Law • Intent • Procedure • Compliance Precision for Professionals and Businesses
By CA Surekha S Ahuja
Background and Conceptual Intent
Under the GST framework, self-invoicing refers to a situation where the recipient of goods or services issues the tax invoice in place of the supplier. This mechanism ensures tax compliance where the supplier cannot issue a valid tax invoice because they are unregistered under GST.
The intent behind self-invoicing is to ensure that tax on reverse charge transactions is properly documented, ITC flow is transparent, and tax authorities can match credits and liabilities seamlessly. It prevents leakages where supplies from unregistered persons might otherwise escape the tax net.
Legal Foundation
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Section 31(3)(f) of the CGST Act, 2017
→ The recipient who is liable to pay tax under Section 9(3) or Section 9(4) (reverse charge) shall issue an invoice in respect of goods or services received from an unregistered supplier. -
Rule 46 of the CGST Rules, 2017
→ Specifies mandatory particulars of a tax invoice — such as supplier/recipient details, GSTIN, date, description, value, tax rate, and amount. -
Notification No. 10/2017–Central Tax (Rate) dated 28 June 2017 and related notifications
→ Lists categories of services liable to reverse charge, including director remuneration (non-salary), legal services, GTA services, etc.
When Does Self-Invoicing Become Mandatory? (Trigger / Threshold)
Self-invoicing is not a routine compliance; it is triggered only when:
| Scenario | Supplier Status | RCM Applicability | Self-Invoicing Requirement |
|---|---|---|---|
| Goods or services received from registered supplier | Registered | Forward charge | Not required |
| Goods or services received from unregistered supplier, and such supply is notified under Section 9(3) or 9(4) | Unregistered | Reverse charge applicable | Mandatory |
| Goods or services received from unregistered supplier, but not covered under any RCM notification | Unregistered | Reverse charge not applicable | Not required (since no GST liability arises) |
Key Trigger:
Whenever the recipient becomes liable to pay tax under reverse charge from an unregistered supplier, self-invoicing under Section 31(3)(f) is mandatory, irrespective of transaction value or frequency.
Director Remuneration — Special Consideration
| Nature of Payment | Relationship | GST Applicability | Self-Invoicing Requirement |
|---|---|---|---|
| Director remuneration paid as salary (employment contract, TDS under section 192 of the Income-tax Act) | Employer–employee | Not a supply under Schedule III | Not applicable |
| Director fees or sitting fees, professional or commission payments | No employer–employee relationship | RCM applicable under Notification No. 13/2017–CT (Rate) | Self-invoicing mandatory |
Effective Date:
Reverse charge on director’s remuneration (non-salary component) continues to apply from 1 July 2017 and remains unchanged. The test of employment continues to be based on substance — not designation.
Procedural Guide: Step-by-Step
(a) Generate Self-Invoice
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Issue on the date of receipt of goods/services or on payment, whichever is earlier.
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Must contain recipient’s GSTIN, supplier’s name and address, description, HSN/SAC, value, tax rate, and amount.
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Mention clearly “Self-Invoice issued under Section 31(3)(f) read with Rule 46”.
(b) Payment Voucher
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Issue a separate Payment Voucher at the time of making payment to the unregistered supplier under Rule 52.
(c) Payment of Tax
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Pay GST under reverse charge through electronic cash ledger only (not through ITC).
(d) Reporting in Returns
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Report self-invoiced transactions in GSTR-3B, Table 3.1(d) (inward supplies liable to reverse charge).
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Claim corresponding Input Tax Credit (if eligible) in GSTR-3B, Table 4(A)(3).
(e) Bookkeeping Treatment
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Record the expense (net of GST if credit eligible; gross if credit blocked).
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Record RCM liability in GST payable ledger; clear it upon payment.
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Recognize ITC (if admissible) in Input GST ledger.
Illustrative Example
A private limited company avails professional consultancy services from an unregistered tax consultant for ₹50,000 on 15 October 2025.
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Nature of service: Notified under Section 9(3) (legal/professional services).
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Supplier: Unregistered.
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Recipient: Registered under GST.
Action Required:
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Issue self-invoice for ₹50,000 + GST @18%.
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Pay ₹9,000 (CGST ₹4,500 + SGST ₹4,500) under reverse charge.
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Issue payment voucher while paying the consultant.
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Claim ITC of ₹9,000 if used for taxable business activity.
Accounting and Audit Perspective
| Particular | Accounting Entry (if ITC eligible) |
|---|---|
| On receipt of service | Expense A/c Dr. ₹50,000 Input CGST A/c Dr. ₹4,500 Input SGST A/c Dr. ₹4,500 To GST Payable (RCM) ₹9,000 To Party (Consultant) ₹50,000 |
| On payment of RCM liability | GST Payable A/c Dr. ₹9,000 To Cash/Bank ₹9,000 |
| On claiming ITC | Input GST A/c (CGST/SGST) offset against Output Tax |
If ITC is ineligible (for exempt or personal supplies), charge the GST portion to expense directly; do not capitalize or carry as asset.
Points to Remember – To Avoid Penalties or Defaults
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Self-invoice issuance is not optional once RCM is attracted — missing even a single instance may lead to interest and penalty under Section 122.
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Ensure the supplier is truly unregistered; cross-verify GSTIN status on the GST portal.
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Do not delay tax payment — liability under RCM arises on the date of receipt of goods/services or payment, whichever is earlier.
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Report accurately in returns — unreported RCM liability may block ITC.
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Maintain linkage between expense invoice, payment voucher, and RCM challan for audit trail.
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Director remuneration must be bifurcated — salary portion (Schedule III) and fee portion (RCM). Incorrect classification is a common audit objection.
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ITC eligibility must be tested under Section 16(2) and Rule 36 — no credit for blocked items under Section 17(5).
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Reconciliation between books and GSTR-3B every month to avoid future mismatches in scrutiny or audit.
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Late payment of RCM tax attracts interest under Section 50(1) and potential penalty under Section 122(1)(vii) for non-payment.
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Maintain documentation for five years from annual return filing due date — mandatory under Section 36.
Key Points
Self-invoicing is not merely a procedural step — it is the legal evidence that substantiates a reverse charge transaction.
It ensures traceability, protects ITC entitlement, and shields the taxpayer from allegations of tax evasion or suppression.
Professional Insight:
Treat self-invoicing as part of your internal control checklist, not a compliance burden. Automate wherever possible and document meticulously.
Suggested Template – Self-Invoice under Section 31(3)(f)
Header:
Self-Invoice issued under Section 31(3)(f) read with Rule 46 of the CGST Rules, 2017
| Field | Example Entry |
|---|---|
| Invoice Number | SI/2025-26/015 |
| Date | 15 October 2025 |
| Recipient (Self) | XYZ Pvt. Ltd., GSTIN 07AAXXXXXXX1ZV |
| Supplier (Unregistered) | Mr. Ramesh Kumar, 23, Lajpat Nagar, Delhi |
| Description | Professional consultancy services |
| HSN/SAC | 998312 |
| Value | ₹50,000 |
| CGST @9% | ₹4,500 |
| SGST @9% | ₹4,500 |
| Total GST Payable under RCM | ₹9,000 |
| Declaration | “Tax payable under reverse charge – Section 9(3) of CGST Act.” |
The essence of self-invoicing under GST lies in responsible tax stewardship — acknowledging that compliance integrity is as critical as tax saving. For professionals, it represents not just adherence to law but a shield against future scrutiny.
In short:
When in doubt — self-invoice, pay, document, and reconcile.
When confident — still verify.
