Section 31 of the CGST Act and Rule 46
Tax invoices are the heart of the GST structure as they maintain the transparency and compliance of the transaction. The legal requirement regarding the issuance of a tax invoice is prescribed under Section 31 of the CGST Act, 2017, whereas the prescribed format and details that are to be incorporated in an invoice encompassed Rule 46 of the CGST Rules, 2017. This will help the businesses understand inter-linkages of provisions.
Section 31 of the CGST Act, 2017
Section 31 mandates that a registered supplier must issue a tax invoice before or at the time of removal of goods (in cases where movement is involved) or before or at the time of delivery (if no movement is required). For services, the invoice must be issued before or after service delivery but within the prescribed period. The government may specify different categories of goods and services requiring invoicing under specific conditions.
Key provisions under Section 31:
- Tax Invoice for Goods: Must be issued before or at the time of supply, depending on movement.
- Tax Invoice for Services: Can be issued before or after service delivery within a specified timeframe.
- Revised Invoices: Registered persons can issue revised invoices for supplies made before obtaining GST registration.
- Exemptions for Small Transactions: No invoice is required for supplies below ₹200 unless requested by the recipient.
- Receipt & Refund Vouchers: If advance payments are received, a receipt voucher must be issued; in case of non-supply, a refund voucher must be issued.
- Reverse Charge Transactions: Recipients must issue invoices and payment vouchers when purchasing from unregistered suppliers.
- Continuous Supply: Special invoicing rules apply for goods/services supplied on a recurring basis.
-Goods Sent on Approval: If goods are sent for sale on an approval basis, an invoice must be issued within six months or at the time of actual supply.
Rule 46 of the CGST Rules, 2017
Rule 46 prescribes the format and particulars required in a tax invoice. It ensures standardization across businesses, promoting uniformity and reducing discrepancies.
Mandatory Details in a Tax Invoice
- Supplier Information: Name, address, GSTIN.
- Invoice Number: Unique serial number (up to 16 characters, alphanumeric or special characters allowed).
- Invoice Date: Date of issue.
- Recipient Details: Name, address, GSTIN (if registered) or Unique Identity Number (if applicable).
- Unregistered Recipient Details: For transactions above ₹50,000, recipient’s name, address, state, and code are required.
- HSN Code & Description: Harmonized System of Nomenclature (HSN) code for goods/services, with detailed descriptions.
- Quantity & Unit: Must specify unit of measurement.
- Value & Tax Details: Total and taxable value, applicable tax rates, and tax amounts (CGST, SGST, IGST, UTGST, cess).
- Place of Supply: Essential for interstate transactions.
- Reverse Charge Indicator: Must specify if tax is payable under reverse charge.
- Signature/Digital Signature: Required from the supplier or an authorized representative.
- QR Code & Invoice Reference Number (IRN): Mandatory if e-invoicing is applicable under Rule 48(4).
Relation Between Section 31 and Rule 46
or say Interplay between Section 31 and Rule 46 is given as under.
Section 31 establishes the legal requirement for issuing invoices, whereas Rule 46 specifies the format and necessary details to be included in a tax invoice. Rule 46 ensures that all tax invoices comply with the provisions set in Section 31, ensuring uniformity across transactions.
For example, even though section 31 specifies that an invoice should be raised for a taxable supply, Rule 46 would provide for essential information like HSN codes, tax amounts, and details of the supply on the invoice. Non-compliance with such conditions could lead to penal action under the GST regime..
Changes & Amendments in Rule 46
- QR Code Requirement (Amendment in 2020): Businesses with an aggregate turnover exceeding a specified limit (currently Rs. 5 crores) must include a QR code containing an Invoice Reference Number (IRN).
- E-invoicing Mandate (Implemented in Phases): Initially applicable to businesses with a turnover of Rs. 500 crores (October 1, 2020), later extended to Rs. 100 crores (January 1, 2021), Rs. 50 crores (April 1, 2021), and eventually Rs. 10 crores (October 1, 2022).
- HSN Code Digit Requirement: The government has specified the minimum number of HSN digits required based on turnover categories.
- Online Service Transactions (2022 Amendment): Invoices for online gaming, e-commerce, and database access services must contain recipient state details for tax compliance.
- Declaration Requirement (Latest Amendment): Businesses not required to issue e-invoices under Rule 48(4) must now include a declaration stating the same.
Practical Scenarios & Examples
Scenario 1: Sale of Goods with Movement
ABC Traders, a registered supplier in Delhi, sells electronics worth ₹1,00,000 to a retailer in Mumbai. Since the goods require transportation, ABC Traders must issue an invoice before dispatch, mentioning IGST, HSN codes, and the place of supply (Maharashtra).
Scenario 2: Service Invoice Issuance
XYZ Consultants provides IT services to a client in Bangalore on March 10, 2024. As per Section 31, an invoice can be issued before or after service completion, but within 30 days. XYZ Consultants issues the invoice on March 15, ensuring compliance.
Scenario 3: Reverse Charge Mechanism
A company in Kolkata purchases legal services from an unregistered lawyer. Since legal services fall under reverse charge, the recipient company must issue an invoice and a payment voucher, per Section 31 and Rule 46 requirements.
Scenario 4: Continuous Supply of Services
A cloud storage provider bills customers monthly. As per Section 31, invoices must be issued on or before each due date. Rule 46 ensures that these invoices carry all mandatory details, including applicable GST.
Scenario 5: E-invoicing Compliance
A manufacturer with a turnover exceeding ₹10 crores must generate invoices via the Invoice Registration Portal (IRP) as per Rule 48(4). Each invoice must contain a QR code with an embedded IRN for compliance.
Conclusion
Section 31 of the CGST Act and Rule 46 of the CGST Rules jointly provide a standardized framework for invoicing tax in India. Whereas Section 31 prescribes legal requirements for an invoice, Rule 46 further standardizes the content and provides completeness in invoice content. Companies need to remain updated with such amendments like e-invoicing and QR code requirements to ensure compliance and avoid penalties. By following these provisions, businesses can maintain smooth GST compliance, ensuring accuracy and transparency in their transactions.