Whether self-Invoice a mandatory document for availing ITC of reverse charge GST or payment challan is sufficient?

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Whether self-Invoice a mandatory document for availing ITC of reverse charge GST or payment challan is sufficient?

Disallowance of ITC during GST audit and assessment is one of the most common feature. The question arises, whether self-Invoice a mandatory document for availing ITC of reverse charge GST or payment challan is sufficient? One may note that in addition to prescribing a tax invoice and debit notes, Sec 16(2)(a) also provides for other taxpaying documents as may be prescribed. Accordingly, Rule 36(1)(b) prescribes documents relevant for availing ITC of reverse charge GST which is a self-invoice issued u/s 31(3)(f), subject to the payment of tax.

Whether the ITC may even be claimed merely on the basis the tax Challans? One may note the following:

As per section 31(3)(f), a registered person liable to pay reverse charge GST is required to issue self-invoice only in respect of goods or services received by him from the unregistered supplier.

Rule 36(1)(b) as laid out above besides prescribing self-invoice as a document, subject the same to payment of tax. Hence, it is imperative that the expression “subject to” as articulated by the courts is assigned its true meaning while reading the said rule.

In order to conclude that Section 31(3)(f) entails issuance of self-invoice only if the supplier is unregistered, below grounds may be relevant:

As per Section 2(94), “registered person” means a person who is registered u/s 25….

Section 25(3) provides that if a persons who are not liable to be registered u/s 22 or 24, may still get them registered voluntarily in which case the provisions of the GST Act shall apply to such person as it applies to a registered person.

The above provision indicates that a person can either be a registered or an unregistered person and not a combination of both at a given point in time.

This position is also drawn from the below FAQ issued by CBIC;

Question:
Can a GTA obtain registration for one vertical (Rail, Cargo, Renting, Warehousing etc.) for which tax needs to be paid while not obtaining registration for another vertical (GTA uRCM) on which there is no tax liability.

Answer:
No, because the business entity is not engaged exclusively in the supply of services liable to tax under reverse charge mechanism.

Hence, the specific provision u/s 31(3)(f) that the recipient shall issue self-invoice only if the supplier is not registered leaves no doubt that there need not be any requirement to issue self-invoice if the supplier is registered but still tax is payable under reverse charge.

As discussed above, R 36(1)(b) besides prescribing for self-invoice, subjects the same to payment of tax.

Below is the exact provision;

“an invoice issued in accordance with the provisions of clause (f) of sub-section (3) of section 31, subject to the payment of tax”

Hon’ble SC in case (1966 2SCR221) held that when a provision is expressly made subject to another provision or condition, the said other provision or condition shall prevail.

The effect of the above as it appears is that the tax paid challan is a mandatory document for availing ITC while making the requirement for issuance of self-invoice as procedural.

Hope the issue & discussion would be relevant for the readers. You may post your comment & opinion hereunder.

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