What Is a Tax Invoice?

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Whenever a seller issues a tax invoice, it means they have supplied goods and services to the buyer. On the other hand, if the seller is not registered, then the buyer should approach a registered dealer or get a payment voucher.

So, when a dealer makes a taxable sale, they have to issue a valid tax invoice to the buyer. Thereafter, the buyer can avail tax credit on their purchased product if the seller has to resell the goods.

Here, we will throw more light to understand what is a tax invoice and how to generate it? So, if you are a registered purchaser or registered dealer who wants to learn about the tax invoice or retail invoice, give a full read.

What Is A Tax Invoice?

A tax invoice is a legal document issued by a certified seller to the buyer of their goods, showing payable tax. Usually, a tax invoice includes product name and description, invoice date, invoice number, tax amount, and services rendered.

These tax invoices can be of original copy or duplicate copy as per the requirement. Since there is no such limit, the supply of products can be varied as per registered supplier availability. Basically, it is just a summary invoice that consists of goods sold, the tax charged at the time of service provided, and other services tax.

Hence, it is primary evidence which states that one registered vendor delivered goods and services to the GST registered customers who want to avail input tax credit.

Is Tax Invoice a Receipt?

Receipts and invoices are created by sellers before issuing them to the buyer. Even though both documents may contain somewhat similar information, a tax invoice is not the same as a receipt.

An invoice is sent to the buyer or company before payment is made and is used to request payment. It contains prices, discounts, the amount of tax payable, and details of both the buyer and the seller.

A receipt is issued once the payment is done. It is proof that the taxable sale has been finalized and payment has been made. It also serves as proof of ownership. The products and services rendered, are listed in the invoice with discounts, taxes, payment methods, prices, and the amount paid.

The main objective an invoice has is to request payment. On the other hand, a receipt is proof that certain products and services have been paid for.

Steps To Generate Tax Invoices

Below are the necessary steps to generate tax invoices using word document:

  • Open the MS Word and choose a new document. The page will appear blank where you need to type “Tax Invoice” as the header.
  • Type your business Information like business name, logo, address, phone number, and email on the right-hand side of the header.
  • Following details of your business, then type your customer name, and contact information as the seller’s identity.
  • Add the invoice date, the invoice number, and GST registered number before you put the payment due date and the quantity purchased.
  • Type every description of services provided in their right quantities and standard-rated purchases.
  • In this process, you should not forget to input tax charges and shipment fees in the total amount. The total amount should be boldly typed.
  • Lastly, add payment terms and accepted payment methods.

This tedious process of generating tax invoices can be simplified by using invoicing software like InvoiceOwl.

Why Is A Tax Invoice Necessary?

Tax invoices are useful for different reasons other than accounting purposes. Below are the reasons why tax invoices are necessary:

  • To uphold a claim from tax registered customers to avail tax credits
  • To know whether goods or services supplied are under the taxable period or not
  • To find the payment due date when the tax invoice received
  • In recognizing transactions and a tax identification number for the state’s tax system
  • A tax invoice will act as proof for input tax credit claim
  • Tax invoices will help a relevant government authority to prevent tax evasion
  • To calculate taxes accurately of a financial year and help to claim tax relief
Frequently Asked Questions
  1. Is Tax Invoice a Bill?

    Sellers issue invoices on time for services provided along with the applicable taxes. If a seller is transporting goods, they need to issue an invoice when they delivered them to the buyer. A tax invoice is different from the general bill as it requests payment from the buyer. The general bill helps customers in knowing the products purchased and the prices.


  2. What are the necessary points to be included in a Tax Invoice?

    Following are details that you need to mention at the time of generating the tax invoice.

    • Invoice date
    • Invoice number
    • Customer’s name and contact details
    • Shipping address
    • Product description
    • Amount of tax payable
    • Vendor’s signature

  3. Will invoices help me to submit a tax return?

    A tax invoice can only help you complete the payment as it is a legal document requesting payment from your side. However, you need to save the payment receipts which will aid you during the submission of the tax return. Also, you can show the receipt if you have tax-related inquiries.

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Conclusion

Tax invoices are prepared by the seller who expects payment from their client. It is helpful for the buyers if they want to claim tax credits. We understood the meaning and use of the tax invoices before finding the difference between an invoice and a receipt. Also, we discussed the steps to generate tax invoices using a word document. On the ending note, we hope now you will find it easier to send or collect the tax invoices.

Are you taking more time to generat an invoice? Yes, then use the Invoice Generator at InvoiceOwl. .

Author Bio
Jeel Patel
Jeel Patel
Founder

Jeel Patel is the Founder of InvoiceOwl and is the main curator & writer of the content found on this site. With ideals of quality, commitment, and perseverance, he believes in creating lasting business relationships with the clients.

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