Invoice is the most important document in an administration of GST. It is generally issued by the supplier notifying the purchaser of the obligation to make payment in respect of any transaction. It contains information as mentioned under Rule 1 of GST Invoice Rules. A tax invoice is an essential evidence to:
- support a registered person’s claim for the ITC of GST (input tax) incurred;
- trigger the time of supply as the invoice date will determine when GST is to be accounted for by a registered person on the supply of goods and services (accounting on invoice basis);
Section 2(59) defines invoice as a meaning assign to under section 28. In common parlance, Invoice indicates the amount receivable by the person issuing the invoice from the person to whom the invoice is issued.
IMPORTANCE OF TAX INVOICE
The GST required to be paid throughout the distribution chain of ‘Supply’, on the value addition made at each stage is taxed thus avoiding double taxation. The GST will be paid in full, by utilizing the credit amount of GST already paid by the input supplier and in cash pertaining to the value addition.
The GST system designed to be a self-regulatory system based on strong Information Technology backing. This proposed system will be monitor by way of Invoice Reporting at every stage in the form of Returns GSTR-1, GSTR-2, GSTR-3 etc or rectified in form of returns GSTR-1A, GSTR-2A, GSTR-3A. Therefore, Tax invoices are the most important document under GST Scheme as they would issue by the supplier notifying the purchaser of obligation to make payment in respect of any transaction.
Invoice is important for the determination of GST liability of taxpayers particularly is important for following purposes:
- For determination of address of delivery
- For determination of continuous journey of goods or services
- For input services distributor’s mechanism;
- For determination of time of supply of goods and services;
- Application of GST in case of change in rate of tax;
- For determination of Value of goods or services;
- For taking input tax credit;
- Assessment and other proceedings.
Commercial Invoice and Tax Invoice
A tax invoice is similar to a commercial invoice or receipt, however, a tax invoice issued in the compliance with GST contains additional details or information as may specified under the GST law. Every registered person who makes taxable supply of goods and services is required to issue a tax invoice in compliance with GST Laws.
For a registered person, a tax invoice is necessary to claim input tax credit. Without a proper tax invoice, a registered person and his customers/clients cannot claim ITC incurred on their purchases of taxable goods or services.
STATUTORY PROVISIONS PERTAINING TO INVOICE
The detail provisions pertaining to Invoice are provided in Chapter VII of Model GST Laws and Draft Goods and Services Tax -Invoice Rules.
In general Invoicing doesn’t seem like a big component of a business, but entire seamless credit under GST framework works around this documents. Taxpayers and department have always different opinion on the contents of an invoice, common mistakes can cost business and revenue significantly. Therefore a clear and unambiguous law and rules are required to govern issuance and other matter relating to invoice.
The Model GST Law and draft Goods and Services Tax-Invoice Rules are place in public domain which deal with statutory framework to regulate the invoicing matter.
This article is written by Vineet Sahay, CS “GST Blogger “.