Composition vs Unregistered Bill of Supply

Rule 49 of the CGST Rules 2017 requires a Bill of Supply (not a tax invoice) when GST is not collected on the supply, either because the supplier is below the GST registration threshold (Rs. 40 lakh goods / Rs. 20 lakh services) or because the supplier is on the Composition scheme under Section 10. Composition-scheme BoS must carry the Rule 49(2)(b) declaration ("Composition taxable person, not eligible to collect tax on supplies"); unregistered-seller BoS carries the supplier's PAN in place of a GSTIN. Buyers cannot claim Input Tax Credit against either variant; that is the defining difference from a pakka bill.

Three filer categories must issue a Bill of Supply rather than a tax invoice: composition-scheme registrants paying turnover tax under Section 10, suppliers below the registration threshold under Section 23, and registered suppliers issuing exempt-supply lines under Section 31(3)(c). Each category has a distinct statutory basis, but the buyer-side consequence is identical: no Input Tax Credit. For the buyer that means the GST element of the cost stays on their P&L; for the supplier it means clients building B2B chains may prefer a registered counterparty who can pass ITC. Picking the wrong variant is the most common Section 31 audit query we see, and it is preventable at issue time.

You can generate a compliant Bill of Supply at our Bill of Supply generator in under 60 seconds, with the variant routing handled by a pre-form selector.

Three statutory categories trigger the Bill of Supply requirement, and the differences matter for the document layout itself.

The unregistered seller below threshold sits under Section 23 of the CGST Act 2017, which lists persons not liable for registration. Annual aggregate turnover under Rs. 40 lakh (for exclusive suppliers of goods) or Rs. 20 lakh (for service suppliers and mixed suppliers) keeps the seller outside the registration net. With no GSTIN, the seller cannot collect GST. The BoS carries the seller's PAN in place of a GSTIN, and the buyer-side ITC consequence follows automatically: no GSTIN means no eligible input.

Composition-scheme registrants sit under Section 10 of the CGST Act, which provides a simplified turnover-tax option for suppliers with aggregate turnover up to Rs. 1.5 crore (Rs. 75 lakh in special-category states). The composition supplier pays a flat 1%, 5%, or 6% on turnover to the government but cannot collect GST from buyers. The GSTIN appears on the BoS, but the Rule 49(2)(b) declaration is mandatory verbatim.

Section 31(3)(c) covers the third case: a registered supplier issuing an exempt good or service (educational services, certain healthcare lines, agricultural produce, and others on the exempt schedule). The supplier prints their GSTIN, charges no tax, and skips the composition declaration.

The pre-form router on /bill-of-supply handles the first two variants directly; the third uses the composition variant template since the GSTIN-with-no-GST-on-supply shape is identical.

Rule 49(2) of the CGST Rules 2017 lists eight mandatory fields. A BoS missing any one of these is technically deficient and can be questioned during audit.

1. Name, address, and GSTIN of the supplier (or PAN, where the supplier is unregistered).

2. A consecutive serial number, maximum 16 characters, unique per financial year. Alphanumeric is acceptable; a slash or hyphen counts toward the 16-character limit.

3. Date of issue.

4. Name, address, and GSTIN of the recipient (the GSTIN field is mandatory only if the recipient is registered).

5. HSN code for goods or Service Accounting Code (SAC) for services. Four-digit HSN is acceptable for small businesses below the Rs. 5 crore turnover threshold.

6. Description of goods or services.

7. Value of supply, net of any discount or abatement.

8. Signature or digital signature of the supplier or their authorised representative.

The composition-scheme declaration sits separately under Rule 49 of the CGST Rules, sub-rule (2)(b): "Composition taxable person, not eligible to collect tax on supplies." This declaration is mandatory on every composition BoS regardless of the supply value, and its absence is the single most common defect flagged in composition-scheme audits.

Our Bill of Supply generator auto-renders the declaration for the composition variant and the statutory ITC-ineligibility disclaimer for both variants.

The two BoS variants diverge on four practical axes, and getting these right is the difference between a defensible document and an audit query.

GST liability on the supplier. The composition supplier pays a flat turnover tax to the government: 1% for traders, 5% for restaurants without alcohol, and 6% for service providers under the recent Section 10 expansion. The supplier absorbs this; it does not appear on the BoS and cannot be passed to the buyer. The unregistered supplier pays nothing because they are outside the GST net entirely. Both routes are clean, but the composition supplier carries a known annual tax cost that the unregistered supplier does not.

ITC eligibility for the buyer. Both variants produce zero ITC for the buyer. The BoS is the document type that makes the no-ITC outcome explicit on the face of the document.

PAN versus GSTIN on the document. The composition BoS shows a GSTIN. The unregistered BoS shows a PAN. The bulk-Excel template at /corporate-bulk carries a variant column gating which identifier slot validates against which regex, so a row with variant=unregistered and a GSTIN-shaped value will fail validation at upload time.

The Rule 49(2)(b) declaration. The declaration appears only on the composition variant. Per the BoS spec for our generator, the declaration text is editable in the per-document form with a reset-to-statutory-default control, so an authorised user can adjust wording for a specific jurisdiction or company style guide without losing the canonical Rule 49(2)(b) language.

A supplier crossing the registration threshold mid-financial-year switches the BoS variant: to composition if they elect Section 10, or to a pakka bill if they register as a regular taxpayer. The BoS-to-pakka-bill switch is the more common path because the composition election has its own ceiling at Rs. 1.5 crore.

A Bill of Supply is not a universal substitute for a tax invoice. Registered persons making taxable supplies above Rs. 50,000 must issue a pakka bill under Section 31, not a BoS, and the document-class error is one of the most common audit triggers we see in CA debriefs.

Three error modes recur. First, a registered supplier issues a BoS when a tax invoice is required. This invalidates the buyer's ITC for that line and exposes the supplier to disallowance during audit, often with interest and penalty under Section 122. The buyer's accounting team usually catches it during ITC reconciliation and routes the document back for reissue, but the audit trail of the defective document persists.

Second, a composition-scheme supplier issues a tax invoice with GST charged. Rule 5(g) of the composition rules explicitly forbids this. A composition supplier who has collected GST from a buyer must remit it to the government and may lose composition eligibility under Section 10 for the entire financial year.

Third, an unregistered supplier issues a document labelled "tax invoice" with GST charged. This is a Section 32 violation; the recipient cannot claim ITC because there is no underlying GSTIN against which the credit can be matched in GSTR-2B.

For the registered taxable case, use the pakka bill generator instead. For the broader document-class question (when to issue an invoice versus a receipt versus a quotation), see our guide on invoice vs receipt vs quotation.

Our /bill-of-supply form keeps the Rule 49 layout intact and collapses data entry into four screens.

A pre-form GST-status router opens the page with three choices: pakka-bill (which routes the user out to /pakka-bill), composition, and unregistered. The router asks two yes/no questions about turnover and GST registration status and selects the variant; the user can override the selection if their situation is mixed.

The 4-step form covers Bill details, Parties, Items, and Preview. The Preview step renders the exact PDF the user will receive, with all eight Rule 49(2) mandatory fields populated.

On the composition variant, the Rule 49(2)(b) declaration is editable with a reset-to-statutory-default control that snaps the text back to the canonical language. The default loads with the form; any override is logged in the document metadata.

Payment is Rs. 4 via Razorpay or 1 credit per BoS under the corporate plan, and the PDF is generated entirely in-browser via pdf-lib. No row data crosses to our servers, no logs of the document content are written, and the only server interaction is the Razorpay order creation and capture call. The free preview carries a watermark.

For batches, the bulk-Excel mode accepts up to 500 BoS in one upload, with the variant column gating which fields are validated for each row.

Generate a Bill of Supply: free watermarked preview, Rs. 4 for the clean PDF.

Five recurring defects on a Bill of Supply attract audit scrutiny disproportionate to their apparent severity. Fixing them at issue time is cheaper than defending them at audit.

1. Missing serial number. Rule 49 read with Rule 46(b) requires a unique consecutive serial number per financial year, maximum 16 characters. Skipping it invalidates the document outright; auditors treat the absence as evidence of casual record-keeping and widen the sample.

2. Missing composition declaration when variant equals composition. Rule 49(2)(b) is direct: the declaration "Composition taxable person, not eligible to collect tax on supplies" must appear verbatim or in close paraphrase. The violation is independent of any tax question and is the most common single defect on composition-scheme BoS in audit data.

3. Wrong-format date. Indian convention is DD-MM-YYYY. ISO format (YYYY-MM-DD) is also accepted, but mixing formats across receipts from the same supplier is the visible flag. Pick one and hold it.

4. Charging tax on a BoS. The recipient cannot claim ITC against the (improperly charged) tax because the BoS document type does not feed GSTR-2B. The supplier is on the hook for the wrongly-collected amount under Section 76 and faces a Section 31 violation in parallel.

5. Missing HSN or SAC code. Rule 49 read with Rule 46(g) is explicit. Four-digit HSN is acceptable for businesses below Rs. 5 crore turnover, but absent any HSN or SAC, the description-of-supply field cannot be reconciled against the tariff and the document is technically deficient.

Section 31, CGST Act 2017. Section 31 establishes the tax invoice obligation for registered persons making taxable supplies and, in sub-section (3)(c), the Bill of Supply obligation for exempt supplies and composition-scheme supplies. The BoS-relevant text sits in Section 31(3)(c). We cite this section as the statutory anchor for the BoS document class.

Rule 49, CGST Rules 2017. Rule 49 prescribes the BoS format and the eight mandatory fields enumerated above under "What Rule 49(2) Requires Verbatim". Sub-rule (2)(b) carries the composition-scheme declaration text. We cite Rule 49 in full because every field listed on our generator output traces directly to a numbered sub-rule.

Section 10, CGST Act 2017. Section 10 creates the composition scheme: the eligibility threshold, the turnover-tax rates by category, and the restrictions on inter-state supply and ITC. We cite Section 10 to anchor the composition variant of the BoS and the Rule 49(2)(b) declaration that follows from it.

Section 23, CGST Act 2017. Section 23 lists persons not liable for registration, including suppliers below the threshold of Rs. 40 lakh (goods) or Rs. 20 lakh (services). We cite Section 23 to anchor the unregistered variant of the BoS and the PAN-in-place-of-GSTIN convention that follows.

Last reviewed 2026-05-15. CBIC has not amended Rule 49 since the FY 2024-25 budget; we re-verify after every annual budget. If you find a discrepancy between this article and the source, the source wins. Flag it to support@hrareceipt.in.