If you run a small shop under the GST composition scheme, or you sell goods that are fully exempt from GST, you have probably been told at some point: "Aapko tax invoice nahi, bill of supply dena hai." Many shopkeepers nod, keep using the same printed bill book, and hope nobody asks questions. That works until a customer, a supplier or a GST officer looks closely at your bill and notices tax shown where it should not be, or a missing declaration that the law requires.
This guide explains what a bill of supply is, who must issue it, what details it must carry, how it differs from a tax invoice, and how to create one quickly without making mistakes. It is written for kirana owners, small traders, dairy and vegetable sellers, and other small businesses who want clarity without legal jargon.
What Is a Bill of Supply Under GST?
A bill of supply is a document issued by a registered person for a sale on which GST cannot be charged. It looks a lot like a normal bill: it has your name, GSTIN, bill number, date, item description and value. The key difference is that it shows no GST amount, because either the goods are exempt, or the seller is a composition dealer who is not allowed to collect tax from customers.
The legal basis is Section 31(3)(c) of the CGST Act read with Rule 49 of the CGST Rules. In simple words: when you are registered under GST but you are not allowed to charge tax on a supply, you issue a bill of supply instead of a tax invoice.
Who needs to issue a bill of supply?
- Composition dealers: Businesses that have opted for the composition scheme pay tax at a fixed low rate on turnover from their own pocket. They cannot collect GST from customers and cannot issue a tax invoice, so every sale is billed on a bill of supply.
- Sellers of exempt goods or services: A registered business selling items that are exempt from GST (for example, many unprocessed food items like fresh vegetables, fresh milk or unbranded grains, depending on the current rate notification) issues a bill of supply for those items.
- Mixed sellers: If a regular GST dealer sells both taxable and exempt items to an unregistered customer, the rules allow a single "invoice-cum-bill of supply" instead of two separate documents.
Exempt status depends on the item, its form (branded, packaged, processed) and current notifications. Always check the latest rate on the GST rates list or with your CA before deciding an item is exempt.
Composition scheme in brief
At the time of writing, the composition scheme is generally available to traders and manufacturers with aggregate turnover up to ₹1.5 crore in the previous year (₹75 lakh in certain special category states), and a separate composition option exists for small service providers. Limits and rates change from time to time, so confirm current eligibility on gst.gov.in or with your CA before opting in.
Mandatory Details in a Bill of Supply Format
Rule 49 lists what a bill of supply must contain. A correct format includes:
- Name, address and GSTIN of the supplier (you).
- A consecutive serial number, unique for the financial year, of not more than 16 characters. It can use letters, numbers, hyphen (-) and slash (/).
- Date of issue.
- Name, address and GSTIN or UIN of the recipient, if the customer is registered.
- HSN code for goods or accounting code (SAC) for services, as applicable to your turnover.
- Description of goods or services.
- Value of supply after any discount or abatement.
- Signature or digital signature of the supplier or authorised representative.
For composition dealers, there is one more important line. The bill must carry the words "composition taxable person, not eligible to collect tax on supplies". Composition dealers are also expected to display "composition taxable person" on their signboard at the shop.
Bill of Supply vs Tax Invoice: Key Differences
Here is a side-by-side view of the two documents.
| Point | Bill of Supply | Tax Invoice |
|---|---|---|
| Who issues it | Composition dealers; sellers of exempt goods/services | Regular GST-registered dealers making taxable supplies |
| GST shown | No CGST, SGST or IGST shown or collected | CGST + SGST (within state) or IGST (inter-state) shown separately |
| Input tax credit for buyer | Buyer cannot claim ITC on it | Registered buyer can claim ITC, subject to rules |
| Special declaration | Composition dealers must print the "not eligible to collect tax" line | Not required |
| Title on the document | "Bill of Supply" | "Tax Invoice" |
| Typical users | Small kirana under composition, dairy, vegetable and grain sellers | Most hardware, electronics, building material and wholesale shops |
The biggest practical point: a composition dealer who shows GST on a bill is collecting tax they are not allowed to collect. That can lead to penalties and demand notices. On the other side, a regular dealer who issues a bill of supply for a taxable item is under-reporting tax. Both mistakes usually come from using a generic bill book or an Excel template that does not switch formats properly.
Common Mistakes Shopkeepers Make
- Using a "Tax Invoice" heading as a composition dealer. Many printed bill books come with this heading by default. Get it corrected.
- Adding a GST line "just to be safe". Composition dealers must not charge GST to customers, even if the customer asks.
- Missing the declaration. The composition line is mandatory and is often forgotten on handwritten bills.
- Wrong exempt classification. An item that is exempt in loose form may be taxable when branded or packaged. Check before you bill.
Step-by-Step: How to Issue a Correct Bill of Supply
- Confirm your status. Are you a composition dealer, a regular dealer selling exempt goods, or both? This decides the document.
- Set up your business details once. Name, address, GSTIN and, for composition dealers, the declaration line.
- Choose a numbering series. For example, BOS/26-27/0001. Keep it consecutive and within 16 characters.
- Add products with HSN codes. Mark exempt items correctly so tax is never added by mistake.
- Enter customer details when needed. If the buyer is registered, add their GSTIN.
- Check the total. It should be the plain value of goods after discount, with no tax lines.
- Share and store. Print, send on WhatsApp or save as PDF, and keep a copy for your records.
How MaterialBill Helps With Bill of Supply
Doing all of this by hand every day is tiring and easy to get wrong. The MaterialBill billing app, made by Givni Private Limited, supports bill of supply for composition dealers, so you do not have to remember which lines to remove or add each time.
- Create a bill of supply or a GST invoice (with CGST/SGST/IGST auto-calculated) from the same app, depending on your registration and the items sold.
- Share bills on WhatsApp, SMS or email, download as PDF, or print on a thermal printer.
- Track customers who buy on credit with the built-in udhaar khata and send payment reminders on WhatsApp or SMS.
- Get daily and monthly sales reports and export them to Excel/CSV for your CA.
- Keep data in the cloud with sync across phone, tablet and PC browser, plus offline mode when the internet is weak.
The free billing software plan allows 30 GST bills a month, udhaar khata and party management with no credit card required. Paid plans start at ₹249 per month at the time of writing; check the pricing page on the website for current details. If you run a grocery store, the kirana billing software page shows how it fits a typical dukaan.
FAQs
Can a composition dealer issue a tax invoice?
No. A composition dealer cannot collect GST from customers, so they cannot issue a tax invoice. They must issue a bill of supply with the declaration "composition taxable person, not eligible to collect tax on supplies".
Can the buyer claim input tax credit on a bill of supply?
No. Since no GST is charged on a bill of supply, there is no tax for the buyer to claim as input tax credit. This is one reason some B2B buyers prefer to purchase from regular GST dealers.
Is HSN code required on a bill of supply?
The HSN or SAC requirement depends on your turnover and current notifications. Many small businesses are required to show at least a 4-digit HSN on B2B documents. Check the current rule with your CA, and add HSN codes to your product list so they print automatically.
Can I issue one bill for taxable and exempt items together?
Yes, a regular registered dealer selling both taxable and exempt items to an unregistered person can issue a single "invoice-cum-bill of supply". Composition dealers issue a bill of supply for all their sales.
Do I need a separate numbering series for bills of supply?
You can use a separate series, which many businesses prefer for clarity. Whatever you choose, numbers must be consecutive, unique for the financial year, and not more than 16 characters.
Conclusion
A bill of supply is a simple document, but small errors on it, like showing tax or missing the composition line, can cause real trouble later. Set up your format correctly once, keep numbering clean, and let software handle the repetitive work. You can start with MaterialBill's free plan today, no credit card needed. For help with setup, call or WhatsApp +91 98359 42411 or write to support@materialbill.in. For any doubt about your GST status, always confirm with your CA or on gst.gov.in.
