What is a bill of supply?

A bill of supply is a document issued instead of a tax invoice when GST cannot be charged — namely by composition-scheme dealers and by suppliers of exempt goods or services. It looks like an invoice but shows no GST and does not enable the buyer to claim input tax credit.

Who issues a bill of supply?

Two categories: composition taxable persons (who pay tax at a flat rate and cannot collect GST from customers), and registered persons supplying wholly exempt goods or services. Both must issue a bill of supply rather than a tax invoice.

What declaration must a composition dealer print on the bill?

A composition dealer must print the words: 'composition taxable person, not eligible to collect tax on supplies' on every bill of supply. This informs the buyer that no GST is being charged and no input tax credit is available.

Can a customer claim ITC on a bill of supply?

No. Because no GST is charged on a bill of supply, there is no tax for the buyer to claim as input tax credit. This is a key reason B2B buyers may prefer suppliers who issue tax invoices.

Bill of Supply Format for the Composition Scheme

Not every registered business issues a tax invoice. Composition dealers and suppliers of exempt goods issue a bill of supply instead. It looks similar to an invoice but carries no GST — and understanding the difference keeps both you and your customers compliant.

Tax invoice vs bill of supply

A tax invoice is issued by a normal registered person on a taxable supply. It shows GST and lets a registered buyer claim ITC.
A bill of supply is issued when no GST can be charged — by composition dealers and by suppliers of exempt goods/services. It shows no tax and gives no ITC.

Who must issue a bill of supply?

Two categories:

Composition-scheme dealers — small businesses that opt to pay tax at a flat rate on turnover and, in exchange, cannot collect GST from customers or claim ITC.
Suppliers of exempt goods or services — where the supply itself is exempt, there is no tax to charge, so a bill of supply is used.

The composition scheme in brief

The composition scheme is a simplified option for small businesses. Key features:

Available up to a turnover of ₹1.5 crore (₹75 lakh in special-category states) for goods; a separate scheme exists for small service providers up to ₹50 lakh.
Tax is paid at a low flat rate on turnover (for example, 1% for traders/manufacturers, 5% for restaurants not serving alcohol, 6% for eligible service providers) rather than the normal slab.
The dealer cannot collect GST from customers and cannot claim ITC.
Returns are simpler (e.g. quarterly CMP-08 and an annual return).

Mandatory declaration: Every bill of supply from a composition dealer must carry the words "composition taxable person, not eligible to collect tax on supplies". Omitting it is a compliance breach.

What a bill of supply must contain

As per Rule 49, a bill of supply should include:

Name, address and GSTIN of the supplier
The heading “Bill of Supply”
A consecutive serial number (max 16 characters) unique for the financial year
Date of issue
Name, address and GSTIN/UIN of the recipient, if registered
HSN/SAC code (per the turnover-based digit rules)
Description of goods or services
Value of supply
Signature of the supplier

Crucially — no tax rate, no tax amount, and no CGST/SGST/IGST breakup, because none is charged. For a composition dealer, add the mandatory declaration.

What it does not do

A bill of supply:

Does not show GST
Does not allow the buyer to claim ITC
Cannot be used where a taxable supply is being made by a normal (non-composition) dealer

Composition dealers and purchases: A composition dealer pays the flat rate out of its own pocket and cannot pass GST to customers. This is why the scheme suits businesses selling mainly to end consumers rather than to ITC-hungry businesses.

A quick example

A composition trader (1% rate) sells goods worth ₹5,000 to a customer:

Document: Bill of Supply (not a tax invoice)
Value: ₹5,000, no GST line
Declaration printed: “composition taxable person, not eligible to collect tax on supplies”
The dealer separately pays 1% on turnover (₹50 on this sale) as its own tax

The bottom line

If you are a composition dealer or supply exempt goods, you issue a bill of supply, not a tax invoice — with no GST, no ITC, and (for composition dealers) the mandatory declaration. It keeps you compliant with the scheme while making clear to buyers that no tax credit is available.

Create a clean bill of supply or a full GST tax invoice — whichever your registration requires — free with the RaiseBill Bill Maker.

This guide is for general information only and is not legal or tax advice. GST law changes frequently — consult a qualified Chartered Accountant for advice specific to your business.