Self-Invoice Under GST: Compliance and Best Practices
What is Self-Invoice Under GST
Self-invoicing is required when you purchase from an unregistered supplier and such purchases of goods or services fall under reverse charge.
Since your supplier cannot issue a GST-compliant invoice, the concept of self-invoicing was introduced. It allows the recipient to document the tax liability, pay taxes on behalf of the supplier, and avail input tax credit (ITC) on the same.
Under GST, a person who is not registered cannot collect any amount as tax on any supply of goods or services. To bring such transactions under the GST net, the reverse charge mechanism (borrowed from the erstwhile regime) has been incorporated in:
- Section 9(3) & 9(4) of the CGST Act
- Section 5(3) & 5(4) of the IGST Act
Cases Where Self-Invoice Needs to Be Issued
The recipient liable to pay tax under reverse charge must issue a self-invoice for goods or services received from an unregistered supplier within the specified time limits. A payment voucher must also be issued at the time of making payment.
For purchases from unregistered persons, the recipient may issue a consolidated invoice at the end of the month, subject to the specified conditions.
In terms of Section 9(3) of the CGST Act (and Section 5(3) under IGST Act), the recipient of certain goods or services is required to pay tax under reverse charge, as specified in Notification 4/2017 Central Tax (Rate) and Notification 13/2017 Central Tax (Rate), along with corresponding IGST notifications.
Under Section 9(4) of the CGST Act (and Section 5(4) of IGST Act), a specified class of persons must pay tax under reverse charge on purchases from unregistered persons.
Time Limit Prescribed for Issuing Self-Invoice and Discharging Tax Liability
The time of supply for goods and services under reverse charge is the earliest of:
- Date of receipt of goods
- Date of payment to the supplier
- Date immediately following 30 days (goods) or 60 days (services) from the date of invoice issued by the supplier
If the time of supply cannot be determined, it shall be the date of entry in the recipient’s books of account. Self-invoices must be issued within these time limits.
Contents of the Self-Invoice
While GST law does not specifically prescribe self-invoice contents, Rule 46 of the CGST Rules applies. A self-invoice should include:
- Name and address of the supplier
- Unique invoice number
- Date of issue
- Recipient’s GSTIN, name, and address
- HSN code and description
- Quantity of goods (or Unique Quantity Code)
- Total value of supply
- Taxable value (after discount or abatement, if any)
- Rate of tax and tax amounts
- Place of supply
Availment of ITC on Self-Invoices and Restrictions
There is no separate time-limit for availing ITC on self-invoices. General provisions apply:
- ITC can be availed in the same month and used for discharge of tax liability on outward supplies
- ITC can be claimed until the due date of filing September return of the following financial year
- Not subject to 10% Rule 36(4) restrictions
- Blocked credits under Section 17(5) still apply
Consequences of Not Issuing a Self-Invoice
No specific penalty exists for non-issuance of self-invoices. However:
- Self-invoice is required to claim ITC under reverse charge
- Without it, ITC claims can be challenged, resulting in potential loss of credit
Accounting Entries
| Transaction | Debit (Dr.) | Credit (Cr.) |
|---|---|---|
| At the time of purchase / expense | Purchase / Expense Account | URD Vendor Account |
| At the time of creating liability under reverse charge | RCM CGST Input Account RCM SGST Input Account | RCM CGST Payable Account RCM SGST Payable Account |
| At the time of payment of tax | RCM CGST Payable Account RCM SGST Payable Account | Bank Account |
| At the time of taking input tax credit | Input CGST Input SGST | RCM CGST Input Account RCM SGST Input Account |
Reach Us
We hope this guide is helpful. For any queries or further assistance, feel free to reach out to Nexpective Advisors.
