Difference Between Invoice and Tax Invoice

Invoices are important in today’s normal business activities. They act as evidence for transactions made and can be a reference point for past activities. There are two main types of invoices; tax and retail. Tax invoices is that invoice which is issued from a registered business vendor to another during the sale of goods or service provision. Here the purchaser is not the end user of the commodities purchased. Retail invoice is the document issued from a business vendor to the end consumer during a sale. Tax invoices are important as they avail tax credits. Retail invoices are important as they request customers to make payments doe services provided or goods that have been delivered to them.

What is an Invoice?

An invoice is a document mainly used to record a transaction. The document provides the record of the sold item and the amount of money involved. An invoice is also known as a bill. The document is used before any payments of the goods or services are made. The information is useful to both the seller and buyer. The seller uses the records to follow up with the buyers for billing. Invoices are useful to keep records of the total amount owed to you by customers.

The invoice is useful to the buyer as it can be used for bookkeeping purposes and for seller accountability especially when the goods or services don’t match the expectations and refunds are required. This commercial tool is created in duplicate, the original copy is left with the seller and a copy is issued to the buyer. A regular invoice has the following details:

• Date of invoice issue
• An invoice number
• Details of the buyer
• Details of the seller
• Quantity
• Price per quantity
• Total price
• Discounts
• Signature of the selling agent

What is a Tax Invoice?

A tax invoice is a legal document issued to a registered purchaser, (usually not the end consumer), during a sale by a registered seller. Invoices are created in triplicate; one is issued to the buyer while two copies are reserved with the seller. The final copy will be later submitted to the significant government authority.

Tax invoices are important in any country, as they play a key role in the given state’s tax system by recognizing transactions. For accounting purposes, at the end of every financial year, the content of the tax invoices is submitted to the relevant authority to enable tax relief. These invoices are important to the government as they in turn prevent tax evasion.  The regular tax invoice consists of the following:

• Date of invoice issue
• An invoice number
• Details of the buyer (name and address)
• Details of the seller (name and address)
• The relevant tax identification number
• The description of the items
• Quantity
• Price per item
• GST charged on each item (if relevant)
• The amount of tax charged
• Total cost including the tax or GST (if relevant)
• Signature of the relevant signatory

Difference Between Invoice and Tax Invoice

1. Definition

A tax invoice is a document legally recognized by a government authority and is issued by the authorized dealer to a purchaser. It shows the tax amount payable for the exchange of goods or services. An invoice is a document issued from a buyer to a seller indicating the amount due for the goods or services exchanged.

2. Contents

Both the documents contain similar contents however, there are a few differences. The tax invoice contains an additional clause indicating the tax or GST amount payable. The invoice does not have any tax indication.

3. Preparation

The tax invoice is prepared in triplicate. One copy for the buyer, one for the seller and the other for the relevant government authority. The regular invoice is issued in duplicate one for the buyer and the other is left with the seller.

4. Receiver

A tax invoice is often issued to another business or company for goods that will be resold or used in a manufacturing process. An invoice is often issued to the end consumer.

5. Objective

The main objective of a tax invoice is to request payment for goods or services rendered. The main objective of the tax invoice is to avail tax credit or tax relief.

6. Conditions

When issuing the tax invoice, both the giver and recipient must be registered and authorized dealers. Regular invoices only require the seller to be a registered business or company.

Invoice vs. Tax Invoice: Comparison Chart

Similarities of Invoice and Tax Invoice

• Both documents are used as records for transactions.
• Both documents are non-negotiable.
• Both are legally recognized tools and can be used as evidence in a court of law.
• Both contain details of both the seller and buyer, and, a short description of the goods and services.

Summary of Invoice vs. Tax Invoice

• A tax invoice is the document used during transactions to indicate the amount of tax payable for the exchange of goods or services.
• An invoice indicates the amount a buyer should pay the seller for the purchase of goods or services.
• Tax invoices can only be issued by registered dealers under the Tax Act relevant in the given region.
• Tax invoices are prepared in three copies while regular invoices are prepared in two copies.

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