tax invoice

Chapter 18

How to Create a Tax Invoice

Author: Bhaval Patel

Step by Step Guide On How to Create a Tax Invoice

To create a tax invoice, the vendor must have a purchase record with the right details of the purchase,  including the product or service type, right quantity, the price agreed upon by both him and the buyer, as well as the tax amount for every item.

To charge the tax incurred from the purchase of their good and services, the customer must get a tax invoice from the vendor. The tax invoice is evidence that supports tax credit claims.

This aspect of the MixBit guide covers:

  • What is a Tax Invoice?
  • What must be included in a Tax Invoice?
  • How  to Create a Tax Invoice
  • What is a Recipient Created Tax Invoice?
  • The Use of Tax Invoice

What is a Tax Invoice?

Tax Invoice is evidence of tax charges for goods and services. It is a list of charges for goods sold and services offered with indirect tax charge for every product and service.

What is a Tax Invoice

The tax invoice should include the right description for products and services rendered in their quantities, price of the products and services, the date they were supplied, and mode of transportation. It must also include the total amount of the products or services and the applicable tax of supplies.

What Must be Included in a Tax Invoice?

What Must be Included in a Tax Invoice

A tax invoice must contain the following necessary information:

  • Date of invoice
  • Vendor’s contact information
  • Invoice number
  • The word “Tax invoice.”
  • Customer’s contact details
  • Shipping address
  • Description of good and services in quantities and price
  • Applicable tax for each product and service
  • The total amount including tax
  • Vendor’s signature

How to Create a Tax Invoice

Creating a  Tax invoice with the Word program requires the following steps:

  • Open the Word program and choose a new document. The page will appear blank, type “Tax Invoice” as the header
  • Type your business Information on the right-hand side of the header. Your business information must include your business name and address, phone number, email, and your business logo
  • Adjacent your business information, type your customer’s contact information
  • Add the date you’re preparing the invoice and the invoice number. Also, add the payment due date
  • Type every detail of the products and services in their right quantities and prices
  • Add up all the prices to get the total amount with tax charges and shipment fees. The total amount should be boldly typed
  • Add payment terms and accepted payment methods.

What is a Recipient-Created Tax Invoice?

A recipient invoice tax invoice is created by the buyer of the goods and services. The only situation where the buyer issues a recipient tax invoice is when there’s an agreement between both the buyer and seller, and the agreement is current.

It is often created like a tax invoice; the only difference is the clear statement on the invoice that reads “recipient created tax invoice.”

The buyer of the goods and service must issue a tax invoice within 28 days of sale. The original copy must also be kept for reference purposes.

The Use of Tax Invoice

The tax invoice is used for taking advantage of tax credits. They are transparent proof for transactions in a state tax system. Tax invoices are remitted to the appropriate authorities at the end of a fiscal year for accounting purposes, and to provide financial relief.

Tax invoices are useful for preventing tax evasion.

Tax invoices are only useful when issued on time when the vendor supplies goods and services to the buyer and sends them an invoice. The tax invoice is often issued by the buyer within 30 days of receiving the services and goods. For banks and other financial institutions, a tax invoice is issued within 45 days.

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