Tax
Bill of supply: when you issue one instead of a tax invoice
Composition dealers and sellers of exempt goods or services do not issue tax invoices. What a bill of supply is, what it must show, the wording it carries, and the mixed case.
15 Nov 2026 · 6 min read
A hardware shop in Nagpur switches to the composition scheme to keep its GST simple. The next morning a contractor buys forty door hinges and asks for a GST bill, as usual. The shopkeeper prints the same invoice as yesterday, with CGST and SGST on it. That is the one thing a composition dealer must not do. It cannot collect GST from customers at all, so it cannot issue a tax invoice.
What it issues instead is a bill of supply. This post explains who issues one, what it shows and how it differs from a tax invoice. It is plain guidance, not legal advice.
Who issues a bill of supply
- Composition dealers. Businesses in the composition scheme pay GST as a small share of their turnover, from their own pocket. They charge customers no GST and claim no input tax credit.
- Registered businesses selling exempt goods or services. When nothing on the sale is taxable, like fresh vegetables or a service the law exempts, there is no tax to show, so the document is a bill of supply.
A business that is not registered at all issues neither. It gives a plain invoice or receipt, with no GSTIN and no tax. And exports are not exempt: they are zero-rated, and go on a tax invoice. See billing clients abroad.
The composition scheme in brief
| Who | Turnover limit | Tax on turnover |
|---|---|---|
| Traders and manufacturers | ₹1.5 crore (₹75 lakh in some special category states) | 1% |
| Restaurants | ₹1.5 crore (₹75 lakh in some) | 5% |
| Service providers, and mixed businesses | ₹50 lakh | 6% |
These are the limits and rates at the time of writing; the CBIC website has the current notifications. Each rate is split equally into CGST and SGST, and it is paid by you, not added to the bill. Composition dealers generally cannot sell to other states, cannot sell certain goods, and file a short statement each quarter (CMP-08) and a yearly return (GSTR-4). Whether the scheme suits you is a question for your CA: it is simpler, but your business customers get no GST credit from you, which some of them will mind.
What a bill of supply must show
Rule 49 of the CGST Rules lists the fields. It is a tax invoice with the tax taken out:
- Your name, address and GSTIN
- A serial number, up to 16 characters, unique in the financial year
- The date of issue
- Your buyer’s name and address, and their GSTIN if they are registered
- HSN code for goods or SAC for services
- A description of what you sold
- The value, after any discount
- Your signature or digital signature
No rate, no CGST, SGST or IGST, and no “reverse charge” line. The numbering works exactly as for invoices: one series per financial year, in order, no repeats. See how to number invoices.
The sentence composition dealers must print
A composition dealer writes, at the top of every bill of supply: “Composition taxable person, not eligible to collect tax on supplies”. Service providers in the 6% scheme use the wording set in their own notification, which names Notification No. 2/2019-Central Tax (Rate). The same words, “composition taxable person”, also go on the signboard at your place of business.
The point of the sentence is to tell a business buyer, before they file anything, that there is no GST on this bill for them to claim.
Taxable and exempt on one sale
A regular, registered grocer sells a customer a packet of branded snacks, which is taxable, and a kilo of fresh tomatoes, which is exempt. Two documents for one basket would be silly. When the buyer is not registered, the rules allow one combined “invoice-cum-bill of supply”: the taxable line with its GST, the exempt line without, on one document. For a registered buyer, issue a tax invoice for the taxable part and a bill of supply for the exempt part, or ask your CA how they prefer it.
Mistakes to avoid
- A composition dealer adding GST to the bill. That tax would be collected without the right to collect it.
- Leaving out the composition sentence.
- Calling an export or a 0% sale “exempt”. Zero-rated sales still get a tax invoice.
- Skipping the HSN or SAC because there is no tax. Rule 49 still asks for it.
The short version
- Composition dealers and sellers of only exempt goods or services issue a bill of supply, not a tax invoice.
- It shows everything a tax invoice does, except the tax.
- Composition dealers print “Composition taxable person, not eligible to collect tax on supplies” on every bill.
- Selling taxable and exempt items to a consumer: one invoice-cum-bill of supply is allowed.
- Exports are zero-rated, not exempt, and still need a tax invoice. The full tax invoice list is in what a GST tax invoice needs.