Self-Invoice Under Reverse Charge: A Practical RCM Guide

Self-invoice reverse charge rules: when registered buyers must issue self-invoices for purchases from unregistered or foreign vendors.

What Triggers a Self-Invoice

Section 31(3)(f) of the CGST Act requires a registered buyer to issue a self-invoice when they procure taxable goods or services from an unregistered supplier and the supply falls under reverse charge. This commonly happens with goods transport agency services, legal services from advocates, security services, and director sitting fees. The buyer effectively plays both roles — supplier on paper and recipient in reality — and pays GST directly to the government instead of routing it through the vendor. Without a self-invoice, the buyer cannot claim ITC on the RCM tax paid.

Foreign Vendors and Import of Services

When an Indian business pays a foreign vendor for services like AWS hosting, Google Ads, Zoom subscriptions, or freelance designers abroad, IGST under RCM applies regardless of the foreign supplier's tax status. The Indian buyer must raise a self-invoice on the date of payment or invoice receipt, whichever is earlier, and discharge IGST at 18% (typically). This is treated as an import of service under Section 2(11) of the IGST Act, even if no physical goods cross the border. Many SaaS-heavy startups miss this and accumulate years of RCM liability with interest.

Mandatory Fields and Payment Voucher

A self-invoice must include the supplier's name and address (even if they're unregistered), your GSTIN as the buyer-issuer, a unique serial number, HSN/SAC, taxable value, tax breakup, and the words "tax payable on reverse charge basis." Alongside the self-invoice, Rule 46 also requires a separate payment voucher under Section 31(3)(g) when you actually pay the vendor. Treating these as two distinct documents avoids confusion during audits.

Reporting and ITC Claim

RCM liability is reported in Table 3.1(d) of GSTR-3B in the month the self-invoice is issued, and the corresponding ITC is claimed in Table 4(A)(3) of the same return. Cash payment of RCM tax is mandatory — you cannot offset it against existing ITC balance. The ITC claim is restricted by Section 16(4), so delays in self-invoicing can permanently kill your credit. Maintaining a monthly RCM register helps reconcile against tally and bank statements.

Automating RCM in BillBabu

BillBabu offers a dedicated "RCM purchase" entry type where you tag the vendor as unregistered or foreign and the system auto-generates a compliant self-invoice with the required declaration. The corresponding payment voucher is linked to the bank or cash entry, and the RCM liability flows into the GSTR-3B summary report. This keeps small businesses audit-ready without needing a separate accountant for every freelancer payment.

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Built for Indian small businesses. BillBabu is GST-compliant billing software that helps you create invoices, manage estimates, track payments and stay audit-ready — from your phone. Learn more about BillBabu or download the app.