rules:
TheGST payment includes the CGST and SGST values depending on the transactions made inter-state and intra-state. The GST payment for a regular taxpayer must be proceeded by the 20th day of the succeeding month.
When should GST invoices be issued?
The GST invoices must be issued for the GST-registered products above the value of Rs. 200. The time limit varies for issuing GST invoices based on the goods and services that are sold.
For Goods:
The GST invoice should be issued after the purchasing of the item for a normal supply of goods. The GST invoice should be issued after receiving the payment in the case of continuous supply of goods.
For Services:
For general services, the invoice should be issued within 30 days, and for financial services, the invoice should be issued within 45 days.
A vendor who doesn’t follow the following rules may be charged penalties. So, it is crucial to follow the time management in issuing GST invoices.
Significance of GST Invoice:
Input Tax Credit: With a GST invoice, the buyer can claim the Input Tax Credit (ITC). The business or companies can counteract the GST by reducing the overall tax. The ITC cannot be claimed without a valid GST.
Tax Calculation: The GST invoice covers the tax calculation that includes the CGST and SGST values for the amount that must be paid for the product. This ensures that the right amount is collected.
Maintaining Records: The GST invoices serve as an official record for transactions carried out. It serves as an easy way to maintain the records and helps in accurate GST filing.
Number of GST Invoice Copies Issued by a Supplier:
The number of Invoice copies that the supplier should issue is 3.
- The first one is for the customer.
- The second one is for the transporter as proof.
- The third one is for the supplier itself for their own reference.
Mistakes to Avoid in GST Invoice:
- The invoice value, including all the tax values, must be accurate.
- In case both the buyer and seller have GSTIN numbers, it is crucial to enter the correct number.
- The GST invoice number is a long one, and a minute error in it can cause issues.
- The terms regarding the discounts, offers, and reverse charges should be mentioned correctly in the invoices.
It is the correct time for small business owners to register for GST as it provides certain tax benefits. GST invoice—an essential document for business—helps in managing the business flow, claiming tax credits, and maintaining accurate records for legal compliance.
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