Section 9(4) of CGST Act says that: -
"The central tax in respect of the supply of taxable goods or services or both by a supplier, who is not registered, to a registered person, shall be paid by such person on reverse charge basis as the recipient and all the provisions of this Act shall apply to such recipient as if he is the person liable for paying the tax in relation to the supply of such goods or services or both".
The above law states that all the registered people who are purchasing goods and services from an unregistered person have to pay the taxes on a reverse charge basis and all the provisions of the act shall apply to this registered person as if the person is liable to pay the taxes.
Further section 31(f) of CGST Act states that: -
"a registered person who is liable to pay tax under sub-section (3) or sub-section (4) of section 9 shall issue an invoice in respect of goods or services or both received by him from the supplier who is not registered on the date of receipt of goods or services or both".
Therefore, all the registered persons who is covered under section 9(4) of the CGST Act, shall issue invoices if they are paying taxes on a reverse charge basis. They will be giving invoices to themselves that is why it is called self-invoicing.
Further, in CGST Rules 2017, rule 46 talks about tax invoice wherein the proviso it is clearly mentioned that all the registered person who is covered under section 9(4) of CGST Act, i.e. all registered person paying taxes under reverse charge shall issue a consolidated invoice at the end of every month, where the aggregate value of such supplies exceeds Rs 5000 in a day from any all suppliers. So, if the aggregate value of supplies does not exceed Rupees 5000, such supplies will be exempt from tax.
In addition to the above, all the taxes that are payable on reverse charge shall be paid through cash, we cannot use input tax credit for the payment of such taxes. After the payment, we can use them as input credit for payment of our liabilities.
What to show in GSTR Returns?
GSTR 1- Give serial numbers of Invoice issued under the Table of Documents Issued. No other details required to be given related to self-invoicing.
GSTR 3B- We have to show liability under reverse charge in Table 3.1 Taxes on outward and reverse charge inward supplies and input tax credit under reverse charge in Table 4 Eligible ITC.