The Pillars of Compliance – Issue and Deemed Issue of Invoices under GST

The Goods and Services Tax (GST) framework hinges on proper documentation, with the tax invoice serving as the foundational record of a supply. An invoice is often considered the ‘proof of sale,’ but legally, it is a document that records the terms of a pre-existing arrangement or agreement. The stringent provisions governing the timing and method of invoice issuance—including provisions for "deemed issue"—are crucial for determining the Time of Supply (TOS), fulfilling Input Tax Credit (ITC) conditions, and establishing tax liability.

1. Mandatory Requirements for Issuing a Tax Invoice (Section 31)

Every registered person supplying taxable goods or services must issue a tax invoice. The requirement varies based on the nature of the supply:

A. Supply of Goods

The timing for issuing a tax invoice for goods depends on whether the supply involves movement:

1. Supply involving movement of goods: The invoice must be issued before or at the time of removal of the goods for supply to the recipient. Removal is defined as dispatching the goods for delivery or the recipient collecting the goods.

2. Supply not involving movement of goods: The invoice must be issued before or at the time of delivery of the goods or making them available to the recipient.

B. Supply of Services

A registered person supplying taxable services must issue a tax invoice before or after the provision of service but within a prescribed period.

• General Time Limit: The invoice must generally be issued within thirty days from the date of supply of service.

• Special Cases (45 Days): If the supplier is an insurer, a banking company, or a financial institution (including a non-banking financial company), the period is forty-five days from the date of supply of service.

• Continuous Supply of Services (Section 31(5)): 

  • If the due date of payment is ascertainable from the contract, the invoice is due on or before the due date of payment.

  • If the due date is not ascertainable, the invoice is due before or at the time the supplier receives the payment.

  • If payment is linked to the completion of an event, the invoice is due on or before the date of completion of that event.

• Cessation of Services (Section 31(6)): If supply ceases before completion, the invoice must be issued at the time of cessation, covering the extent of the supply made up to that point.

C. Contents and Format

A tax invoice must contain numerous particulars, including the supplier's and recipient's GSTIN and address, a consecutive serial number (max sixteen characters, unique for a financial year), date of issue, description, quantity/UQC, total value, taxable value, rate of tax, amount of tax charged, place of supply (for inter-state), and whether tax is payable on Reverse Charge Basis (RCM).

• Tax Indication (Section 33): Every person liable to pay tax must prominently indicate the amount of tax in all documents relating to assessment and tax invoice, and this amount shall form part of the price at which the supply is made. If tax is not indicated explicitly, the entire amount might be treated as 'ex tax'.

• Manner of Issue (Rule 48): Invoices for goods must typically be prepared in triplicate (Original for Recipient, Duplicate for Transporter, Triplicate for Supplier), and for services in duplicate (Original for Recipient, Duplicate for Supplier).

2. Documents in Lieu of Tax Invoice and Deemed Issue Provisions

The law prescribes several specific situations where documents other than the standard tax invoice are required, or where the timing of issuance is accelerated or delayed by deeming fictions.

A. Bill of Supply

A registered person supplying exempted goods or services, or one paying tax under the composition scheme (Section 10), must issue a Bill of Supply instead of a tax invoice. Generally, no ITC can be claimed based on a bill of supply.

B. Revised Tax Invoice (Section 31(3)(a))

A person who applies for registration within 30 days of becoming liable is granted registration effective from the date they became liable. For taxable supplies made during this interim period (between the effective date of registration and the actual date of the registration certificate), the registered person may issue a Revised Invoice within one month of receiving the registration certificate.

• Consolidated Revised Invoice: A consolidated revised tax invoice may be issued for all taxable supplies made to an unregistered recipient during this period. For inter-State supplies, a consolidated revised invoice can be issued for unregistered recipients in a state if the value of supply does not exceed ₹2,50,000.

C. Invoices in Reverse Charge Mechanism (RCM) – Deemed Issue

In RCM scenarios, the recipient is often required to issue documents:

1. Self-Generated Tax Invoice (Section 31(3)(f)): A registered recipient who is liable to pay tax under RCM (Section 9(3) or 9(4)) must issue an invoice (a self-invoice) for goods or services received from an unregistered supplier. The recipient must issue this invoice within thirty days from the date of receipt of the supply.

2. Payment Voucher (Section 31(3)(g)): The registered recipient liable under RCM must issue a Payment Voucher at the time of making payment to the supplier.

D. Advance Payments and Refunds

• Receipt Voucher (Section 31(3)(d)): A registered person receiving an advance payment for goods or services must issue a Receipt Voucher. This is required as tax is still leviable on advances received for services (though GST is generally not applicable on advances against supply of goods).

• Refund Voucher (Section 31(3)(e)): If a Receipt Voucher was issued for an advance, but subsequently no supply is made, a Refund Voucher may be issued to the person who made the payment.

E. Goods Sent on Approval (Section 31(7)) – Deemed Issue Timing

This provision dictates a specific timeline for issuance: If goods are sent or taken on approval for sale or return, and are removed before the supply takes place, the tax invoice must be issued at the earlier of the following dates:

1. The time of supply (i.e., when the customer accepts the goods); or

2. Six months from the date of removal.

If acceptance does not occur within six months, the supply is deemed to occur on the date the six-month period expires, and the invoice must be issued accordingly.

3. Credit and Debit Notes (Section 34)

Credit and debit notes are documents issued by the registered supplier to adjust the value or tax liability recorded in original tax invoices.

A. Credit Note (CN)

A registered supplier may issue one or more credit notes for supplies made in a financial year when:

1. The taxable value or tax charged in the invoice exceeds the payable value or tax.

2. The goods supplied are returned by the recipient.

3. The goods or services supplied are found to be deficient.

• Time Limit for Tax Adjustment: Details of the credit note must be declared in the return no later than the thirtieth day of November following the end of the financial year in which the original supply was made, or the date of furnishing the relevant annual return, whichever is earlier.

• Condition for Reduction: Reduction in output tax liability is not permitted if the incidence of tax and interest on the supply has been passed on to any other person.

B. Debit Note (DN)

A registered supplier must issue one or more debit notes for supplies made in a financial year when:

1. The taxable value or tax charged in the invoice is less than the payable value or tax.

2. The term "debit note" includes a supplementary invoice.

• Time Limit: Unlike credit notes, there is no statutory time limit for the issuance or declaration of a debit note. The details must be declared in the return for the month during which the debit note is issued.

4. Time of Supply (TOS) and Invoice Linkage

The issuance of an invoice is directly linked to the determination of when the tax liability arises (Time of Supply).

Conclusion:

Think of the GST invoice system as a complex timing lock for a safe (the tax liability). For standard supplies, the lock opens (tax liability is fixed) either when the supplier turns the key (issues the invoice) or when they insert the cash (receive payment), whichever happens first. For special transactions, like RCM or goods sent on approval, the lock has multiple sensors (deeming provisions) that trigger the opening based on fixed deadlines, even if the primary parties haven't turned the key or inserted the cash, ensuring the tax liability is never indefinitely postponed.

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