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e-Invoicing applies to transactions that fall under the ambit of the reverse charge mechanism under GST. This article covers the different types of RCM transactions and e-invoicing applicability on the same.
Under GST, normally, the supplier of goods and services is liable to pay the tax. However, under the reverse charge mechanism, the recipient of goods and services is liable to pay GST instead of the supplier. This could be because the supplier is not a registered person under GST law, or the supplier falls in the category of service providers notified by the government, or any other reason. Hence, the recipient of supplies pays the GST on behalf of the supplier to the government and reports the same in his GST returns.
Reverse charge is applicable in the cases mentioned below:
e-Invoicing was implemented in India in a phased manner from 1st October 2020 for companies having turnover higher than Rs.500 crore in any financial year from FY 2017-18 onwards. Later, it was made applicable to businesses with turnover higher than Rs.100 crore and Rs.50 crores from 1st January 2021 and 1st April 2021, respectively.
Under e-invoicing, a supplier must upload all their B2B invoices on the Invoice Registration Portal (IRP). The IRP authenticates the invoice and issues an Invoice Reference Number (IRN). The supplier carries out this process. But, in the case of reverse charge transactions, the recipient of supplies generates the invoice and reports the same to the government in the GST returns. The invoice will now need to be reported to the IRP first, and from there, the same will get auto-populated in the GST returns.
Now, let’s discuss the applicability of e-invoicing on different types of RCM transactions:
The following are the validations provided by the IRP for reverse charge mechanism: