Self-Invoice Under Reverse Charge: When the Buyer Has to Raise the Invoice

What is reverse charge?

Under reverse charge, the liability to pay GST shifts from the supplier to the recipient. There are two routes:

• Section 9(3) of the CGST Act: the government notifies specific goods and services on which the recipient always pays the tax, whoever the supplier is.
• Section 9(4): the government notifies categories of registered recipients who must pay tax on specified supplies received from unregistered suppliers. At present this applies mainly to promoters in the real estate sector.

Common services under Section 9(3)

The list is long and is amended from time to time. Some common examples are:

• Goods transport agency (GTA) services, where the GTA has not opted to pay tax itself.
• Legal services from an individual advocate or a firm of advocates to a business entity.
• Services of a director to the company.
• Sponsorship services provided to a body corporate or partnership firm.
• Security services by a person other than a body corporate to a registered person (with exceptions).
• Renting of a commercial property by an unregistered person to a registered person (from October 2024).
• Services from an insurance agent to an insurance company, or a recovery agent to a bank or NBFC.

Check the current notifications for the exact conditions, because exceptions apply to almost every item.

When is a self-invoice needed?

Section 31(3)(f) requires a registered person who is liable to pay tax under reverse charge to issue an invoice for goods or services received from a supplier who is not registered.

So:

• Supplier is registered: the supplier issues a normal tax invoice, marked "Tax payable on reverse charge: Yes". No self-invoice is needed. The recipient pays the tax.
• Supplier is unregistered: the recipient issues a self-invoice, and pays the tax.

For example, a registered company that hires an unregistered individual advocate, or rents an office from an unregistered landlord, must raise a self-invoice for the service.

Payment voucher

Alongside the self-invoice, Section 31(3)(g) requires the recipient to issue a payment voucher at the time of making payment to the supplier under reverse charge. Rule 52 sets out its contents: supplier and recipient details, voucher number and date, description, amount paid, rate and amount of tax, place of supply, and signature.

The 30-day time limit

Until 2024, the law did not set a clear deadline for self-invoices. From 1 November 2024, Rule 47A requires a self-invoice for supplies received from unregistered suppliers to be issued within 30 days of the date of receipt of the goods or services.

This matters for input tax credit: the self-invoice is the document on which the recipient claims credit of the tax paid under reverse charge. Issuing it on time also keeps your reverse charge tax and the matching credit in the right month.

What a self-invoice must contain

A self-invoice follows the format of a tax invoice under Rule 46, with the roles adjusted:

• Your name, address and GSTIN, as the recipient issuing it.
• Name and address of the unregistered supplier, and their state.
• A consecutive serial number of up to 16 characters, unique for the financial year. Use a separate series, such as SI/26-27/001.
• Date of issue.
• HSN or SAC, description, quantity and value.
• Rate and amount of tax under each head.
• Place of supply.
• A clear statement that tax is payable on reverse charge.
• Signature.

Paying the tax and claiming credit

• Tax under reverse charge must be paid in cash (through the electronic cash ledger). It cannot be paid using input tax credit.
• After paying, the recipient can usually claim input tax credit of the same tax, if the goods or services are used for business and the normal conditions are met.
• Report RCM liability in GSTR-3B Table 3.1(d) and the credit in Table 4A(3). Self-invoices are not reported in GSTR-1, because GSTR-1 is for outward supplies.

Common mistakes

• Paying RCM tax through credit instead of cash.
• Not issuing a self-invoice for rent or legal fees paid to unregistered persons.
• Issuing it late, after the 30-day limit.
• Mixing self-invoices into the sales invoice series. Keep a separate series.
• Charging GST to the buyer as a registered supplier of an RCM service. The supplier should mark reverse charge, not add tax.

Prepare a self-invoice

You can prepare a self-invoice in the OwnInvoice Invoice Studio: enter your business as the issuer, the unregistered supplier's details, and set the document title to "Self-Invoice (Reverse Charge)". Use a custom field to add "Tax payable on reverse charge: Yes" and your own number series. Then record the RCM tax in your GSTR-3B as usual.

Note: Reverse charge notifications are detailed and frequently amended. This article is general information, not tax advice; check the current notifications or consult a GST practitioner for your situation.