Invoice payment terms state when and how the buyer must pay, for example 'Net 15' (full payment within 15 days of the invoice date), 'Due on receipt', '50% advance, balance on delivery' or '2/10 Net 30' (2% discount if paid within 10 days, otherwise full amount in 30). Agree them before the sale, print them on every invoice and keep them consistent with your contract.
Payment terms are the line on your invoice that decides when you actually get paid. Leave them vague and the buyer decides for you. Set them clearly and consistently, and most customers will follow them.
This guide covers the common payment terms used in India, how to calculate due dates and discounts, how to word terms on an invoice, and how to choose terms that protect your cash flow.
What are invoice payment terms?
Payment terms are the conditions under which the buyer must pay you. They usually cover:
- When payment is due (on receipt, in 15 days, at milestones)
- How much is due at each stage (full, advance, instalments)
- How to pay (bank transfer, UPI, cheque)
- What happens if payment is early (discount) or late (interest or suspension of supply)
They are a commercial agreement, not a GST field. Rule 46 of the CGST Rules lists what a tax invoice must contain, and payment terms are not on that list. But the invoice is where your terms get noticed, so print them every time.
What are the most common payment terms?
| Term | Meaning | Typical use |
|---|---|---|
| Due on receipt | Pay as soon as the invoice is received | Small jobs, new customers, retail |
| Net 7 | Full payment within 7 days of invoice date | Fast-moving trade |
| Net 15 | Within 15 days | Regular B2B supplies |
| Net 30 | Within 30 days | Established B2B customers |
| Net 45 / Net 60 | Within 45 or 60 days | Large buyers, distributors (check MSME rules) |
| EOM | Due at end of the month of the invoice | Monthly accounts |
| 15 EOM | Due 15 days after month end | Corporates batching payments |
| 2/10 Net 30 | 2% discount if paid in 10 days, otherwise full in 30 | Encouraging early payment |
| Advance / CIA | Cash in advance before work or dispatch | Custom orders, new buyers |
| 50/50 | Half upfront, half on delivery | Projects, fabrication |
| Milestone | Payment tied to project stages | Construction, software, events |
| COD | Cash or UPI on delivery | Local delivery, D2C |
| PDC | Post-dated cheque given against supply | Some traditional trades |
How do you calculate the due date?
Unless your contract says otherwise, count from the invoice date.
- Take the invoice date.
- Add the number of days in the term.
- If the term is EOM-based, go to the last day of the invoice month first, then add days.
- Print the resulting date on the invoice as "Due date", not just the term.
| Invoice date | Term | Due date |
|---|---|---|
| 5 Oct 2026 | Net 15 | 20 Oct 2026 |
| 5 Oct 2026 | Net 30 | 4 Nov 2026 |
| 5 Oct 2026 | EOM | 31 Oct 2026 |
| 5 Oct 2026 | 15 EOM | 15 Nov 2026 |
| 28 Feb 2026 | Net 30 | 30 Mar 2026 |
Showing the actual date removes arguments about whether Net 30 means 30 calendar days or 30 working days.
Worked example: does an early-payment discount make sense?
A Surat textile trader invoices a garment unit ₹2,36,000 (taxable value ₹2,00,000 plus 18% GST of ₹36,000, assuming that rate applies) on terms 2/10 Net 30.
- If the buyer pays within 10 days, the trader gives a 2% discount on the taxable value: 2% × ₹2,00,000 = ₹4,000.
- The trader effectively gets money 20 days earlier for ₹4,000.
Is that cheap or expensive? Annualise it:
- ₹4,000 ÷ ₹2,00,000 = 2% for 20 days
- 2% × (365 ÷ 20) = about 36.5% a year
That is far more than most business loans or overdraft rates. So a 2/10 Net 30 discount is generous to the buyer. A trader who needs cash urgently might accept that; one who does not should offer a smaller discount, such as 1/10 Net 30 (about 18% a year).
On the GST side, how the discount is handled matters. A discount shown on the original invoice reduces the taxable value directly. A discount given after supply needs to be agreed in advance and linked to the invoice, usually through a credit note. Get your accountant's view before offering post-supply discounts.
How should you word payment terms on an invoice?
Short, specific and unambiguous. Examples you can adapt:
- "Payment due within 15 days of invoice date. Due date: 20 October 2026."
- "50% advance with order; balance before dispatch."
- "Payable by UPI or bank transfer to the account below. Please quote the invoice number."
- "2% discount on taxable value if paid by 15 October 2026; otherwise full amount due by 4 November 2026."
- "Interest at 1.5% per month on overdue amounts, as agreed in our contract dated 1 April 2026."
Put the terms near the total and the bank details, where the person paying will see them.
How do you choose the right terms?
- Look at your own cash cycle. If you pay suppliers in 15 days, giving customers 45 days means you are financing them.
- Consider the customer's risk. New or slow-paying customers get shorter terms or advance.
- Match industry norms. Distributors often expect credit; retail customers do not.
- Check MSME protection. If you are a micro or small enterprise registered under the MSMED Act, buyers have statutory payment timelines. See the MSME 45-day payment rule.
- Agree before supplying. Terms on the invoice should match the quotation and purchase order. Surprise terms on an invoice are easy to dispute.
- Review periodically. Tighten terms for customers who are always late.
Payment terms for different business types
| Business type | Commonly used terms |
|---|---|
| Retail shop | Immediate payment, UPI or cash |
| Wholesale trader | Net 7 to Net 30 depending on customer |
| Manufacturer supplying OEMs | Net 30 to Net 45, often per PO |
| Contractor / fabricator | Advance plus milestone payments |
| IT or agency services | Monthly invoice, Net 15; retainers in advance |
| Professional services | Advance retainer, then monthly billing |
| Subscriptions | Advance, auto-billed each period (see recurring invoices) |
Remember that payment terms do not change invoice timing under GST: service invoices must still be issued within thirty days of supply under Rule 47, whatever credit you give.
How do payment terms work with advances and milestones?
Advance and milestone terms need a little more structure on paper, because money moves before or during supply.
- Write the schedule. For example: 30% with order, 40% on delivery, 30% within 15 days of installation.
- Issue the right document for each payment. An advance received before supply is acknowledged with a receipt voucher. The tax invoice follows at the time of supply. See advance payment under GST.
- Show the adjustment. The final tax invoice should show the full value of supply, less advances already received, leaving the balance payable.
- Link each milestone to a deliverable. "On installation" is clearer than "on progress".
Worked example: a 30/40/30 schedule
A Rajkot machinery maker sells a machine for ₹5,00,000 plus 18% GST (assumed) = ₹5,90,000 total.
| Stage | Share | Amount (₹) |
|---|---|---|
| With order | 30% | 1,77,000 |
| On delivery | 40% | 2,36,000 |
| 15 days after installation | 30% | 1,77,000 |
| Total | 100% | 5,90,000 |
The invoice at delivery shows the full ₹5,90,000, less the ₹1,77,000 advance, leaving ₹4,13,000, of which ₹2,36,000 is due on delivery and ₹1,77,000 after installation. Printing both due dates on the invoice keeps everyone aligned.
What should you do when a payment becomes overdue?
Terms only work if you follow them up the same way every time. A simple escalation ladder keeps it professional:
- Three days before the due date: a friendly reminder with the invoice number, amount and due date.
- On the due date: a second message with a payment link or bank details.
- Seven days overdue: a phone call to the person who approves payments, asking whether anything is disputed.
- Fifteen days overdue: a written reminder quoting the agreed terms, including any agreed late-payment interest.
- Thirty days overdue: pause further credit supplies until the account is cleared, if your terms allow it.
Worked example: interest on a late invoice
A Rajkot packaging supplier's contract says interest of 1.5% a month applies on overdue amounts. An invoice of ₹1,18,000 due on 10 November is paid on 10 January, two months late. Simple interest is ₹1,18,000 × 1.5% × 2 = ₹3,540. The supplier raises that interest as agreed in the contract; ask your accountant how to treat that interest for GST.
For micro and small suppliers, the MSMED Act sets its own payment deadline and interest rules that apply regardless of what the buyer prefers; see the MSME 45-day payment rule for how those work.
Common mistakes with payment terms
- No terms at all. "Please pay" gives no deadline.
- Terms that differ from the PO. The buyer will follow their PO, not your invoice.
- Showing only "Net 30" without a date. Calculate and print the due date.
- Discounts that cost more than borrowing. Annualise before offering.
- Charging interest that was never agreed. It invites disputes and is hard to recover.
- Long credit to unknown buyers. Start short and extend as trust builds.
- Not following up on the due date. Terms work only if you act when they pass. See payment reminder templates.
How software enforces payment terms
Billing software can store default terms per customer, calculate the due date automatically, print it on the invoice and send reminders before and after it. Billing Software by Betterwork, for example, adds the due date to each invoice, sends payment reminders and includes a UPI or payment link so customers can pay in one tap. For a broader view on collections, read how to get paid faster, or explore the features page.
Key takeaways
- Payment terms are a commercial agreement, not a GST field, but belong on every invoice.
- Use clear terms such as Net 15 or 50% advance, and always print the actual due date.
- Annualise early-payment discounts before offering them; 2/10 Net 30 costs about 36.5% a year.
- Agree terms before supply and keep them consistent with the quotation and PO.
- Micro and small enterprises have statutory payment protection under the MSMED Act.
- Follow up on the due date, every time.
This guide is general information, not tax advice. Rules last checked on 20 October 2026; confirm with your tax professional for your situation.