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July 31, 2026

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How to create a GST invoice with multiple tax rates and discounts

Operating a retail shop, distribution agency, or multi-class business entity typically entails selling products that attract different tax rates on the same invoice. You could be selling items such as packaged foods that attract a 5% tax rate along with kitchen appliances that attract an 18% tax rate on the same invoice. In case you have any promotional offers or trade discounts, the process of billing becomes complex.

Creating a GST invoice with multiple tax rates and discounts correctly is critical to keeping prices clear and minimizing errors on monthly returns. In this comprehensive guide, you will learn how to work with multiple rates of taxes, structure discounts per line item and total invoice discount, compute taxable amounts under Section 15 of the CGST Act and prepare GST invoices flawlessly.

When does a GST invoice contain multiple tax rates?

According to the GST rules, various products and services are divided into categories based on their HSN and SAC code. There is a GST rate prescribed for each category, which may be 0%, 5%, 12%, 18% or 28%. Therefore, there will be more than one GST rate in case of the sale of multiple products/services through one invoice.

1. Different GST slabs

Departmental stores, stationery stores, and electronic goods retailers often use invoices that contain various products at different rates of GST. For instance, if we consider the invoice issued by the grocery shop, it may have products such as milk (0%), cooking oil (5%), and cleaning agents (18%).

2. Combination of products in different categories

The wholesalers who supply products to general stores often include garments (with different GST slabs depending upon the cost price) and plastic boxes (18%) in one single invoice.

3. Combination of goods and services

When an auto repair shop sells spare parts (taxed @18%) and also levies a service charge (separately taxed @18%), both these products should be included in one single invoice with their HSN/SAC codes.

Practical scenario of a business setup

Let us assume an office stationery shop is selling 10 reams of printing paper (12% GST) worth ₹2,500 and 2 desk chairs (18% GST) worth ₹10,000. Instead of sending 2 separate invoices, one single tax invoice with the base cost and taxes charged on both categories is prepared.

‍Read More:Credit Notes and e-Invoicing

How to apply discounts on a GST invoice

According to Section 15(3) of CGST Act, discounts lower the value of supply of goods and/or services to be taxed only in certain statutory conditions. Knowing how discounts influence the base price prior to GST calculation helps one avoid overpayment of GST.

1. Pre-supply discounts

It includes the trade discount, immediate promotion, or volume-based price reduction given at or prior to the supply time and shown on the invoice. It is taken into account directly from the gross price to get the net taxable amount before calculating the GST.

2. Post-supply discounts

Given after the preparation of the invoice (such as discounts due to early payment or end-of-year sales discount). Such discounts may help in reducing the tax burden if the agreement has been made in writing before the supply and the buyer reverses ITC related to the same. In any other case, such discounts shall be considered as credit notes without GST adjustment.

3. Line item discount vs. Invoice-level discount

Line item discount: It refers to the discount provided directly to the unit price of the specific goods. This is the simplest way of doing multi-rate invoicing because it reduces the exact taxable value before applying the GST rate of the specific good.

Invoice level discount: It refers to the cash discount given (for example, "Discount of ₹1,000 on the total order value more than ₹15,000"). In case of multi-rate invoicing, the invoice level discount should be distributed among the line items.

‍Read More: Discount Valuation Rules

Calculation example

Let us assume that you sell a leather purse for ₹2,000 (with GST 18%) and provide a discount of 10% before supply.

Gross value: ₹2,000
Discount: ₹200 (10%)
Net taxable value: ₹1,800
GST: ₹1,800 x 18% = ₹32

Step-by-step process to create the invoice

There is a systematic approach required in order to create an invoice so that all tax elements may be considered in the right manner.

Provide seller & buyer details: Provide the information about the sellers and buyers including their legal names, addresses, GSTIN, invoice number, invoice date, and place of supply.
List item groups: Provide the description of items along with HSN/SAC, quantities, unit prices, and gross value. Specify the GST rate applicable for all the items individually.
Subtract discounts from calculating Taxable Value: Deduct the discount amount either by line items or on overall basis proportionally to find out the actual value of each item.
Calculate taxable value post discount: Deduct any line item discount or distribute any overall discount proportionately to calculate the taxable value.

Intra-state supplies: Divide the GST rate into CGST and SGST evenly.
Inter-State supplies: Apply the GST rate fully as IGST.

Subtotal and round off calculation: Calculate subtotals for all the taxable values along with GST, and round off the invoice total, if required.

Suggested Read: Create GST invoice online

Conclusion

Understanding the procedure to prepare a GST invoice with multiple tax rates and discounts is essential for every expanding business with a mixed variety of products. By applying discounts before calculating the tax, segregating the HSN codes and calculating the tax components, you can avoid billing problems and make sure that the ITC of your buyer does not become invalid. Use of accounting software makes the whole procedure much easier.

FAQs

1. How do you treat invoice level discount under GST?

An invoice-level discount (like money deductions from the grand total on the invoice) needs to be evenly distributed across the entire invoice on the basis of gross amounts for each line item.After distribution, the taxable value is determined for each line item and the relevant GST rate applied.

2. Can the billing software apply different GST rates automatically?

Yes, today's GST billing software and ERP systems automatically compute line item discount, allocate lump sum discount proportionally, segregate the items according to the HSN code and instantly calculate CGST, SGST or IGST depending upon the Place of Supply chosen.

3. What if a wrong GST rate is used?

Use of the wrong GST rate will result in tax mismatch in both GSTR-1 and GSTR-3B returns, thereby preventing your customer from claiming his Input Tax Credit (ITC). In order to rectify this, one needs to issue either a tax credit note (in case of excess tax) or debit note (undercharge tax) with reference to the initial invoice.

4. Is it possible for a GST invoice to include different GST rates?

Yes, one GST invoice may consist of various GST rates. All items should be separately mentioned in the invoice, along with the HSN/SAC codes, taxable values after discounts, and

applicable GST rates, including calculation of tax amounts (CGST/SGST or IGST).

5. Should the discounts be taken into account before or after GST?

Discounts prior to supply shall always be considered before calculating the GST. As per the CGST Act, under Section 15, the tax is calculated based on the net consideration after deductions of discount as mentioned on the invoice.

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