Often, international shipping involves extensive documentation. These documents are essential at nearly every stage for verification and clearance processes. When sending goods to international clients, commercial invoices must be presented.

Meaning and Importance of a Commercial Invoice

A commercial invoice serves as a critical export document, legally confirming a sale between a buyer and seller. Its primary function is to facilitate customs clearance and assist in determining and assessing the duties and taxes that are payable. This document provides a complete description of the goods sold, their quantities, and the value previously agreed upon by the involved parties.

The significance of a commercial invoice can be observed in the following ways:

• Helps in maintaining records: Commercial invoices are a mandatory component of import and export procedures, forming a vital part of the documentary trail for these transactions.
• Proof of sale: Since a commercial invoice details all aspects of the transaction, including buyer and seller information, and the description and value of goods, it acts as essential evidence that the sale transaction has taken place.
• Guarantees payment: As a legal document validating a sales transaction, a commercial invoice is instrumental in ensuring that payment for the goods is secured.
• Assistance in verification: The detailed description of goods, encompassing quality, quantity, and price, enables the importer to cross-check and confirm if the shipment's contents match those listed on the commercial invoice.
• Can serve as a notice for payment due: The commercial invoice includes all the pertinent information of a regular invoice and can therefore be utilized as a prompt for outstanding payments. It is an effective method for nurturing customer relationships.
• Ensures no one gets fleeced: Due to its comprehensive and verifiable nature, the commercial invoice helps prevent buyers from evading payment.

Indian Laws on Commercial Invoices

The Central Board of Indirect Taxes and Customs (CBIC) requires certain mandatory documents for import or export procedures, and the commercial invoice is among them. As per Circular No. 01/15-Customs, a combined commercial invoice and packing list meets the criteria set by Customs authorities for proper import or export processes, as both documents contain similar information.

According to the Foreign Trade Policy, the following documents are mandatory for conducting import and export activities:

• Airway bill/bill of lading
• Commercial invoice cum packing list
• Shipping bill

Time Limit for Raising a Commercial Invoice Under Indian Law

Under GST laws, a registered taxable person supplying goods subject to taxes is required to issue an invoice. This invoice must clearly state the nature, quantity, and value of the goods, the applicable tax, and any other necessary information.

If the supply involves the movement of goods, the invoice must be raised on or before the date the goods are removed from the supplier’s location for delivery to the buyer. In essence, the invoice should be issued by the dispatch date of such goods.

Contents of a Commercial Invoice

A commercial invoice does not transfer the title or ownership of goods; it simply serves as proof of sale between the buyer and the seller. A commercial invoice typically includes the following information:

• Information regarding the buyer and seller
• Name, address, tax information, and contact details of the buyer
• Name, address, tax information, and contact details of the seller
• Information regarding the transaction
• Date of the invoice
• Invoice number
• Order number
• Description of the goods
• Quantity and value of the goods
• Mode of payment and related instructions
• IEC Code and GSTIN
• Country of origin
• Shipping related information
• Freight charges
• Export route
• Date of shipment
• Gross weight
• Number of packages
• Insurance charges

How is Packing & Shipping dealt with in a Commercial Invoice?

Consistent with the aforementioned customs circular, a commercial invoice combined with a packing list can be prepared. This document will include packing and shipping details alongside the standard commercial invoice fields. The packing and shipping specifics may comprise:

• Country of origin
• Final destination
• Gross weight
• Number of packages
• Export route/carrier
• Loading port
• Discharge port
• Marks and number

This integrated approach helps simplify business operations and trade-related activities.