E-invoicing started in Oct 2020 and the onus of creating invoices and getting them registered on the Invoice Registration Portal (IRP) lies on the Supplier. This, in a usual scenario, can work fine. However, for a business, there could be transactions that need to be reported under the Reverse Charge Mechanism (RCM). The confusion on RCM transactions arises because under RCM, the recipients generally create invoice on self and report in GST Returns. However, registering an invoice to obtain Invoice Reference Number (IRN) can be done only by the supplier.
Let us understand the rules of e-invoicing in relation to Reverse Charge Mechanism (RCM)
What is Reverse Charge Mechanism (RCM)?
GST is normally charged by Supplier of Goods/Services. Supplier is liable to collect tax from the recipient and pay the total tax amount to the Government. But in certain types of transactions (refer below), the Recipient of Goods/Services is liable to pay GST instead of Supplier. This in essence is Reverse Charge.
You may read about all the transactions covered under RCM and Preparation of Payment Vouchers here.
Type of transactions covered under Reverse Charge Mechanism (RCM)
- Supply of notified goods or services –
- Example for goods like supply of silk yarn, raw cotton, tobacco leaves, supply of lottery etc.
- Examples for services like Goods Transport Agency (GTA) services, Services provided by an insurance agent to person carrying on insurance business etc
- Supplies from Unregistered person to Registered person –
- As per section 9 (4) of the CGST/SGST (UTGST) Act and section 5 (4) of the IGST Act, if a registered person purchases goods/services from an unregistered dealer (URD) then the registered taxpayer is liable to pay GST on reverse charge basis (only for certain goods/services).
- Services through an e-commerce operator –
- E-commerce operator that provides a platform to buyers and sellers of services is liable to pay GST on behalf of his suppliers.
- For example, Ola provides services of transportation of Passenger through Radio Taxis. Then Ola has to pay GST on behalf of actual service provider i.e. Driver.
Scope of E-invoicing in light of RCM transactions
As per CGST Notification 01/2022 released on 24th Feb 2022, GST e-invoice was made mandatory for entities with turnover of Rs. 20 Cr and above. The Government now plans to extend the scope of e-Invoicing to taxpayers below Rs. 20 Cr. and the process has begun. Taxpayers with turnover between Rs. 5 Cr. and Rs. 20 Cr. are enabled for testing on Sandbox. And, as per the latest GST Notification 17/2022 dated 01-08-2022 mandates e-invoicing for taxpayers having AATO above Rs. 10 crores in any financial year since FY 2017-18 w.e.f 1st October, 2022.
As of now, the scope is limited to transactions covering outward B2B supplies (i.e. supplies from the registered taxpayer to registered counter-party), Export, Deemed Export, Supplies to SEZ and transaction through E-commerce operator and B2B reverse charge transactions.
Also, IRN can be generated by only Supplier or E-commerce Operator
Exemption from E-invoicing and QR code has been granted to some sectors such as SEZ Units, insurance, banking, financial institutions, NBFCs, GTA2, and passenger transportation service, etc. Here if these sectors are providing any services other than core services then those transactions will fall under E-invoicing.
- If transaction through E-commerce comes under RCM then these transactions are also covered under GST E-invoicing. And E-commerce operator can also generate IRN for the same.
- If we see here, GTA comes under RCM notified services but it is exempted as of now from E-invoicing. SEZ units are exempted from E-invoicing however the SEZ developer needs to generate IRN as they fall under E-invoice mandate.
So, let’s take a deeper look at all the RCM transactions that are covered under the E-invoicing mandate:
|RCM Transaction Type||E-invoice Applicable||Points to note|
|Sale of Goods or supply of services notified for Reverse Charge Mechanism (RCM) under section 9(3) of CGST Act, 2017||Yes. Supplier of goods/services need to registered invoice with IRP||
Such sale is made by a notified taxpayer covered under mandate (Turnover > Rs. 500 cr and from Jan 2021, Turnover >Rs. 100 cr)
These are B2B and SEZ outward supplies under Reverse Charge Mechanism (RCM) gets covered.
So, if supplies made to unregistered person i.e. B2C sale then for B2C transaction, it is not required to generate IRN. Suppliers with turnover >Rs. 500 Cr need to self -generate QR code for B2C cases.
|Taxable Supplies from Unregistered Person to Registered Person u/s 9(4)||No||IRN can be generated only by a supplier. As the supplier himself is unregistered, hence IRN is not applicable.|
|RCM on Services through an e-commerce operator||Yes. E-commerce operator needs to generate IRN||
As in such cases e-commerce operator is supposed to prepare invoice as if he is the supplier, IRN is also required to be generated by him.
Such e-commerce operator is covered under mandate.
Such sale is not B2C sale as B2C is not included for IRN.
Validations provided by IRP for RCM transactions
The IRP has defined certain validations for Reverse Charge Mechanism transactions. So, while sending the invoice data to IRP for RCM transactions, following points should be noted:
- “Reverse Charges” can be set as “Y” in case of B2B and SEZ invoices and tax is being paid in a reverse manner as per rule.
- Even in the case of B2B Reverse Charged invoices, the Supplier has to generate the IRN.
IRIS’s E-Invoicing software -IRIS Onyx provides a seamless IRN generation experience. It is made to handle all types of transactions for e-invoicing, including RCM transactions. Further, as we believe data extraction /integration programs need to be uniform for all records in the accounting system, the control lies with the user to decide whether or not for the particular invoice, IRN is needed. This control is at invoice level, and works even when bulk upload is done.
Also, when it comes to E-invoicing and B2C transactions, the supplier needs to self-generate QR code. Hence this automated generation of QR code facility is also available in IRIS Onyx.
IRIS Onyx – A complete E-invoicing solution
IRIS Onyx is an automated, integrated and seamless e-invoicing solution!
Onyx is a cloud-based solution that can integrate with your billing systems seamlessly in multiple ways and generate IRN with zero disruption to your business. It is a one-stop platform to view, share and collaborate with your customers and suppliers alike while managing the entire communication with the GST systems in a hassle-free manner.
IRIS Onyx helps with both E-invoicing and E-way Bill generation seamlessly and makes the entire process smooth and hassle-free![/vc_column_text][/vc_column][/vc_row]
E invoice is Not applicable for GTA, is it correct?
GTA are excluded from e-invoicing
if we are receiving services which are liable for GST under reverse charge , Do we need to make e- invoice for services received from 1st January 2021?
The confusion on RCM transactions arises because under RCM, the recipients generally create invoice on self and report in GST Returns. However, registering an invoice to obtain Invoice Reference Number (IRN) can be done only by the supplier.
Supplier only has to do e-invoicing if he is required to do so
Ours is more than Rs.100cr turnover company. Do we need to prepare e-Invoice under Rule 48(4) for payment of GST under RCM for Transporters Bills, Advocate Bills etc. and upload in GST Portal.
Your valued opinion is requested pl.
In case of B2B Reverse Charged invoices, the Supplier has to generate the IRN
GTA services are exempted from e-invoicing
For Advocate bills you are receiver of services and E-Invoice can only be generated by supplier. Hence your entity is not required to generate E-Invoice
E-invoice issued by advocate in RCM , can charged GST on invoice ? example if advocate fees is 10 Lakhs and they charged GST on Invoice @18% (Invoice value showing 11.80 Lakhs) and also mentioning RCM applicable on the face of invoice . In such case, Invoice value is 11.80 lakhs so as a company, we have to pay GST in RCM also ? AND HOW ?
Being an advocate supplier has issued you einvoice. You shall pay tax component directly to GSTN and make payment of balance amount to the supplier
The GTA Company is having Turnover more than 50 Cr. Being the GTA the company it is not required to get register under “E’ Invoice. In case GTA Company want to sale few spare parts or sale of scrap of Rs. 1 cr. during the Year, whether the Company has to get register under ‘E’ Invoice