GST and Reverse Charge Invoices: What Must Be on the Page

Indian GST and EU reverse charge look like separate worlds, but they fail the same way: get the customer's location wrong and your client loses their tax credit. Here is what each system needs on the invoice itself.

Two systems, one recurring mistake

A freelancer in Pune bills a client in Bengaluru and splits the tax into CGST and SGST. The same freelancer bills a client in Mumbai and has to issue IGST instead. A designer in Berlin bills a client in Dublin and charges no VAT at all — but only if a specific sentence appears on the invoice, and only if they checked a database first.

These look like different problems. They are the same one: in both systems, where your customer is determines how the tax works, and the invoice has to prove you got it right. Get the split wrong and your customer cannot claim the credit. That is the moment the invoice comes back.

India: CGST + SGST, or IGST — never both

GST is one tax collected in two ways, and the deciding factor is the place of supply against your own registration.

• Intra-state — supplier and place of supply in the same state. The rate splits into equal halves: an 18% supply becomes 9% CGST plus 9% SGST.
• Inter-state — different states. The whole rate goes on one line as IGST, so 18% stays 18% IGST.

The customer pays the same total either way. What changes is which government receives it, which is why the split has to be right rather than merely arithmetically plausible. Showing CGST and SGST on a supply that was actually inter-state does not just look wrong — it files the tax to the wrong place.

This is also why place of supply is a mandatory field rather than a nicety. It is the evidence for the split you chose.

The sixteen fields

Rule 46 of the CGST Rules lists the content a tax invoice must carry. The ones most often missed in practice:

1. The heading must read "Tax Invoice". Not "Invoice", not "Bill". The wording is prescribed.
2. A unique serial number, maximum sixteen characters. Long descriptive references break this limit surprisingly easily.
3. Your GSTIN, and the customer's GSTIN for B2B. Without the recipient's GSTIN the supply cannot be matched in their GSTR-2B, and their input tax credit fails.
4. HSN or SAC code on every line. Goods take an HSN code, services a SAC.
5. Place of supply, which drives the CGST/SGST versus IGST decision.
6. A signature or digital signature.

An invoice missing a mandatory field is legally deficient, and the practical consequence lands on your customer: they lose the credit, so they ask you to reissue.

Numbering resets, and the e-invoicing line

Two operational rules catch people out.

The document series restarts each financial year. From 1 April, invoice, credit note and debit note numbering begins a fresh sequential series. Carrying last year's sequence forward creates reconciliation problems in GSTR-1. Where a business holds several GSTINs, the reset applies to each registration separately, not once at PAN level.

E-invoicing applies above ₹5 crore aggregate annual turnover. That threshold has been in force since August 2023 under Notification 10/2023-Central Tax, and it is tested at PAN level across every GSTIN, in any financial year since 2017-18. Cross it once and e-invoicing applies permanently, even if turnover later falls back. Above ₹10 crore there is a further trap: invoices must reach the Invoice Registration Portal within thirty days of the document date, and after that window the IRP rejects them outright — which means the buyer's credit is gone.

Below ₹5 crore, e-invoicing is optional and an ordinary invoice is fine.

GST rates were rationalised in September 2025. Check the current rate for your specific HSN or SAC rather than relying on a figure you memorised.

EU: reverse charge is 0% VAT, not "no VAT"

When you supply services to a VAT-registered business in another EU member state, the place of supply generally moves to the customer's country under Article 44 of the VAT Directive, and Article 196 shifts the obligation to account for the VAT onto them. You charge nothing. They declare the VAT in their own return and reclaim it in the same breath, so a fully registered business bears no net cost.

The distinction that matters for the document: this is a supply taxed at zero, not a supply outside the tax. Show the VAT line explicitly at 0.00. Deleting the line entirely is a frequent reason invoices get bounced back, because the customer's accounts payable system cannot tell whether you meant zero or forgot.

The sentence, and the check

Article 226(11a) of the Directive requires the words reverse charge to appear. Citing Article 196 alongside is not strictly mandated but is near-universal practice and gives a cleaner audit trail. A safe form is: reverse charge — VAT to be accounted for by the recipient under Article 196 of Council Directive 2006/112/EC.

This wording is not decorative. The Court of Justice of the European Union held in Case C-247/21 that omitting the reverse-charge mention cannot simply be repaired afterwards by asserting that liability had transferred. Put it on the invoice at the time.

Before you apply reverse charge at all, validate the customer's VAT number on VIES, the European Commission's verification system, and keep dated evidence that you did. Article 196 only applies where the customer is a taxable person registered in another member state. If the number is invalid, the supply is not an intra-EU B2B supply — it may be treated as domestic, leaving you liable for VAT you never charged, with interest. That is a backdated bill for someone else's paperwork error, which is why the one-minute check is worth doing every time.

Two boundaries are worth knowing. Reverse charge under Article 196 covers services; shipping physical goods to a business in another member state is an intra-community supply under Article 138 — a similar zero-VAT outcome, but a different legal basis with its own reporting. And reverse charge is B2B only: a private individual with no VAT number is a B2C sale, and you charge VAT normally.

Issuing a reverse-charge invoice does not end your obligations either. EU-established suppliers still report these supplies in a recapitulative statement.

Doing it on the invoice

Our invoice generator handles both. Choose GST (India) and pick intra-state to split each rate into equal CGST and SGST halves, or inter-state for a single IGST line; the compliance panel then checks for your GSTIN, place of supply, an HSN or SAC on every line, the "Tax Invoice" heading and the sixteen-character number limit. Choose reverse charge and the VAT is set to zero, shown explicitly as a zero line rather than removed, with the Article 196 wording added automatically.

For the arithmetic on its own, the VAT calculator adds or strips VAT at any rate, and the sales tax calculator covers the US destination-based equivalent — a useful contrast, since American sales tax follows the buyer's address but has no credit mechanism at all.

General information for planning, not tax advice. GST rules and EU VAT treatment change regularly and depend on your specific supply — confirm with a qualified accountant or the relevant tax authority.