GST

E-Invoicing in GST

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E-Invoicing or electronic invoicing is a system in which B2B invoices are authenticated electronically by GSTN for further use on the common GST portal. E-invoicing facilitates exchange of the invoice document (structured invoice data) between a supplier and a buyer in an integrated electronic format. ‘E -invoice’ in ‘e-invoicing’ doesn’t mean generation of invoice by a Government portal.

Need/Benefits for E-invoicing:

  • To ensure that the invoices generated by accounting software are valid to be used for processes like e-way bill creation and GST return filing.
  • Ensures Digitization, Standardization, Interoperability and Paperless mode in invoice communication.
  • Eliminates data re-entry and reconciliation errors
  • Faster availability of input tax credit
  • Improves payment cycles
  • Reduces processing costs
  • Reduces disputes among transacting parties
  • GST reporting compliance will be part of natural business system
  • Improves overall business efficiency
  • Lesser frequency of audit/surveys by the tax authorities since the information they require is available at a transaction level
  • Facilitates business-friendly e-initiatives such as invoice financing
  • Mitigates invoice fraud
  • Global imperative

Applicability:

  • E-Invoicing has been made applicable from 1st October 2020 to all businesses whose aggregate turnover has exceeded ₹500 crores limit in any of the preceding financial years from 2017-18 to 2019-20.
  • From 1st January 2021, E-Invoicing will be applicable to businesses exceeding the ₹100 crores turnover limit in any of the financial years between 2017-18 to 2019-20
  • Exceptions include Special Economic Zones (SEZ) units, insurance, banking, financial institutions, NBFCs, GTA, passenger transportation service and sale of movie tickets.

Salient Features:

  • Taxpayers will continue to create their GST invoice on their own accounting/billing/ERP system
  •  E-invoice, as prepared, will be reported to Invoice Registration Portals (IRP)
  •  Multiple Invoice Registration Portals (IRP) will be established to ensure uninterrupted availability. To start with, NIC will be the first Registrar. Based on experience, more registrars will be added.
  • IRP will generate a unique Invoice Reference Number (IRN), digitally sign it and return the e-invoice.
  • IRP will also generate a QR code containing the unique IRN along with below key particulars:
  1. GSTIN of supplier
  2. GSTIN of recipient
  3. Invoice number as given by supplier
  4. Date of generation of invoice
  5. Invoice value (taxable value and gross tax)
  6. Number of line items.
  7. HSN Code of main item (the line item having highest taxable value)
  8. Unique Invoice Reference Number (hash)
  •  QR code will enable Offline verification of invoices using Mobile App

Schema/Format:

  • E-invoice schema is notified as ‘INV-1’
  • ‘Schema’ simply means a structured template or format
  • ‘E-invoice’ schema is the standard format for electronic invoice
  • Invoice details in prescribed schema to be reported to IRP in JSON format (JavaScript Object Notation)
  • ‘JSON’ can be thought of as a common language for systems/machines to communicate between each other and exchange data

Documents to be reported:

  1. B2B Invoices
  2. B2G Invoices
  3. RCM invoices
  4. Export Invoices
  5. Credit Notes
  6. Debit Notes
  7. QR Codes for B2C Invoices (Not in function currently)

Difference from Current practice of invoicing:

  • Invoices have to follow the prescribed schema and contain the mandatory parameters.
  • Invoice Reference Number generated through hash generation algorithm must be used under e-invoicing system. The objective is to allow easy comparison of e-invoices through unique IRN validated on the Central Registry and stored for future reference.
  • Validated e-invoices are sent to the supplier to their registered e-mail ID.
  • Validated invoices will be digitally signed by the IRP.
  • Validated invoices will also contain QR code generated by IRP. This will enable verification of invoices even when internet facility is not available. It is mandatory for B2C transactions to have QR code.
  • E-invoice is only available for 24 hours with the IRP during which time the invoice can be fully cancelled. After that, the invoice can be amended as per GST laws on the GST portal.
  • Necessary invoice details can be made available on an app that can scan the QR code. Further, e-invoices are sent as an e-mail ID so the supplier can always save a copy under the e-invoicing system.
  • Easy to verify the genuineness by scanning QR code and also checking of IRN
  • Lower possibility of a search by the department since invoice details at the transaction level is already available with them.

Mandatory fields of an e-invoice:

  • E-invoice comprises of 12 fields and 6 annexures consisting of total 138 fields.
  • Out of the 12 Sections – 5 are Mandatory and 7 are Optional. Two annexures are mandatory.
  • The 5 Mandatory sections are basic details, supplier information, recipient information, invoice item details, document total. The two mandatory annexures are details of the items and document total.

API in E-Invoicing:

  • API (Application Programming Interface) is a software intermediary which allows two applications to interact with each other. 
  • With regard to the e-invoicing system, APIs facilitate the communication and exchange of data between taxpayers or GSPs (GST Suvidha Providers), and the e-invoice system.
  • The e-invoice system uses RESTful web services to provide various taxpayer functionalities such as filing of returns, registration, viewing ledgers, making online payments, etc.
  • API helps in generating an e-invoice. The process for the same is as follows:
    • A taxpayer needs to enter the details of their invoice into their accounting system.
    • The data is then sent through the API to the Invoice Registration Portal (IRP). The invoice gets registered under the IRP, an IRN gets generated, and the invoice is sent back to the taxpayer along with the digitally signed e-invoice and QR Code. 
    • The taxpayer’s system prepares the invoice for print, which contains the IRN and the QR Code embedded in it.
  • There are several benefits of API described as below:
  • It provides a smooth integration between the ERP / accounting system of the taxpayer and the e-invoice system.
  • As the outward supply invoices are first entered in the ERP of the taxpayer and then passed on to the e-invoice system, APIs will avoid the duplicate or double entry of an invoice/IRN.
  • APIs help in eliminating data entry errors in the e-invoices.

E-invoice flow:

  • Seller uploads the e-invoice and receives the digitally signed JSON of e-invoice that contains the QR code.
  • Invoice registration portal (IRP) signs the invoice, sends the invoice to the GST system, adds a QR to the JSON and sends back the JSON to buyer.
  • The GST system updates the outward and inward supplies for buyer and seller.
  • Buyer can view the ITC related to the invoice in his GSTR – 2A .

Frequently asked questions:

  • What businesses need to do, to be e-invoice ready?
    Businesses will continue to issue invoices as they are doing now. Necessary changes on account of e-invoicing requirement (i.e. to enable reporting of invoices to IRP and obtain IRN), will be made by ERP/Accounting and Billing Software providers in their respective software. They need to get the updated version having this facility.
  • Is E-invoice mandatory for B2C transactions?
    B2C invoices are exempt from e-invoicing, but a taxpayer is still required to generate QR code for all B2C invoices
  • Is e-invoicing applicable for NIL-rated or wholly-exempt supplies?
    No. In those cases, a bill of supply is issued and not a tax invoice.
  • Whether the financial/commercial credit notes also need to be reported to IRP?
    No, only the credit and debit notes issued under Section 34 of CGST/SGST Act have to be reported.
  • Whether e-invoicing is applicable for supplies by notified persons to Government Departments?
    E-invoicing by notified persons is mandated for supply of goods or services or both to a registered person. Thus, where the government department doesn’t have any registration under GST (i.e. not a ‘registered person’), e-invoicing doesn’t arise. However, where the government department is having a GSTIN (as entity supplying goods/services/ deducting TDS), the same has to be mentioned as recipient GSTIN in the e-invoice.
  • What is the applicability of e-invoice for import transactions?
    E-invoicing is not applicable for import bills of entry.
  • Do SEZ Developers need to issue e-invoices?
    Yes, if they have the specified turnover and fulfilling other conditions of the notification. In terms of Notification (Central Tax) 61/2020 dt. 30-7-2020, only SEZ Units are exempted from issuing e-invoices.

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