GST
Composition dealer? Your bill is a bill of supply, not a tax invoice
Who can opt for the composition scheme, why you cannot show GST on your bills, the fields a bill of supply must carry, and the line every bill must print at the top.
Many small shops register for GST under the composition scheme. You pay a small fixed percentage of your turnover instead of charging GST on every sale. The paperwork is lighter.
But the bill you give the customer changes too, and this is where a lot of shops go wrong. A composition dealer does not issue a tax invoice. You issue a bill of supply. And it must not show GST.
This is general information, not tax advice; confirm with your CA.
What the composition scheme is
Section 10 of the CGST Act lets an eligible registered person pay tax at a fixed rate on turnover, in place of normal GST.
The turnover limit. Section 10 sets a base limit of ₹50 lakh of aggregate turnover in the previous financial year, and lets the government raise it by notification up to ₹1.5 crore. Notification No. 14/2019-Central Tax, in force from 1 April 2019, set that limit at ₹1.5 crore, and at ₹75 lakh for Arunachal Pradesh, Manipur, Meghalaya, Mizoram, Nagaland, Sikkim, Tripura and Uttarakhand. Check with your CA that no later notification has changed this for your State.
The rate for shops. Rule 7 of the CGST Rules says a trader (the “any other supplier” category) pays central tax at half a per cent of the turnover of taxable supplies in the State. State tax is charged under your State’s GST law as well, so ask your CA for the combined figure you will pay.
The option can lapse mid-year. Under Section 10(3), the option lapses from the day your turnover during a financial year crosses the limit. From that day you are a regular dealer and your bills must change. Keep an eye on your running total.
Who cannot opt
Section 10(2) and Rule 5 list the main conditions. You cannot use the scheme if, among other things:
- you make inter-State outward supplies, such as sending goods to a buyer in another State;
- you supply services beyond a small allowance (Section 10(1) allows services up to 10% of the previous year’s turnover in the State or ₹5 lakh, whichever is higher);
- you are a casual taxable person or a non-resident taxable person;
- you manufacture ice cream, pan masala or tobacco products. Notification 14/2019 excludes manufacturers of these. A shop that only sells them is not excluded by this list.
One more catch: if several registrations share the same PAN, all of them must opt for the scheme, or none can.
These lists are not complete. Your CA should check your situation before you opt in.
Why you cannot show GST on the bill
Section 10(4) is short and strict. A composition dealer shall not collect any tax from the recipient and cannot claim input tax credit.
So your bill cannot have CGST and SGST lines, a “GST @ 5%” row, or “inclusive of GST” wording. The price you charge is simply the price. The composition tax comes out of your own margin, paid on your turnover.
It also means there is no tax on your bill for a business buyer to claim as input tax credit. If a business customer asks why, this is the reason.
The line every bill must carry
Rule 5(1)(f) is the condition shops most often miss. You must print these exact words at the top of the bill of supply:
composition taxable person, not eligible to collect tax on supplies
Rule 5(1)(g) adds a second requirement: the words “composition taxable person” must appear on a notice or signboard displayed at a prominent place at your main place of business and at every other place of business.
What a bill of supply must show (Rule 49)
Section 31(3)(c) says a composition dealer issues a bill of supply instead of a tax invoice. Rule 49 lists what goes on it:
| Clause | Particular | Notes for a shop |
|---|---|---|
| (a) | Your name, address and GSTIN | You are registered, so your GSTIN appears |
| (b) | Consecutive serial number, up to 16 characters, unique for the financial year | Letters, digits, hyphen and slash allowed; more than one series is fine |
| (c) | Date of issue | |
| (d) | Customer’s name, address and GSTIN or UIN, if registered | For business buyers |
| (e) | HSN code | See note below |
| (f) | Description of goods or services | |
| (g) | Value of supply after discount, if any | The final price; no tax lines |
| (h) | Signature or digital signature of you or your authorised representative | Not needed for an electronic bill of supply issued under the IT Act, 2000 |
Rule 49 also says the provisos to Rule 46 (the tax invoice rule) apply to a bill of supply too. One of those provisos lets the government notify how many HSN digits are needed. Notification No. 78/2020-Central Tax lets a business with turnover up to ₹5 crore leave out HSN on invoices for supplies to unregistered persons. Ask your CA how this applies to your bills of supply.
Small sales under ₹200
Section 31(3)(c) has its own proviso: a registered person may not issue a bill of supply for a sale under ₹200, subject to prescribed conditions. For tax invoices, the Rule 46 provisos set those conditions: the customer is unregistered, does not ask for a bill, and the shop issues one consolidated document at the close of each day. Rule 49 applies the Rule 46 provisos to bills of supply too, so ask your CA how this works for you. Most shops with billing software just print every bill, which is simpler.
Common mistakes
- Printing “Tax Invoice” as the heading. Your document is a bill of supply.
- Showing a GST line, even “GST included”. That suggests you are collecting tax, which Section 10(4) does not allow.
- Leaving out the Rule 5 wording at the top of the bill.
- No signboard with “composition taxable person”.
- Sending goods to a buyer in another State. That is an inter-State supply, which rules out the scheme. Check with your CA before you take such an order.
- Not watching turnover. Cross the limit and the option lapses that day.
A quick self-check
Take one bill from your counter today. Does it say “bill of supply” or at least avoid “tax invoice”? Does the composition line appear at the top? Your GSTIN? A serial number that has not reset? No tax lines anywhere?
If any answer is no, fix it before your next busy day.
How Bazaar IQ handles composition shops
In Bazaar IQ, your GST registration is a setting. Choose composition and every bill prints as a Bill of Supply with your GSTIN and the Rule 5(1)(f) line at the top, and no tax lines, so GST never appears on a customer’s bill. Before you rely on any software’s bill format, including ours, print a sample and ask your CA to check it against Rule 49 and the Rule 5 wording above. More on how registration types work is on the GST features page. If you are a regular dealer instead, see our tax invoice checklist.