Invoicing and GST terms, in plain language

Bill of Supply

The document issued instead of a tax invoice when no GST can be charged, for example by a business under the composition scheme. It shows the price but no tax.

CGST

Central GST. The half of the tax that goes to the central government when you and your client are in the same state. On an 18% service it is 9%.

Composition scheme

A simpler GST option for small businesses: you pay a small fixed percentage of turnover, but you can’t charge GST to clients or claim input tax credit, and you issue a Bill of Supply.

Credit note

A document that reduces or reverses an invoice already issued, for example after a refund or a discount agreed later.

Export of services

A service for a client outside India, paid in foreign currency. It is zero-rated: no GST if you have a LUT, or IGST that you can claim back if you don’t.

Financial year (FY)

The Indian accounting year, 1 April to 31 March. Invoice numbering restarts each financial year: FY 2026-27 runs from April 2026 to March 2027.

GST

Goods and Services Tax, India’s tax on the supply of goods and services. Most professional services are taxed at 18%.

GSTIN

Your 15-character GST identification number. The first two digits are your state code, the next ten are your PAN.

HSN and SAC codes

Codes that classify what you sold: HSN for goods, SAC for services. For example, 998314 covers IT design and development services.

IGST

Integrated GST. Charged instead of CGST and SGST when you and your client are in different states, or on exports without a LUT. The full rate goes on one line.

Input tax credit (ITC)

The GST you paid on business purchases, which a registered business can subtract from the GST it collected before paying the government.

LUT (Letter of Undertaking)

A yearly declaration filed on the GST portal that lets you export services without charging IGST. Its reference number goes on each export invoice.

PAN

Permanent Account Number, your 10-character income-tax identity. Clients often need it to deduct TDS correctly.

Payment terms

How long the client has to pay, such as “Net 15” for 15 days from the invoice date. The due date on the invoice comes from this.

Place of supply

The state where a service is treated as supplied, usually the client’s state. Comparing it with your own state decides between CGST + SGST and IGST.

Proforma invoice

A preliminary bill sent before the work or payment, to show what the invoice will be. It isn’t a tax invoice and has no place in your invoice number series.

Retainer

A fixed fee paid on a regular cycle, usually monthly, for ongoing work or availability, instead of billing each project separately.

Reverse charge

Cases where the buyer, not the seller, pays the GST to the government. It applies to certain notified services and some purchases from unregistered suppliers.

Scope creep

Work growing beyond what was agreed, one small request at a time, without the fee growing with it. Written approvals and a clear task list are the usual defence.

SGST

State GST. The half of the tax that goes to the state government on a sale within one state. It always equals the CGST on the same invoice.

Tax invoice

The invoice a GST-registered business issues when it charges GST. It must carry both GSTINs where applicable, the place of supply, SAC codes and the tax split.

TDS

Tax Deducted at Source. A client may hold back a percentage of your fee and pay it to the income-tax department in your name. You get credit for it when you file your return, so record the invoice as paid in full with the TDS part noted.

UPI

Unified Payments Interface, India’s instant bank-to-bank payment system. A UPI QR code on an invoice lets the client pay from any UPI app.

Zero-rated supply

A supply taxed at 0% where you can still claim input tax credit, such as exports. Different from “exempt”, where no credit is available.

These are general explanations, not tax advice. Rates, thresholds and rules change; check the GST portal or ask a chartered accountant about your own situation. Agency CRM works out the tax on invoices but doesn’t file returns.