Exempt Supplies and e-Invoicing

e-Invoicing is not applicable for exempt supplies. Therefore, e-Invoice should not be generated for exempt supplies, instead a bill of supply needs to be created.

What should be done when an invoice has both taxable and exempt invoices?

Separate invoices should be created for taxable and exempt invoices, e-invoice should be generated only for the invoice containing taxable goods or services.

If the invoice contains both taxable and exempt items, the exempt goods or services should be reported as other charges and should not form a part of taxable value. The exempt goods or services should not be reported as taxable values with zero tax rate.

For example – Suraj is a manufacturer who manufactures both taxable and exempt goods. He sells taxable (GST 18%) goods worth Rs 10000 and exempt goods worth Rs 7000 to Vikas. Ideally, Suraj should generate two separate invoices for taxable (e-Invoice for goods of taxable value Rs 10000) and exempt goods (Bill of Supply for exempt goods of value Rs 7000).

But by mistake Suraj generates a single invoice.

In that case e-invoice should be generated in the following way

Line item 1 – Taxable value – Rs 10000 GST Rate – 18% Tax ( IGST or CGST and SGST) – Rs 1800

Line item 2 – Taxable value – Rs 0 GST Rate – 0% Tax ( IGST or CGST and SGST) – Rs 0 Other Charges – Rs 7000

Wrong way of generating the e-invoice

Line item 1 – Taxable value – Rs 10000 GST Rate – 18% Tax ( IGST or CGST and SGST) – Rs 1800

Line item 2 – Taxable value – Rs 7000 GST Rate – 0% Tax ( IGST or CGST and SGST) – Rs 0

Reporting of Exempt Sales in GSTR 1

Exempt sales should be reported in Table 8 of GSTR 1.