Before knowing what a bill of supply is, it is very import to know about composition tax dealer who is authorized to prepare and issue Bill of Supply. Gst composition scheme is for small businesses belonging to the unorganized sector with aggregate turnover less than Rs. 1.5 crore (less than 75 lakhs for North Eastern states). The business owners registered under this scheme are called compounding vendors/dealers or composition dealers, and these composition dealers they pay tax at a lesser rate. (Not less than 1% on turnover in the State or union territory they operate in) Also, they have fewer returns to file compared to normal taxpayers.
This discussion makes us to draw a question whether normal tax payers and Composition tax payers are one if not then what differentiates them from each other.
Normal Dealer | Composition Dealer |
A normal dealer calculates GST liability by deducting the input tax credits from the Output tax liability and pays the difference in cash. | A composition dealer on the other hand calculates the GST liability by paying a fixed rate on the turnover and creates a challan for the amount and pays the tax as a composition dealer is not eligible to collect tax nor claim Input Tax credits the calculation of GST liability is different from the normal dealer |
A normal dealer has to file 3 monthly returns and an annual return, totaling to 37 returns in a year | Whereas a composition dealer has to just file 4 Quarterly returns and a annual return making the tally to just 5 returns a year |
A normal tax dealer can make inter and intra-State state supplies of goods and or services | But a composition dealer is barred from making inter state supplies of goods. |
A normal taxpayer can engage in any type of service oriented business. | But a composition dealer, if a service provider is only eligible to carry out restaurant services (not serving alcohol) |
For a normal tax dealer higher rate of tax is applicable as per the GST rate tier structure 5%,12%,18% and 28% | For a composition dealer we have just two rates of taxes 1%, 5% (. 5% CGST and 0.5% SGST and 2.5%CGST and 2.5 % SGST respectively) The 1% rate is applicable for manufacturers and traders and 5% rate is for composition dealer engaged in service of providing restaurant services. |
Threshold registration limit for normal dealer is aggregate turnover exceeding Rs 20 lakhs (Rs 10 lakhs for North Eastern and hill states) and it is mandatory to register for every registered taxable person whenever that line is crossed. | Threshold registration limit to opt for composition scheme is aggregate turnover not exceeding 1.5 Crores in previous financial year. |
A normal dealer is eligible to issue tax invoice | A composition dealer on other hand can only issue Bill of Supply. |
Finer Point Study : The ‘aggregate turnover’ as defined in GST law is the aggregate value of all:
With this backdrop let’s learn about bill of supply and what are its characteristics.
What is a bill of supply : A business registered under GST issues a tax invoice to the buyer. Such an invoice mentions the GST rate charged on the goods and services sold. But there are some businesses which even though registered under GST cannot charge any tax on the invoice issued by them. Such dealers have to issue a Bill of Supply.
When GST is not applicable on a transaction, bill of supply is issued in its place or when ever there's a scenario where GST is not to be recovered from the customer a bill of supply is issued in that place. So this makes it important to know as who could issue such bill of supply.
Who could issue a bill of supply :
| A taxpayer whose turnover is less than Rs 1.5 Crores For rest of India and 1 Crores for North Eastern states can opt for composition scheme. Any registered person opting for composition scheme has to deposit tax on their receipts themselves, they are not allowed to collect any tax from their buyers. Here the GST liability has to be paid out of pocket by the composition dealer. They cannot charge GST in the invoice. Thus a composition dealer has to raise a Bill of Supply instead of a Tax Invoice. And he has to mention the words ‘composition taxable person not eligible to collect taxes on supplies’ on the Bill of Supply. |
| Since exports supplies are zero-rated. Therefore a taxpayer exporting goods can issue a Bill of Supply in place of a tax invoice. The dealer has to mention the following in their Bill of Supply- “Supply Meant For Export On Payment Of IGST” “Supply Meant For Export Under Bond Or Letter Of Undertaking Without Payment Of IGST” |
| When registered dealer supplies exempt goods or services they are required to issue Bill of Supply. For example, when a registered taxpayer provides unprocessed agricultural products they have to issue a Bill of Supply instead of a tax invoice. |
To sum up bill of Supply is a document to be issued by a registered person supplying exempted goods or services or both or paying tax under the provisions of section 10 instead of a tax invoice. And it’s wrong to say that only composition dealer issues a bill of supply because an exporter and exempt goods supplier can also issue Bill of Supply.
Characteristics of bill of supply ( for a composition dealer) : A bill of supply of a composition dealer must include the following :
Such taxable registered person may not issue a bill of supply if the value of the goods or services or both supplied is less than two hundred rupees. The person shall mention the words “composition taxable person, not eligible to collect tax on supplies” at the top of the bill of supply issued by him. And shall mention the words “composition taxable person” on every notice or signboard displayed at a prominent place at his principal place of business and at every additional place or places of business.
Invoices are a vital instrument for any business. At the GST software, Tally, they very well understand that your need to raise different types of GST bill/invoice and this may seem a bit daunting in the GST regime since you are getting used to the new system. Not to worry! You can generate invoice by changing the title of the invoice to Bill of Supply by selecting Titling in the print features instead of Tax Invoice. And to change the title and subtitle of invoice go to Sales voucher and press Alt P and then click on configuration window, enter Bill of Supply in the field Title of Document, and enter Composite Dealer Not Eligible to Collect Tax in the field Sub Title. So certainly one can now say that the GST regime calls for altering some business practices in a fundamental way, the most important of which is to inculcate the habit of digitizing business data. You need to digitize your GST bills/ invoices so as to be compliant to GST and Tally.ERP 9 is built with the same perspective.