If you run a business in India, sooner or later you bump into the word “Tax Invoice”. And honestly, for most new business owners, the term sounds more complicated than it actually is. Once you break it down, a tax invoice under GST is simply a formal record of what you sold, who you sold it to, and how much tax you collected. But because GST is governed by strict legal rules, the invoice carries a little more weight than a normal bill.
So today, let’s unpack the whole thing in a relaxed, human way. No jargon. No heavy law-school tone. Just a simple walk-through of what a GST tax invoice actually means, why it matters, and what the law expects from you.
What Exactly Is a GST Tax Invoice?
A tax invoice is a document issued by a registered supplier when supplying taxable goods or services. Think of it as the official receipt that proves:
- A supply has happened,
- The buyer owes the amount mentioned,
- Tax has been charged correctly, and
- The buyer can claim ITC (Input Tax Credit) based on it.
The GST law (Section 31 of the CGST Act) treats the invoice as the central piece of evidence for the whole tax chain. Without it, the buyer can't claim ITC. And for the seller, it proves that tax was collected and needs to be deposited.
Why Is a Tax Invoice So Important?
Here’s the thing. GST works on a credit-based system. The buyer can claim ITC only if a valid tax invoice exists. So if the seller messes up the invoice, the buyer loses credit — and this always leads to disputes, calls, emails, and unnecessary headaches.
A tax invoice:
- Helps the government track the flow of goods/services
- Helps buyers claim tax credit
- Protects sellers legally
- Helps maintain transparency
- Acts as a document of title in some cases (once paid)
In short, it’s not something to take lightly.
Who Must Issue a GST Tax Invoice?
Any registered person supplying -
- taxable goods
- taxable services
- or both
must issue a tax invoice.
If you're supplying exempt goods/services or you're under composition scheme, you issue a Bill of Supply instead (not a tax invoice).
When Should a Tax Invoice Be Issued?
This part confuses many business owners, but here’s the simplest way to remember it.
For Goods
Issue the invoice before or at the time of:
- Removal of goods (if goods are transported), or
- Delivery/availability to customer (if no movement)
Example: If goods leave your warehouse on 12th July, invoice must be issued on or before 12th July.
For Services
Invoice can be issued before or after supplying the service, but within 30 days of the service date.
Banks, NBFCs, and insurers get 45 days.
Example: Service delivered on 01 August → Invoice must be issued by 31 August.
What Must a GST Invoice Contain?
A surprising number of people still use incomplete invoices. But the law lists mandatory fields such as:
- Supplier name, address, GSTIN
- Invoice number (unique each year)
- Date
- Customer name, address, GSTIN (if registered)
- HSN/SAC code
- Description of goods/services
- Quantity (for goods)
- Taxable value
- Tax rates (CGST, SGST, IGST)
- Total tax amount
- Reverse charge indication
- Place of supply
- Digital/physical signature
Without these, the invoice can be considered non-compliant.
What Happens in Case of Continuous Supply?
Some businesses don’t sell one-off items but work on recurring contracts — like telecom, security services, AMC, subscriptions, or utility providers.
For Goods
Invoice is issued each time a payment or statement is generated.
For Services
Depends on the contract:
- If due date exists → Invoice by that date
- If payment triggers the stage → Invoice at time of payment
- If completion of an event matters → Invoice at that milestone
This structure helps match tax events with service events more accurately.
What if Goods Are Sent on Approval or Return Basis?
Many industries — especially jewellery, garments, consumer electronics — send goods “on approval”.
GST allows this, but with conditions:
- Goods can move without invoice using a delivery challan
- Actual invoice must be issued when supply is confirmed
- If no supply happens → Invoice must still be issued within 6 months of removal
If goods are taken outside India for exhibition but not sold, the same 6-month rule applies.
GST Invoice Format: Can You Design Your Own?
Yes, absolutely.
GST does not prescribe a fixed design or template. As long as the mandatory fields are included, the layout is up to you.
This is why different companies have different invoice styles — some simple, some beautifully branded.
What About E-Invoicing?
If your turnover exceeds ₹5 crore in any year since 2017-18, you must generate e-invoices for B2B and export transactions.
This does NOT mean:
- invoice is created on the government website
Instead:
- You create the invoice in your own software
- Upload it to the Invoice Registration Portal (IRP)
- IRP returns a digitally signed invoice with an IRN and QR Code
This ensures authenticity and prevents fake invoices.
Businesses below ₹5 crore do not need e-invoicing for now.
Small Supplies Under ₹200: Do You Need an Invoice?
Not always.
If:
- The buyer is unregistered
- The supply value is under ₹200
- The buyer does not want an invoice
Then you can skip issuing one. At the end of the day, you issue one consolidated invoice for all such transactions.
Great for small retailers and high-volume counters.
Revised Tax Invoice: When Do You Issue It?
This happens when someone gets GST registration, but the effective date of registration is earlier than the day they actually received the certificate.
Any supplies made in the gap period require a Revised Tax Invoice, issued within 1 month of receiving GST registration certificate.
Why Tax Invoices Are the Backbone of GST
If you think about the entire GST structure, it’s basically one huge chain of invoices from manufacturer → wholesaler → retailer → consumer.
Every link connects to the next through invoices.
That’s why the law spends so much time defining them, regulating them, and ensuring they’re issued properly. Mistakes here lead to mistakes everywhere else — in ITC, in returns, in audits, in notices, and even in legal disputes.
A clean invoice saves a business from a world of trouble.
FAQs
1. What is the main purpose of a GST tax invoice?
To document a taxable supply, show tax charged, and allow buyers to claim ITC.
2. Can I issue a tax invoice after delivering goods?
Only if there is no movement involved. Otherwise, invoice must be issued before or at the time of removal.
3. How many digits of HSN must I show?
- Turnover ≤ ₹5 crore: 4 digits
- Turnover > ₹5 crore: 6 digits
4. Do I need to sign the invoice digitally?
Yes. Either a physical signature or a digital signature is fine. For e-invoices, IRP signature is added automatically.
5. Can I cancel a tax invoice?
You cannot “cancel” a tax invoice in GST. You must issue a credit note to nullify it.
6. Can I design my own invoice format?
Yes. The government specifies mandatory fields, not design.
7. Is a Bill of Supply the same as a Tax Invoice?
No. Bill of Supply is used when no tax is charged (exempt goods or composition scheme).
