GSTN adds two e-invoicing categories for reverse charge purchases

The Goods and Services Tax Network (GSTN) has introduced two new categories under the e-invoicing system to enable businesses to report self-invoices for specified transactions under the reverse charge mechanism (RCM), including domestic purchases from unregistered suppliers and imports of services.

Under RCM, the recipient, rather than the supplier, is liable to pay GST on specified transactions. Businesses must issue self-invoices for applicable purchases from unregistered suppliers and certain other transactions, including imports of services.

The move follows a recommendation made at the 57th meeting of the GST Council and will extend e-invoicing beyond the conventional framework, under which registered suppliers generally report invoices for business-to-business transactions.

According to a GSTN advisory dated October 16, the new categories -- RCM-DOM for specified domestic supplies from unregistered persons and RCM-IMP for imports of services -- will allow eligible businesses to generate Invoice Reference Numbers (IRNs) for self-invoices through authorised Invoice Registration Portals (IRPs).

The facility is intended for registered taxpayers with an aggregate annual turnover of ₹50 million and above, subject to the relevant statutory provisions and government notifications. The production rollout date is yet to be announced, according to the advisory.

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Vivek Jalan, partner at Tax Connect Advisory Services, said the proposed system marked a major shift in goods and services tax (GST) compliance. "For the first time, businesses will be required to generate e-invoices on specified purchase transactions instead of sales transactions," he said.

Jalan said companies needed to strengthen their internal controls and enterprise resource planning (ERP) systems in view of the 30-day timeline prescribed for issuing self-invoices under reverse charge.

"Any delay in identifying eligible transactions could translate into interest exposure and challenges in taking input tax credit due to time barring," he said.

Shivam Mehta, partner at Lakshmikumaran & Sridharan (LKS), said the change was a significant compliance reform intended to strengthen the reporting of imported services and other RCM transactions.

"It will reduce the possibility of such transactions escaping the tax net," he said.

According to the existing GST law, a registered person is not entitled to take input tax credit (ITC) on any invoice or debit note after November 30 following the end of the financial year to which the invoice or debit note pertains, or the date of furnishing the relevant annual return, whichever is earlier. Mehta said it would be worth examining whether the new e-invoicing framework would change the time limit for claiming ITC on self-invoices, or whether the existing deadline of November 30 of the financial year following the year of issuance of the self-invoice would continue to apply.

GSTN said the new facility is available for testing on all six authorised e-invoice portals. Businesses and their software providers can test the system and prepare for its rollout. The production rollout date and the commencement of the reporting requirements will be announced separately, the advisory said.

The National Informatics Centre's e-invoice portal will issue a detailed release note covering technical specifications, business validations and other operational requirements. GSTN and the IRPs will also organise a webinar to explain the new functionality.

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