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What is a GST invoice? Pros and Cons of GST

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GST Invoice

Every GST registered business or organization must provide a specific invoice compliant to all the GST norms put in place by the state jurisdiction. These are purchase invoices that adhere to the GST rules and regulations called GST invoices. A GST invoice (or GST bill) is a charge sheet showing a complete list of all the goods and services provided by the seller to the client (or customer). It looks like a concise list of all the amounts due to be paid to the issuer by the recipient. The bill is made to identify the items and parties involved in the mentioned transactions and clearly show the tax charged for the input tax credit.

Businesses issue GST invoices during or to finalise the sale of a product or service. The organisations issuing the invoice must understand the GST invoice format precisely and fill in the required information clearly and completely at the time of billing customers.

How to write a Invoice

A list of all the essential fields to be included in the tax bill according to the proper GST invoice format are as follows:

  • The invoice serial number and date of issue.
  • The name of the customer to whom the bill is being issued.
  • The complete addresses of shipping and billing.
  • Both customer and provider’s GSTIN.
  • The location of supply.
  • The Harmonized System of Nomenclature (HSN) and Services Accounting Code (SAC).
  • Comprehensive description of the item or service provided (i.e. quantity, unit measurement, unit value, total value etc.)
  • The amount taxable and any discounts applicable.
  • Subtype of tax applied (i.e. CGST, SGST or IGST)
  • Mention of GST payable liability on the recipient end.
  • Signature of supplying body.

Now that we have an exhaustive understanding of what GST invoices are let us delve deeper into a few GST pros and cons to appreciate its concept properly.

Pros and Cons

Pros

  • Eradicates cascading effect of taxes(i.e. “tax on tax’) – It acts as a combined platform for all types of value-addition taxes levied onto a product or service.
  • Increases tax threshold– It is only applicable to firms that produce revenue over the threshold limit in a fiscal year.
  • Aids SMEs– GST allows lesser taxes for small businesses by utilising the composition scheme.
  • Easy to register– The registration process through the online GST portal is simple.
  • Unified return – GST only requires a single consolidated return to be filed, including all other tax types.
  • Unique for online businesses– Provisions for e-businesses under GST are unique and simple.
  • Greater logistics– Inter-state movements of goods and services are made easy.
  • Better organization– The overall taxation process is made easier to regulate.

Cons

  • Software requirements– Businesses must invest in and understand the use of new software.
  • Heavy penalties– Non-compliance with GST incurs substantial fines.
  • Higher operation cost– Tax professionals will likely be required to manage taxation.
  • Taxing pattern– GST became effective mid-year, making it tedious to accommodate in the fiscal year.
  • Completely online– Grasping the new, totally online process of taxation is difficult.

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