Self Invoice Format under GST

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Self Invoice Format

What is a Self Invoice Format?

A customer prepares a self-invoice format where the supplier is unregistered. A supplier usually pays the tax on supply, but under the reverse charge mechanism, the chargeability gets reversed. The recipient of the goods and services becomes liable to pay the tax.

The reverse charge mechanism only applies to specific kinds of business entities. The purpose of shifting GST payments to recipients is to increase tax levies on various unorganized sectors. It also aims to exempt specific supplier classes and tax the import of services since the supplier is located abroad.

Rules under Section 9(4) of CGST Act:

Where a non-registered supplier supplies taxable goods or services or both to a registered person, the central tax shall be paid by the recipient on a reverse charge basis. The Act's provisions shall apply as if the recipient was the person liable for paying the tax for the supply of those goods or services or both.

Professional Self Invoice Format under GST

All registered buyers of goods and services from non-registered sellers must pay taxes on a reverse charge basis. Further, as per section 31(f) of the CGST Act, "A registered person shall issue an invoice in respect of goods or services or both received by him from the supplier who is not registered."

Thus, all the registered persons, i.e., the buyers, shall issue invoices when paying taxes on a reverse charge mechanism. Since the customers will provide invoices to themselves, it is called self-invoicing.

Rule 46 of the CGST Rules states that all registered persons whose supply exceeds Rs 5000 daily from all suppliers must issue a consolidated invoice each month. Therefore, such stores will be tax-free if the total price does not exceed Rupees 5000.

Self-billing invoices under GST

When issuing a self-invoice under goods and services tax, a customer and supplier have additional responsibilities to ensure that all the requirements are met. The buyer can issue self invoice under the following circumstances:

  1. When making the supply, the supplier cannot estimate its value.
  2. Under GST or any other supplier authorized by the Director-General, the supplier and the client are registered.
  3. The issuance of a self-billing invoice must be agreed upon in writing between the supplier and the client.

Contents of Self Invoice Format:

  • State the words 'Self-billed invoice' at a visible place on the invoice.
  • Date and 16-digit alphanumeric serial number of the invoice.
  • Recipient's name, address, and GSTIN number.
  • Description of goods or services.
  • HSC code for goods and SAC code for services.
  • The total amount that the supplier will receive.
  • Tax charged as per the provisions.
  • Location of supplier and state, interstate, or area code, if applicable.

Advantages of self-billing invoice

The self-invoice benefits both the supplier and the customer, some of its advantages are as follows:

  • Increases Efficiency: A customer prepares a self-billing invoice, reducing the supplier's work and compliance burden and improving efficiency.
  • Quick Payments: When the customer makes the invoice, they also clear the payment. Thus, the supplier gets the payments faster.
  • Increases Accountability: The customer is accountable for making the invoices under RCM. So they manage it efficiently and speed up the transactional process.
  • Smooth work: When a customer issues an invoice, he incorporates all the necessary details for the supplier's reference and convenience. Thus, all the work will go smoothly.