4.
Explanation
1. Applicability of GST:
- Tax Invoice: Contains the GST (Goods and Services Tax) amount, and it is used for transactions where GST is applicable, such as business-to-business (B2B) transactions.
- Bill of Supply: Does not include GST separately, and it is used for transactions exempt from GST or for businesses under the Composition Scheme, where they pay a fixed rate and cannot charge GST.
2. GST Registration Requirement:
- Tax Invoice: Typically issued in transactions involving registered persons, where both the supplier and the recipient are GST-registered businesses.
- Bill of Supply: Often used when the supplier falls under the Composition Scheme, is dealing with unregistered persons, or when the supplies are exempt from GST, making it suitable for businesses with specific tax categories.
3. Input Tax Credit (ITC):
- Tax Invoice: Allows the recipient to claim Input Tax Credit (ITC) on the GST mentioned in the invoice. This helps offset the tax paid on purchases against the tax collected on sales.
- Bill of Supply: The recipient cannot claim ITC because there is no separate GST mentioned in the document.
4. Use in Different Scenarios:
- Tax Invoice: Used for most standard taxable transactions, where businesses charge GST to their customers and need to comply with GST regulations.
- Bill of Supply: Used when a supplier is not eligible to charge GST or when the transaction falls under a specific category where GST is not applicable.
5. Legal Requirements:
- Tax Invoice: A tax invoice is a legal document, and businesses must issue it for B2B transactions to comply with GST laws. Failure to do so can result in penalties.
- Bill of Supply: Similarly, a bill of supply is a legal document, but it is used in scenarios where GST doesn’t apply. It is essential for maintaining proper records but does not involve GST compliance.