CH- 14.
Reverse charge
CH-15. Tax invoice, credit
and debit notes
6807 Deepika
6879 Charu
REVERSE CHARGE
Reverse charge is a mechanism where the recipient of the
goods or services is liable to pay Goods and Services Tax
(GST) instead of the supplier. Typically, the supplier of goods or
services pays the tax on supply. Under the reverse charge
mechanism, the recipient of goods or services becomes liable to
pay the tax, i.e., the chargeability gets reversed.
The objective of shifting the burden of GST payments to
the recipient is to widen the scope of levy of tax on various
unorganized sectors, to exempt specific classes of suppliers,
and to tax the import of services (since the supplier is based
outside India).
Purpose of
introducing
reverse charge
Increase Increase TAX
revenues of
TAX the
compliance government
Situations for
application of
reverse charge
under GST law
Supply by Supply of certain
unregistered specified goods
suppliers and services
List of goods on which reverse charge is
applicable
DESCRIPTION OF
SUPPLIER OF RECIPIENT OF
SUPPLY OF GOODS
SUPPLY (The person
GOODS who will pay the tax)
Cashew nuts , not Agriculturist Any registered person
shelled or peeled
Bidi wrapper leaves Agriculturist Any registered person
Tobacco leaves Agriculturist Any registered person
Silk yarn Any person who Any registered person
manufactures silk yarn
from raw silk
Services under Reverse charge under GST
1. Non resident service provider
2. Goods Transport Agency.
3. Recovery Agent.
4. Director of a company or body corporate.
5. An individual advocate or firm of advocates.
6. An insurance agent.
Provisions for reverse charge under GST law
1. REQUIREMENT OF COMPULSORY REGISTRATION (SEC 24):- A person
who is liable to pay tax under reverse charge mechanism needs to be
registered under GST irrespective of the turnover.
2. NON APPLICABILITY OF EXEMPTION FROM PAYING TAX UNDER GST:-
In case of reverse charge, exemption from paying tax under GST if
aggregate turnover is below Rs 20 lakhs is not applicable.
3. NOT INCLUDED IN OUTPUT TAX :- Output tax means tax chargeable
under CGST or IGST Act but it is excluded under reverse charge basis
4. INVOICING RULES:- The taxable person paying tax under reverse charge
is required to issue self-invoice.
5. INPUT TAX CREDIT:- The service recipient can avail Input Tax credit
on the Tax amount that is paid under reverse charge on goods and services.
The only condition is that the goods and services are used or will be used for
business or furtherance of business. Unfortunately, ITC cannot be used to
pay output tax, which means that payment mode is only through cash under
reverse charge.
6. TAX UNDER REVERSE CHARGE TO BE PAID IN CASH
ONLY :- Tax under reverse charge cannot be paid by utilizing ITC , it can only be paid by
cash.
7. Time of supply under reverse charge :-
Provisions are different for goods and services under reverse charge than
normal scenario.
A. Time of supply of goods will be the earliest of the below dates:
1. When the goods are received i.e. the date of receipt.
2. When the amount is paid i.e. the date of payment.
2.Date of payment shall be earliest of ‘The date on which payment has been debited from
supplier’s bank account’ Or ‘When the recipient records the payment in his books of
account’
3.The date immediately after 30 days from the date the supplier issues invoice When the
amount is paid i.e. the date of payment.
If the assessee fails to determine the time of supply from the above-mentioned clauses,
then the time of supply shall be the date on which recipient enters in his books.
For Example:
Date of receipt of goods – 16th May 2017
Date of Payment – 16th July 2017
Date of Invoice – 1st June 2017
Date of Entry in books by recipient – 18th May 2017
Thus, Time of supply will be – 16th May 2017. If by any chance time of supply could not be
determined under mentioned clauses then it will be 18th May 2017, i.e. Date of entry.
of account.
B. Similarly, provisions are different for services under reverse charge. Time of supply
will be the earliest of the below dates:
1. When the amount is paid i.e. the date of payment OR
2. Date of payment shall be earliest of – ‘The date on which payment has been debited
from supplier’s bank account’ Or ‘When the recipient records the payment in his
books of account’.
3. The date immediately after 30 days from the date the supplier issues invoice.
If the assesse fails to determine the time of supply from the above-mentioned
clauses, then the time of supply shall be the date on which recipient of service
enters in his books of account.
For Example:
Date of Payment – 16th June 2017
Date of Invoice – 1st July 2017
Date of Entry in books by recipient – 18th June 2017
Thus, Time of supply will be – 16th June 2017. If by any chance, time of supply could not be
determined under mentioned clauses then it will be 18th June 2017, i.e. Date of entry.
If the supplier is located outside India, then the time of supply shall be the earliest of –
‘When the amount is paid i.e. the date of payment’ OR ‘When the recipient records the
payment in his books of account’.
TAX INVOICE
Tax invoice under GST is an invoice issued for taxable supply
of goods & services. Tax invoice broadly contains details
like description, quantity, value of goods/service, tax
charged thereon and other particulars as may be
prescribed. Tax invoice is a primary evidence for recipient
to claim input tax credit of goods & service.
IMPORTANCE OF TAX INVOICE UNDER GST
1. Evidences supply
2. Essential document to avail input tax credit
3. Indicator of the time of supply
Particulars of TAX invoice
1. Supplier information
2. Serial number
3. Date of issue
4. Information of registered recipient
5. Information of un- registered recipient
6. Code of goods and services
7. Description of goods and services
8. Value of supply
9. Taxable value of supply
10. Rate of tax
11. Signature
12. Address of delivery
MANNER OF ISSUING INVOICE
Manner of issuing
invoice
In case of
In case of
supply of
supply of goods
services
Prepared in Prepared in
triplicate duplicate
Original Duplicate Triplicate Original Duplicate
copy for copy for for copy for copy for
recipient transporter supplier recipient supplier
Time limit for issuance of
Tax invoice in case of
supply of goods
Where the In any
supply involves
movement of other
goods case
Before or at
Before or at the time of
the time of delivery of
removal of goods
goods
Time limit for issuance of tax
invoice in case of supply of services
Within 45 days in
Within 30 days
case of banking
from the date of
company or
supply of service
financial institute
Types of invoice to deal different
situations in GST Law
1. GST - Tax Invoice [ section 31(1)] :- The most commonly issued invoice is the GST - Tax
Invoice as there are various types of invoice under GST. This invoice has to be
mandatorily issued by every GST registered person supplying taxable goods and
services (B2B or B2C). A GST invoice is also issued while making inter-state stock
transfers.
2. Bill of Supply [section31(3)(c)] :- A Bill of Supply is similar to the GST- Tax Invoice.
However, this is to be issued when GST does not apply to the transaction. In other
words, a Bill of Supply is issued when types of GST in India can not be recovered from
the customers. For example, if a GST-registered person is dealing only in exempted
supplies or is availing of the benefits of the composition scheme (composition dealer),
then such a person should issue a bill of supply and not a tax invoice.
3. Receipt Voucher [section(3)(d)] :- In case a person registered under GST receives an
advance payment from a customer, the supplier must issue a receipt voucher.
4. Refund Voucher [ section 31(3)(e)] :- Suppose if the receipt voucher has been issued
to the buyer but against which no supply has been made, then the registered
person is required to issue the Refund Voucher.
5. Revised voucher [section 31(3)(a)] :- A revised invoice is an invoice that has been
updated to reflect changes in the original purchase, such as a change in the
quantity of goods purchased, a change in the price of the goods, or a change in the
terms of the sale.
6. Payment voucher in case of RCM [ section31(3)(g)] :- Payment Voucher under
Reverse Charge Mechanism (RCM) in GST is a proof of transaction between
taxpayer and unregistered supplier. Under GST, when a receiver procures taxable
supply of goods and/or services from an unregistered person, the liability of GST
payment falls on the receiver of goods and/or services.
CREDIT AND DEBIT NOTES (Section 34)
Credit and debit notes are issued to deal with specified situations in GST law. The
tax liability of the registered taxable person is increased or decreased on the
basis of debit note or credit note issued by the person.
CREDIT REDUCE THE
NOTE [SEC TAX
34(1)&(2)] LIABILITY
NOTE
DEBIT NOTE INCREASES
[SEC THE TAX
34(3)&(4) LIABILITY
CREDIT NOTE [ SECTION 34(1)&(2)]
A credit note in accounting means a document that a supplier of goods or services
issues to the recipient. This document notifies that the recipient’s account
needs to be credited with certain amount. Such a credit is on account of an error
in the original invoice or various other reasons. Credit note in GST is defined
under section 34(1) of the CGST act 2017. It is a document issued by the supplier
of goods or services to the recipient where –
A tax invoice has been issued for any supply of goods or services or both and:
Taxable value or tax charged in the invoice exceeds the taxable value or tax
payable in respect of such supply
Goods supplied are returned by the recipient
Goods or services supplied are found to be deficient
In the event any of the above cases, the registered supplier of goods or services
may issue a credit note to the recipient.
When Credit Note is Issued?
When a registered person supplies goods or services, he needs to necessarily
issue a tax invoice. Upon issuing the tax invoice, however, a registered supplier
is required to issue a credit note to the recipient. Thus, the supplier issues a
credit note in the event of any of the following cases:
1. the supplier charges value of goods or services in the invoice that is more than
the actual value of such goods or services
2. supplier charges a higher rate of tax than what is applicable on goods or
services supplied
3. the quantity of goods or services received by the recipient is less than what has
been declared in the original tax invoice
4. quality of goods or services supplied to the recipient is not up to the mark. Thus,
necessitating the supplier to reimburse partial or total amount of the invoice.
5. any other reasons
DEBIT NOTES [SEC 34(3)&(4)]
A debit note in accounting means a document issued by the buyer of goods or
services to the seller. This document notifies that the seller’s account needs to
be debited given goods are returned by buyer to the seller.
Debit note in GST is defined under section 34(3) of the CGST act 2017. It is a
document that a supplier of goods or services issues to the recipient where –
a tax invoice has been issued for any supply of goods or services or both and:
Taxable value or tax charged in the invoice is less than the taxable value or tax
payable in respect of such supply
Goods or services supplied are found to be more than the quantity committed
under original invoice
In the event of any of the above cases, the registered supplier of goods or services
may issue a debit note to the recipient.
When Debit Note is Issued?
When a registered person supplies goods or services, he needs to necessarily
issue a tax invoice. Upon issuing the tax invoice, however, a registered supplier
is required to issue a debit note to the recipient in the event of any of the
following cases:
1. the supplier charges value of goods or services in the invoice that is less than
the actual value of such goods or services
2. supplier charges a lower rate of tax than what is applicable on goods or
services supplied
3. the quantity of goods or services received by the recipient is more than what
has been declared in the original tax invoice
4. any other reasons
Furthermore, such a note also includes the supplementary invoice.
E-WAY BILL UNDER GST
E-way bill stands for Electronic Way Bill. It is usually a unique bill number
generated for the specific consignment involving the movement of goods. EWay
bill for movement of goods to be generated on the eWay Bill Portal. A GST
registered person cannot transport goods in a vehicle whose value exceeds Rs.
50,000 (Single Invoice/bill/delivery challan) without an e-way bill that is
generated on ewaybillgst.gov.in.
Alternatively, Eway bill can also be generated or cancelled through SMS,
Android App and by site-to-site integration through API entering the correct
GSTIN of parties. Validate the GSTIN with the help of the GST search tool
before using it.
When an eway bill is generated, a unique Eway Bill Number (EBN) is allocated
and is available to the supplier, recipient, and the transporter.
