‘E-Invoicing’ or ‘electronic invoicing’ is a system in which Business to Business (B2B) invoices are authenticated electronically by the GST portal for further use on the common GST portal. E-invoicing helps to convert the invoice document between a supplier and a buyer into an integrated electronic format known as structured invoice data. It does not mean that the invoice is generated by the GST portal, but the invoice is approved and authenticated by the government in a particular electronic format and a unique authentication number is generated for the same.
Benefits of E-invoicing
E-invoicing helps to ensure that the invoices generated by different accounting software are standardised and uniform. Which in turn helps in filing valid GST returns and e-way bill generation.
It also encourages a paperless mode of communication under GST which will reduce clerical errors and eliminate data re-entry and reconciliation.
Due to the faster availability of input tax credit, it reduces disputes among transacting parties and improves payment cycles.
Frauds related to bogus invoices shall be reduced and lesser audits or surveys by the external authorities will be required as the information is available to the government at a transaction level.
As the invoices are auto-generated through software APIs, processing costs will be reduced in the long run, and this is a step towards automated compliances which will improve overall business efficiency
Business-friendly e-initiatives such as invoice financing can grow further as the authenticity of the transaction and the parties are confirmed by the GST portal.
Applicability of E-Invoicing
For all businesses whose turnover has exceeded ₹500 crores in any of the financial years between 2017-18 to 2019-20, E-Invoicing has been made mandatory for them from 1st October 2020.
For all businesses whose turnover has exceeded ₹100 crores in any of the financial years between 2017-18 to 2019-20, E-Invoicing has been made mandatory for them from 1st January 2021.
Following businesses are not required to follow E-Invoicing: Special Economic Zones (SEZs), Insurance, Banking, Financial Institutions, NBFCs, Goods Transport Agency (GTA), Passenger Transportation Service and Sale of Movie tickets.
How E-Invoicing works
Multiple Invoice Registration Portals (IRP) will be created to ensure uninterrupted availability. NIC will be the first Registrar and more registrars will be added based on requirements. Taxpayers will continue to prepare their GST invoices on their own accounting software or ERP systems. Invoice, as prepared, will be reported to Invoice Registration Portals (IRP) electronically through APIs in a predefined schema or format. IRP will generate a unique Invoice Reference Number (IRN) and QR code containing the IRN. It will digitally sign and send the e-invoice along with below key particulars:
- GSTIN of supplier & recipient
- Invoice number as provided by supplier
- Date of generation of invoice
- Invoice Amount (taxable value and gross tax)
- Number of line item.
- HSN Code of the line item having highest taxable value main,
- Unique Invoice Reference Number (IRN/Hash)
- QR code which will enable offline verification of invoices using Mobile App
Exchange of Data in E-Invoice
E-invoice is served to the GST portal in a certain electronic format which is known as schema. This schema is notified under ‘INV-1’. Schema simply means a structured template or format. It is a standard format for electronic invoices where invoice details are reported to IRP in JSON form through an API. JSON is a common format for communication between computer systems for exchanging data. API (Application Programming Interface) is a software intermediary which helps two applications to interact with each other. API helps in generating an e-invoice on GST Portal by facilitating the communication and exchange of data between taxpayers, GSPs (GST Suvidha Providers), and the E-Invoice system.
After the Invoice details are entered in the accounting systems of the Seller, it is sent through an API to the Invoice Registration Portal (IRP). The invoice gets registered under the IRP and an IRN is generated. The invoice is sent back to the Seller along with IRN, the digitally signed e-invoice and QR Code. The Seller’s system then prepares the invoice for print, which contains the unique IRN and a QR Code. The GST system updates the outward and inward supplies for the buyer and seller. The buyer can view the ITC related to the invoice in his GSTR-2A & 2B.
APIs provide a smooth integration between the ERP / accounting system of the taxpayer and the e-invoice system. APIs help in eliminating data entry and clerical errors in the e-invoices. As the outward supply invoices are first entered in the accounting software of the taxpayer and then passed on to the e-invoice system, APIs will avoid duplicate or double entry of an Invoice.
The e-invoice system also uses various REST API services to provide taxpayer functionalities such as filing of returns, registration, viewing ledgers, making online payments, etc.
Mandatory fields of an E-Invoice
E-invoice consists of 12 Sections out of which, 5 are Mandatory and 7 are Optional. The 5 Mandatory sections are Basic details, Supplier information, Recipient information, Invoice item details, Document total.
It also consists of 6 annexures out of which 2 annexures are mandatory. The 2 Mandatory annexures are details of the Items and Document total.
An E-Invoice consists of a total of 138 fields.
Documents covered under E-Invoicing
- B2B Invoices (Business to Business)
- B2G Invoices (Business to Government)
- RCM Invoices (Reverse Charge Invoices)
- Export Invoices
- Credit Notes
- Debit Notes
B2C invoices are not yet covered under E-Invoicing, but they are required to have a QR code.
Frequently asked questions
What do businesses need to do, to be E-invoice ready?
Businesses can continue to issue invoices as they have been doing. Changes due to E-invoicing for reporting invoices to IRP and obtaining IRN will be made by Accounting and Billing Software providers. Taxpayers need to get the updated version having this facility.
Is E-invoice mandatory for B2C transactions?
B2C invoices are not required to do E-invoicing, but the seller is still required to generate a QR code for all B2C invoices
Is E-invoicing applicable for NIL-rated or wholly exempt supplies?
In those cases, a bill of supply is issued and not a Tax invoice, so E-Invoicing is not applicable in those cases.
What is the applicability of E-invoice for import transactions?
E-invoicing is not applicable for import transactions involving bills of entry.
Whether Financial or Commercial credit notes have to be reported to IRP?
No, only the credit and debit notes issued for trading activities under Section 34 of the CGST/SGST Act have to be reported.