GST: Self Invoicing Under RCM ( Reverse Charge Mechanism)

GST: Self Invoicing Under RCM ( Reverse Charge Mechanism)

In GST, Section 9 of the CGST Act 2017– related to levy and collection, There are 2 types of charges under GST 

(1) Forward Charges 

(2) Reverse Charges


Under reverse charge, there are two type of payments i.e. 

  1. Taxable supplies provided by register person to register person

  2. depend upon the nature of supplies and nature of suppliers

As per the GST Act, assesse has to maintain, accounts book and record which list is prescribed as per Act, included “ SELF INVOICE” copies.

Background regarding the SELF INVOICE, when govt. introduced the law, section 9 (4) is inserted at earlier stage which is deemed at later stage, the section related to pay RCM on purchases from unregistered dealer which value was more than Rs.5000/-, now this provisions has been substituted by the new section by Government.

Now points need to be considered is that, when as per holding the books and accounts upto 6+1 years including the SELF INVOICE- Is it really require to prepare self-invoice under RCM payment in all cases ? What is use of keeping / preparing of “SELF INVOICE” from assessment point of view? What is use of self-invoice from accounts point of view? What will be the impact after the invoice?

There is no proper answer we receive as on date.. Only!!! Just for compliance!!!

As per our understanding the purpose to inserted this clause was “when register dealer purchased material from unregistered person without tax invoice, in that case, government intended to highlighted the unregistered vendor and way out was to prepare “ SELF INVOICE” that’s all, no any other purpose could be apart from this.

If we think practically, will be notice that, when you are making payment for GTA, SECURITY CHARGES etc. which are register supplier and assesse is paying the payment under RCM for these services DOES NOT REQUIRE TO PREPARE “SELF INVOICE”.


Reason behind that,
  1. Whenever taxable services under RCM like GTA, Security services is provided by register person, then he has to fulfil the compliance by uploading the sale of services data on portal, after his uploading, the same data reflects in 2A automatically under 3.1(d) in GSTR 3B, therefore how much RCM paid by taxable person is easily identified therefore my view is in this case- Does not require to compilation for self-invoice.
  2. Department has also easy way out at the time of assessment, to find out how much RCM paid on the basis on P&L heads and payment- therefore my view is in this case- Does not require to compute for self-invoice
  3. After preparation of “ SELF INVOICE” that is not uploaded anywhere- So no use

In short, service supplier are register dealer and issue invoice with its GSTIN under RCM should not cover under SELF INVOICE, even if services taken by unregistered dealer like “Advocate fees, sponsorship fees etc…etc., “can prove that all these services under RCM and service recipient has to pay RCM even if he has not prepare “SELF INVOICE” all these expenses are identified from financials from register tax payers financials.

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.
  1. ITC of tax paid under reverse charge can be availed in the same month and used for discharge of tax liability on outward supplies
  2. The same shall be availed upto due date of filling September months return of the subsequent financial year.
  3. These credits are also not subject to the restrictions on availment of ITC under Rule 36(4). [10% of ITC available in GST-2A]
  4. 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





For more info visit TAXAJ
Posted by Ramesh Kumar Gupta 




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