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A small-business owner is unsure whether to issue a tax invoice or a bill of supply, and buyers ask why some bills carry no GST.
Regular registered suppliers of taxable items issue a tax invoice under Rule 46. Composition dealers and exempt or nil-rated supplies use a bill of supply under Rule 49, with no tax and no ITC. Mixed sales can use an invoice-cum-bill of supply under Rule 46A.
Tag each item as taxable or exempt in the item master, set the document type by registration status, and keep bills of supply out of ITC claims.
Every sale carries the right document, buyers know which purchases give ITC, and composition-vendor bills are not chased in GSTR-2B.
If you are a regular GST-registered supplier selling taxable goods or services, you issue a tax invoice. If you are a composition dealer, or you are selling exempt or nil-rated items, you issue a bill of supply. A bill of supply charges no GST, so your buyer gets no input tax credit (ITC) from it.
The rules: Section 31 of the CGST Act, Rule 46 for tax invoices, Rule 49 for bills of supply and Rule 46A for a mixed document.
Tax invoice and bill of supply side by side
| Point | Tax invoice | Bill of supply |
|---|---|---|
| Who issues it | Regular registered supplier of taxable items | Composition dealer; any supplier of exempt or nil-rated items |
| GST shown | Yes, CGST plus SGST or IGST | No |
| ITC for the buyer | Yes, once in GSTR-2B | No |
| Appears in buyer’s GSTR-2B | Yes, from supplier’s GSTR-1 | No |
| Number series | Consecutive, up to 16 characters | Consecutive, up to 16 characters |
| Common mistake | Wrong buyer GSTIN or wrong tax head | Composition dealer charging GST on the bill |
What if one sale mixes taxable and exempt items?
Think of a grocery shop that sells unbranded rice (exempt) and packaged snacks (taxable). Rule 46A lets a registered supplier issue one invoice-cum-bill of supply. Taxable lines carry GST; exempt lines carry none. One document, one number, two treatments.
Worked example: one counter bill
A provision store in Mysuru, a regular GST registrant, sells to a hotel:
| Line | Taxable value | GST at 18 percent | Line total |
|---|---|---|---|
| Exempt items (fresh produce) | ₹59,000 | Nil | ₹59,000 |
| Taxable goods | ₹20,000 | ₹3,600 | ₹23,600 |
| Total | ₹79,000 | ₹3,600 | ₹82,600 |
The store issues a single invoice-cum-bill of supply for ₹82,600. In GSTR-1 it reports ₹20,000 as taxable with ₹3,600 of tax, and ₹59,000 as exempt supplies. The hotel can claim ₹3,600 of ITC, not more. Check: ₹59,000 plus ₹23,600 equals ₹82,600.
How does a bill of supply affect the buyer’s books?
The buyer records the full bill as the cost of purchase. There is no ITC line, because no tax was charged. In the monthly match against GSTR-2B, bills of supply should be tagged in the purchase register as “no ITC expected”. Otherwise they show up as unmatched every month.
This is exactly why a composition-scheme vendor never appears in GSTR-2B. Composition dealers do not file GSTR-1, so their bills never reach your GSTR-2B at all. Nothing is wrong; the vendor simply is not passing on any credit.
A quick decision guide
- Are you on the composition scheme? Issue a bill of supply for every sale.
- Is the item exempt or nil-rated? Bill of supply, or invoice-cum-bill of supply if mixed.
- Otherwise, issue a tax invoice, and register it on the IRP if your turnover crossed ₹5 crore.
What to read next
- Next in this series: GSTR-2B vs purchase register reconciliation
- The composition vendor puzzle: Why does my composition scheme vendor not appear in GSTR-2B?
- Back to basics: What is a GST tax invoice, and what must it contain?
- GST reconciliation software: GST inward matching (GSTR-2B and ITC) is on the TransactIG roadmap.