The government recently made a major change to GST rules. Following this new rule, any purchase you make will require an e-invoice. Let's explore who will be affected.
Changes in GST rules will benefit businesses.
The government has made significant changes to GST rules, potentially benefiting businesses. In fact, the GST Network (GSTN) recently announced the addition of two new categories to the e-invoice system. Under this, companies will be required to generate their own e-invoices for certain types of purchases and services obtained from abroad. This rule will apply to select transactions covered under the Reverse Charge Mechanism (RCM).
This change aims to ensure accurate reporting of GST transactions and reduce the potential for tax evasion. This system was recommended at the 57th meeting of the GST Council.
What are the two new categories of e-invoices?
According to the GSTN's advisory of October 16, two new categories will be added to the e-invoice system. The first category will be RCM-DOM, meaning confirmed purchases made from unregistered suppliers within the country, subject to GST under reverse charge. The second category will be RCM-IMP, meaning services obtained abroad, subject to GST under reverse charge.
Through these categories, eligible businesses will be able to submit their self-invoices on the authorized Invoice Registration Portal (IRP) and obtain an Invoice Reference Number (IRN).
What is RCM?
The supplier of a product or service collects GST and remits it to the government. However, in certain transactions, this responsibility falls on the buyer or service recipient. This system is called the reverse charge mechanism, or RCM.
For example, if a company receives a service from abroad that is subject to RCM, it may be responsible for paying GST on that service. In such cases, the business may also be required to issue a self-invoice, depending on the regulations.
Who will be affected?
This feature is available to registered businesses with a total annual turnover of ₹5 crore or more. However, its actual scope will depend on the requirements set out in the relevant laws and government notifications. GSTN has not yet announced the final date for implementing this new system. Currently, businesses can test it on authorized e-invoice portals.
