What is a self-billing invoice?

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A self-billing invoice is an agreement between a registered supplier and a registered customer. A customer prepares an invoice and sends the copy to the supplier along with the payment. This arrangement is more common in an industry where customers usually determine the final value of goods delivered to them.

Who can issue a self-billing invoice?

Normally, a supplier issues an invoice to the buyer. But, in the case of a self-billed invoice, customers issue an invoice as the supplier cannot ascertain the value of supply. A self-billed invoice can be issued only after receiving Director General’s approval. The reference number of the same shall be mentioned on the self-billed invoice itself.

Self-billing invoices under GST

Issuance of a self-billing invoice under GST brings additional responsibilities on the part of the supplier and the customer to ensure that the conditions of self-billing are satisfied. The issuance of a self-billing invoice by a recipient to himself is subject to the below conditions:

  1. The supplier is unable to determine the value of supply at the time of making the supply.
  2. Both the supplier and the customer are registered under GST or any other supplier approved by the Director-General.
  3. There should be an agreement in writing between the supplier and the customer regarding the issuance of a self-billing invoice.

Contents of a self-billing invoice

Below are the contents of a self-billing invoice:

  1. Mention the words ‘Self-billed invoice’ at a prominent place on the invoice.
  2. The date of issue of invoice and invoice serial number.
  3. The name, address and GSTIN of both the supplier and the customer.
  4. The description of the goods, quantity, rate, HSN code, tax rate, discount, if any and taxable value.
  5. The amount payable excluding tax, the tax charged, and the amount payable including tax should be shown separately.

Contents of written agreement to issue self-billing invoices

A written agreement to issue self-billing invoices shall contain the following information:

  1. Name,  address and GSTIN of the supplier and the customer.
  2. The customer agrees to issue a self-billing invoice for all the supplies received from a particular supplier for a specific period as mentioned in the agreement or a period of 12 months.
  3. The supplier agrees to accept the self-billed invoices for supplies as mentioned in the agreement.
  4. The supplier agrees not to issue a GST tax invoice for supplies covered under the agreement.
  5. The supplier and the customer agree to notify each other if any one of them ceases to be registered under GST or transfers his business as a going concern to another party.

Benefits of self-billing invoice

A self-billing invoice is beneficial for both the customer as well as supplier. Below are some of the benefits of issuing a self-billing invoice:

  1. Increases efficiency: A self-billing invoice reduces the supplier’s responsibilities as the customer prepares an invoice that reduces the compliance burden and improves efficiency.
  2. Faster payments: Under a self-billing invoice, a customer usually makes the payment along with the invoice. Thus, suppliers receive faster payments. 
  3. Increases accountability: One of the biggest benefits of self-invoicing is that the customer can manage the invoices independently. They can even alert the supplier about the invoice and speed up the transactional process.
  4. Streamlined work: As the customer is issuing an invoice, he will incorporate all the necessary details for the supplier’s reference and its convenience.

How to mitigate errors in self-billing invoices?

A self-billing invoice has numerous benefits. However, there are certain hurdles as well, which can be avoided if both the supplier and the customer take the necessary steps to avoid errors:

  1. Maintain transparency by way of effective communication between the customer and the supplier.
  2. Cross-check the details mentioned in the self-billing invoice.
  3. Recheck if proper GST rates are applied.
  4. Recheck whether all compliances for issuing a self-billing invoice are met.
  5. Give attention to the audit trail and keep all documents ready for any inspection or scrutiny.