SELF INVOICE UNDER GST
[Reverse charge and self-invoicing mechanism under GST]
Self-invoicing is to be done when you have purchased from an unregistered supplier and such purchase of goods or services falls under reverse charge.
This is due to the fact that your supplier cannot issue a GST-compliant invoice, and thus for documenting the tax liability as you become liable to pay taxes on their behalf and availing the ITC on the same, the concept of self-invoicing was introduced.
Under GST, a person who is not registered cannot collect any amount by way of tax in respect of any supply of goods or services. To bring such transactions under the GST net, the concept of reverse charge mechanism has been borrowed from the erstwhile regime and incorporated in the provisions of Section 9(3) and 9(4) of the CGST Act, and Section 5(3) and 5(4) of the IGST Act.
The provisions of the self-invoicing are briefly as under:
Cases where self-invoice needs to be issued
The person liable to pay tax under reverse charge shall be required to issue an invoice in respect of goods or services received by him from unregistered supplier within the time limits specified, and shall issue a payment voucher at the time of making payment to such supplier. However, in case of purchases from unregistered persons, the recipient shall have an option to issue consolidated invoice at the end of the month, subject to the specified conditions.
In terms of Section 9(3) of the CGST Act, and corresponding Section 5(3) under IGST Act, in respect of specified categories of goods and services, the recipient of supply is required to pay tax under reverse charge and these provisions have been specified in Notification 4/2017 Central Tax (Rate) and Notification 13/2017 Central Tax (Rate) respectively (and corresponding Notifications under IGST), as amended from time to time.
Further, under Section 9(4) of the CGST Act (and Section 5(4) of IGST Act), the specified class of persons are required to pay tax under reverse charge on purchase of specified goods or services from unregistered persons.
Time limit prescribed in law for issuing self-invoice and discharge of tax liability
The time of supply in respect of tax payable in respect of goods and services on which recipient is liable to pay tax under reverse charge shall be earlier of:
- the date of the receipt of goods; or
- the date of payment to the supplier; or
- the date immediately following 30 days for goods and 60 days in case of services from the date of issue of invoice by the supplier.
If it is not possible to determine the time of supply, the time of supply shall be the date of entry in the books of account of the recipient.
Accordingly, the self-invoice in respect of receipt of supplies specified under above provision issued within these time limits.
Contents of the self invoice
The contents of self-invoice have not been specifically prescribed under the law, and hence the contents prescribed under Rule 46 of the CGST Rules would apply to self-invoice as well. Such invoices shall include following details:
- Name and address of the supplier;
- Unique invoice number;
- Date of its issue;
- Registered person’s own GSTIN, name and address;
- HSN code and description
- Quantity in case of goods and unit or Unique Quantity Code thereof;
- Total value of supply of goods or services or both;
- Taxable value of the supply of goods or services or both taking into account discount or abatement, if any;
- Rate of tax and tax amounts;
- Place of supply;
Availment of ITC on self-invoices and restrictions thereon
There is no time-limit specifically prescribed for availing ITC in respect of self invoice hence it shall be governed by the general provisions i.e.
- ITC of tax paid under reverse charge can be availed in the same month and used for discharge of tax liability on outward supplies
- The same shall be availed upto due date of filling September months return of the subsequent financial year.
- These credits are also not subject to the restrictions on availment of ITC under Rule 36(4). [10% of ITC available in GST-2A]
- However, Block Credit restrictions under section 17(5) would still continue to apply.
Consequences of not issuing self-invoice
No specific penalty has been prescribed under law for non-issuance of self-invoices, and hence the same will be covered under general penal provisions as applicable from time to time.
Further, the document required to claim input tax credit of tax paid under reverse charge is self invoice. Thus, raising self invoice is necessary to claim ITC. Without self invoice, ITC claim can be challenged and result into loss of ITC on self invoice
Accounting entries
The accounting entries at the time of purchases attracting reverse charge will be as under:
- At the time of purchase / expense
Purchase / expense account Dr.
To URD vendor account Cr.
- At the time of creating liability under reverse charge
RCM CGST input account Dr.
RCM SGST input account Dr.
To RCM CGST payable account Cr.
To RCM SGST payable account Cr.
- At the time of payment of tax
RCM CGST payable account Dr.
RCM SGST payable account Dr.
To bank account Cr.
- At the time of taking input tax credit
Input CGST Dr.
Input SGST Dr.
To RCM CGST input account Cr.
To RCM SGST input account Cr.
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