As we have understood the provisions of RCM in detail, we can discuss few more points about RCM. We are aware that under Reverse charge mechanism, the tax is required to be paid by the recipient and hence question arises as to who is required to prepare an invoice in such cases. Readers need to know that under GST law only a registered person can issue an invoice. If an unregistered person supplies goods or services then he / she will prepare "Bill of Supply" and not invoice. Hence there can be following two possibilities in cases covered under RCM
Supplier is unregistered
Supplier is registered
If supplier is unregistered then the recipient needs to issue a self invoice. Relevant provision is given under section 31(3)(f) as under
a registered person who is liable to pay tax under sub-section (3) or subsection (4) of section 9 shall (within the period as may be prescribed)
- (These words are inserted through Finance Act 2024) issue an invoice in respect of goods or services or both received by him from the supplier who is not registered on the date of receipt of goods or services or both.
Readers may note that in case the supplies are covered under section 9(3) or section 9(4) and the supplier is unregistered then the recipient is required to issue a self invoice.
Earlier there was no explicit time limit provided for issuing the self invoice and hence there were instances where taxpayers were issuing invoice for earlier years and took input tax credit of the same. However, through Finance Act 2024 section 31(3)(f) was amended and powers are given to government to fix the time limit within which the self invoice needs to be issued. By exercising these powers, government issued notification no 20/2024-CT dated 8th October 2024 and inserted a new rule 47A. The new rule is as under.
47A. Time limit for issuing tax invoice in cases where recipient is required to issue invoice.- Notwithstanding anything contained in rule 47, where an invoice referred to in rule 46 is required to be issued under clause (f) of sub-section (3) of section
31 by a registered person, who is liable to pay tax under sub- section (3) or sub-section (4) of section 9, he shall issue the said invoice within a period of thirty days from the date of receipt of the said supply of goods or services, or both, as the case may be.
As per this new rule the self invoice needs to be issued within 30 days from the date of receipt of the supply. Further amendment was also made to the time of supply (Discussed later in this chapter)
If the supplier is registered and the supply is covered under RCM then the supplier shall issue the tax invoice under Rule 46. However as per this rule the supplier needs to mention in the invoice that the recipient shall pay tax under reverse charge. Further as per rule 50 and rule 51 the supplier shall mention in the receipt voucher as well as in refund voucher that the tax is payable by the recipient under reverse charge.