What is Invoice and bill?

Where the words do differ

In business software the two words usually mark direction rather than document type:

• A sales invoice is what you issue to a customer. It creates accounts receivable.
• A purchase bill is what you receive from a supplier and record. It creates accounts payable.

An illustrative example. A clothing store sells Rs 15,000 of kurtas to a boutique and issues a sales invoice. The same day it receives a Rs 90,000 bill for fabric from its supplier in Birgunj. One is money to come in and the other money to go out, although the two documents look much alike on paper.

The distinction that matters for VAT

For VAT, the name on the document does not matter. What matters is its type:

• A tax invoice, issued by a VAT-registered seller with both parties’ details and the VAT shown separately. A registered buyer needs one to claim input VAT.
• An abbreviated tax invoice, the shorter retail bill for a customer who will not claim VAT.
• A bill from a business registered for PAN only, which shows no VAT and supports no input claim.

Quotations, proforma invoices and delivery chalans can look like bills, but none of them records a sale for VAT. The guide to VAT invoice requirements sets out what each document has to carry under the VAT Act 2052 and VAT Rules 2053. Confirm the details for your own trade with the IRD or your accountant.

Common mistakes

Kuver Books keeps sales invoices for customers and purchase bills for suppliers as separate documents, each approved before it affects receivables or payables, as the VAT invoicing page shows.