If your business is registered for sales tax, every invoice you issue becomes part of your tax record. Mistakes in how you show tax can confuse customers and cause problems when filing returns. This guide explains how to handle sales tax on invoices clearly and consistently, using our VAT Calculator and Invoice Generator. It is general information; for your specific obligations, consult a tax adviser.
Tax-exclusive vs tax-inclusive prices
- Exclusive: you quote Rs 10,000 + tax. The invoice adds tax on top.
- Inclusive: you quote Rs 11,800 including tax. The invoice must show how much of that is tax.
Be clear in quotes which one you mean. Business customers often prefer exclusive prices; retail customers expect inclusive prices.
What to show on the invoice
| Line | Example |
|---|---|
| Value of supply (before tax) | Rs 10,000 |
| Sales tax rate | 18% |
| Sales tax amount | Rs 1,800 |
| Total | Rs 11,800 |
Also include your business name, address, NTN and sales tax registration number, the buyer’s details and a unique invoice number.
Rounding
Calculate tax on the total of each invoice or each line consistently, and round to the nearest rupee. Small rounding differences are normal, but use the same method every time.
Different rates on one invoice
If you sell items with different tax rates, show the rate and tax for each line or group, then the total tax.
Discounts
Apply discounts before tax, and show the discount clearly. The tax is calculated on the discounted value.
Keeping records
Keep copies of all invoices issued and received, organised by month. Many businesses keep both a PDF and a spreadsheet summary. This makes monthly or quarterly returns much easier.
Converting for foreign customers
If you invoice clients abroad, rules for exports differ and tax may not apply in the same way. Check with a tax adviser. Show amounts in the agreed currency and note the exchange rate if needed using the Currency Converter.
For the basic maths of adding and removing tax, see how to calculate sales tax.
Frequently asked questions
Should I show prices including or excluding sales tax?
Either, but be clear; invoices must show the tax amount separately.
Is tax calculated before or after discount?
After discount, on the actual value of the sale.
What registration numbers should an invoice show?
Registered businesses usually show NTN and sales tax registration number.