Service businesses often assume GST invoicing is simpler than goods. No trucks. No warehouses. No e-way bills. But in reality, GST tax invoice rules for services can be even trickier. The confusion usually starts around when exactly the invoice should be issued and what happens when payments are linked to milestones or contracts.
This blog focuses only on services, so if you’re into consulting, IT services, security, maintenance, digital services, agencies, freelancers, or subscriptions—this one’s for you.
What Is a Tax Invoice for Services Under GST?
A tax invoice for services is a document issued by a registered service provider when taxable services are supplied. It confirms:
- Service has been provided (or agreed to be provided)
- Value of service
- Tax charged
- Buyer’s eligibility for Input Tax Credit (ITC)
Under Section 31(2) of the CGST Act, issuing a tax invoice for services is mandatory unless specifically exempted.
When Should a Tax Invoice Be Issued for Services?
This is where services differ sharply from goods.
General Rule for Services
A tax invoice must be issued before or after providing the service, but within a prescribed time limit.
Time Limit:
- 30 days from date of supply of service
- 45 days for banks, NBFCs, insurers, and financial institutions
This gives service providers flexibility, but also creates room for mistakes.
What Is the “Date of Supply” for Services?
Unlike goods, services don’t move physically. So GST uses time-based and payment-based triggers.
The date of supply depends on:
- Completion of service
- Receipt of payment
- Contract terms
This is why invoice timing must be handled carefully.
Continuous Supply of Services – Most Confusing Rule
If services are supplied continuously for more than 3 months under a contract with periodic payments, it qualifies as continuous supply of services.
Examples include:
- AMC contracts
- Internet & telecom services
- Security services
- SaaS subscriptions
- Property maintenance
- Consulting retainers
Invoice Rules for Continuous Supply of Services
The rule depends on how the contract is structured:
Case 1: Due Date Is Mentioned in Contract
Invoice must be issued on or before the due date of payment.
Case 2: Due Date Not Mentioned
Invoice must be issued when payment is received.
Case 3: Payment Linked to Event or Milestone
Invoice must be issued on or before completion of that event.
This ensures tax matches cash flow or service milestones.
What If Service Stops Before Completion?
Sometimes contracts end early.
If service supply ceases before completion:
- Invoice must be issued at the time service stops
- Only for the portion of service actually provided
This avoids disputes later during audits or assessments.
Advance Payment for Services – Special Rule
When a service provider receives advance payment, GST requires documentation even before service is delivered.
What You Must Issue:
- Receipt Voucher
This document acknowledges:
- Advance received
- Tax charged (if applicable)
If later:
- Service is not provided
- Invoice is not issued
👉 A Refund Voucher must be issued.
This rule is very common in event management, consulting, and subscription businesses.
What If Supplier Is Unregistered? (Reverse Charge)
In some cases, service recipient is liable to pay GST under reverse charge.
If you are the registered recipient:
- You must issue a self-invoice
- Also issue a payment voucher at time of payment
This ensures tax compliance even when supplier is unregistered.
Mandatory Contents of a GST Service Invoice
A service invoice must contain:
- Supplier name, address, GSTIN
- Invoice number (unique per FY)
- Date
- Recipient details (GSTIN if registered)
- Description of service
- SAC code
- Value of service
- Tax rate & tax amount
- Place of supply (important for IGST)
- Reverse charge mention (if applicable)
- Signature or digital signature
Missing any of these can cause ITC denial.
SAC Code for Services
Services use SAC (Services Accounting Code) instead of HSN.
Rules depend on turnover:
- ≤ ₹5 crore → 4-digit SAC
- ₹5 crore → 6-digit SAC
Wrong SAC can result in wrong tax rate and notices later.
Invoice Copies Required for Services
Unlike goods, service invoices are issued in DUPLICATE:
- Original – for recipient
- Duplicate – for supplier
No triplicate needed since there is no physical movement.
E-Invoicing for Services
If your turnover exceeds ₹5 crore, e-invoicing is mandatory for:
- B2B services
- Export of services
Process:
- Invoice prepared in your software
- Uploaded to IRP
- IRN & QR code generated
Without IRN, invoice is invalid.
Common Mistakes Service Providers Make
- Issuing invoice after 30 days
- Ignoring advance payment rules
- Wrong place of supply
- Missing SAC codes
- Treating continuous services as one-time supply
- Not issuing receipt or payment vouchers
Most GST notices in service sector start here.
Why Service Invoice Rules Matter So Much
Service businesses often think audits won’t affect them much. That’s a myth.
Service invoices directly impact:
- GST returns
- ITC claims of clients
- Cash flow
- Contract disputes
A single wrong invoice can block your client’s ITC and damage long-term relationships.
FAQs
1. Can I issue a GST invoice after providing a service?
Yes, but it must be issued within 30 days (45 days for banks/NBFCs).
2. Is advance payment taxable for services?
Yes. You must issue a receipt voucher when advance is received.
3. What is continuous supply of services?
Services supplied for more than 3 months with periodic payments under a contract.
4. Do freelancers need to follow these rules?
Yes, if registered under GST and providing taxable services.
5. Is e-invoicing compulsory for service providers?
Yes, if turnover exceeds ₹5 crore for B2B and export services.
6. What happens if invoice is delayed?
Late invoicing may attract penalties and cause ITC loss to the client.
