Background
E-Invoicing is not a new concept if we talk about other countries in the world, though proposed to be implemented in India for the first time. Hence, it can be said to be a new concept in context of Indian tax administration.
Basic idea of introducing e-invoicing is to have a standard to ensure complete inter-operability of invoices across entire eco-system of GST so that invoice generated by one software can be read by any other software whereby need of fresh data entry at every stage is eliminated. Further, it is also expected to bring down the compliance burden by ensuring auto-population of details required to be furnished through GST returns filing.
Through this note, an attempt has been made to understand the basics of e-invoicing, applicability, exemptions, advantages, its salient features and other issues involved therein.
Legal Provisions
In terms of R. 48(4) of CGST Rules, invoice shall be prepared by notified classes of registered persons by including such particulars contained in Form INV-01 after obtaining Invoice Registration Number (‘IRN’) by uploading information contained therein on the common portal. R. 48(5) provides that invoice not generated in accordance with R. 48(4) shall not be treated as an invoice for GST purposes.
In terms of Notification No. 13/2020-CT dated March 21, 2020, Government has notified the registered person whose aggregate turnover in a financial year exceed INR 100 Crores, as a class of registered person who shall be required to prepare invoice in terms of R. 48(4) for supply of goods or services or both made to registered persons. As e-invoicing is to be implemented in a phased manner, such requirements shall, for the time being, apply to B2B transactions only. Further, in terms of Notification No. 61/2020-CT dated July 30, 2020, the turnover limit for determining requirements of e-invoicing has been increased from INR 100 to 500 Crores.
Voluntary implementation, not allowed
Taxpayers having aggregate turnover less than the specified limit cannot opt for e-invoicing voluntarily as, basis the turnover details supplied in GSTR 3B filed for the period July 2017 and onwards, only those registered persons, who satisfy the turnover criteria, have been enabled to register themselves on Invoice Registration Portal (‘IRP’)
Aggregate turnover for e-invoicing
Aggregate turnover for the purposes of determination of applicability of e-invoicing shall mean the ‘aggregate turnover’ as defined in S. 2(6) of CGST Act. In terms of the said section, “aggregate turnover” means the aggregate value of all taxable supplies (excluding the value of inward supplies on which tax is payable by a person on reverse charge basis), exempt supplies, exports of goods or services or both and inter-State supplies of persons having the same Permanent Account Number, to be computed on all India basis but excludes central tax, State tax, Union territory tax, integrated tax and cess.
Persons exempt from e-invoicing
In terms of Notification No. 13/2020-CT dated March 21, 2020, following persons have been exempted from complying requirements of e-invoicing;
1. An insurer, banking company of financial institution including NBFC
2. Goods transport agency (‘GTA’)
3. Supplier providing passenger transport services
4. Person supplying services by way of admission to exhibition of cinematograph films in multiplex screens
5. Special economic zone (‘SEZ’) unit (SEZ unit developer not covered here)
It is important to mention here that the exemption given above is qua business and not qua taxpayer. Hence, if a taxpayer is engaged into two business one of which is not exempted from e-invoicing provisions and one is exempted, such taxpayer shall be required to comply with e-invoicing provisions in respect of business not eligible for exemption.
Special procedure for e-invoicing during the period October 01, 2020 to October 31, 2020
In terms of Notification No. 73/2020-CT dated October 01, 2020, special procedure has been prescribed wherein taxpayer, in respect of invoices raised during the period October 01, 2020 to October 31, 2020, shall obtain Invoice Reference Number (‘IRN’) by uploading prescribed particulars in Form GST INV-01 on the portal within 30 days from the date of such invoice, failing which such invoice shall not be treated as a valid invoice.
Relevant FAQ’s in respect of e-invoicing
| S. No. | Question | Answer |
| 1 | Which financial year’s aggregate turnover is to be considered for applicability of e-invoicing provisions | In case a taxpayer had aggregate turnover for more than INR 500 Crores in any financial year since the introduction of GST, he is mandated to report e-invoice to IRP. |
| 2 | What if aggregate turnover decreases from INR 500 Crores | Once registered for e-invoicing, taxpayer has to generate e-invoice irrespective of turnover levels |
| 3 | Effective date of implementation | October 01, 2020, subject to special procedure as prescribed for the period October 01, 2020 to October 31, 2020 |
| 4 | Which all supplies are covered | B2B supplies, supplies to SEZ (with or without payment of tax), exports (with or without payment of tax), Deemed exports |
| 5 | Documents covered | Invoice, debit notes, credit notes and invoice including revised invoice issued for export transactions |
| 6 | Validation in respect of debit notes or credit notes with reference to original invoice number | No such linkage or validation required in terms of amendments made in CGST laws |
| 7 | Applicability in respect of Business to Government (‘B2G’) transactions | Yes, if registered (even for TDS purposes only) under GST |
| 8 | Applicability in respect of import transactions | Not applicable for import transactions |
| 9 | Applicability in respect of ISD invoice | Not applicable |
| 10 | Applicability in respect of transaction covered under RCM | In case supplier is required to comply with e-invoicing provisions, IRN shall be generated, else not |
| 11 | Applicability in case of SEZ developers | SEZ units are exempted from e-invoicing provisions. SEZ developers have not been exempted, hence they shall be required to generate e-invoice |
| 12 | Who can generate e-invoice | E-invoice can be generated only by suppliers. Recipient and transporters cannot generate e-invoice |
| 13 | Meaning of e-invoicing | E-invoicing here does not mean generating invoice from the portal. It shall only involve registration, on specified portal, of invoice already generated so that such invoice has prescribed IRN along with QR code. |
| 14 | How is e-invoicing different from present system of invoicing | There is not much difference. Invoices shall be required to be generated in conventional manner. Now additionally, such invoices shall be required to be registered on IRP by which an IRN shall be generated by the IRP along with a QE code. An invoice with IRN shall only be treated as a valid invoice. |
| 15 | Portal to be used for e-invoicing | Vide Notification No. 69/2020-CT dated 13.12.2019, 10 common GST portal for e-invoicing, in terms of R 48(4), have been prescribed |
| 16 | Requirements of IRN in case of B2C supplies made by person notified to be covered e-invoicing provisions | Reporting of B2C invoices by the notified suppliers is not required |
| 17 | Are Free Trade Warehousing Zones (‘FTWZ’) are exempt from e-invoicing | Yes. As per Foreign Trade Policy (‘FTP’), FTWZ units are only a special category of SEZ units with a focus on trading and warehousing. Hence, they are also to be treated at par for the purposes of e-invoicing provisions |
| 18 | Applicability of e-invoicing when supplies are made by notified persons to SEZ’s | Supplies made by notified suppliers to SEZ are covered under e-invoicing provisions, as the exemption is to SEZ units when they are supplying |
| 19 | Requirements of signature of supplier on invoice while reporting it to IRP | Not required |
| 20 | Can e-commerce operators generate e-invoice on behalf of their seller on their platform | Yes, if such suppliers, selling through e-Commerce entity are otherwise notified persons and are supposed to report invoices under Rule 48(4). |
| 21 | Will IRP store invoices generated through it | No. It is just a pass through portal which will perform prescribed validations and generate IRN. It will not store any e-invoice data |
| 22 | File format in which invoice data is to be reported to IRP | Invoice details in prescribed schema (INV-01) shall be reported to IRP in Java Script Object Notation (‘JSON’) format |
| 23 | Maximum number of line items that can be reported in the invoice | The limit has been kept at 1000 line items. However the same shall be increased depending upon the requirements |
| 24 | Is invoice number same as IRN generated by IRP | No. Invoice number is assigned by the supplier and is internal to the business. IRN on the other hand is a unique reference number (hash) generated by IRP and returned on successful generation of e-invoice |
| 25 | How is a typical IRN looks like | IRN is a 64-character unique hash which shall look like; 35054cc24d97033afc24f49ec444 4dbab81f542c555f9d30359dc75794e06bbe |
| 26 | On reporting invoice details, what will be returned by IRP? Will it return signed JSON or PDF or both? | IRP will return only the signed JSON. No PDF will be returned. PDF can be generated by the business, if needed. The same can accordingly be printed also |
| 27 | Requirements of printing of IRN on invoice | No such requirements. IRN is embedded into the QR code to be printed on invoice |
| 28 | Would multiple copies of invoice are to be issued in case of e-invoicing | No. there is no need to issue multiple copies of invoice in triplicate or duplicate, as provided in R. 48(6) |
| 29 | What all data is embedded in QR code | GSTIN of both recipient and supplier, Invoice number as assigned by the supplier, date of generation of invoice, invoice value (taxable and gross), number of line items, HSN of main item, IRN, IRN generation date |
| 30 | Possibility of having multiple QR codes on invoice | Yes. Apart from the QR code relating to IRN, the supplier is free to place any other QR Code which is required as per business needs or otherwise mandated by any other statutory requirement. In such cases, the QR Codes need to be marked clearly so that they can be distinguished easily. |
| 31 | Would IRP send or email the e-invoice to the customer | No, IRP will not send the invoice to recipient. It is the supplier who shall send the invoice to the recipient |
| 32 | Possibility of amendments in an invoice for which IRN has already been generated | Amendments are not possible on IRP. Any changes in the invoice details reported to IRP can be carried out on GST portal (while filing GSTR-1). In case GSTR1 has already been filed, then using the mechanism of amendment as provided under GST. Changes will be flagged to the proper officer for information |
| 33 | Can IRN be cancelled | Yes, It can be cancelled within 24 hours. Where e-way bill connected to the invoice has been verified by the officer during transit, cancellation is not permitted |
| 34 | Can cancelled e-invoice number be reused again | No. Once an IRN is cancelled, the concerned invoice number cannot be used again to generate another e-invoice/IRN. In case, it is used again then the same will be rejected by IRP when it is uploaded on IRP. |
| 35 | Possibility of partial cancellation of invoice | Not possible. Invoice has to be cancelled in toto. |
| 36 | Requirements of e-way bill post introduction of e-invoicing | E-way bill requirements shall follow even after e-invoicing has been done. |
| 37 | Auto-population of invoice data once pushed to IRP | GSTR-1 of the supplier and GSTR-2A of the recipient shall be auto-populated with IRN and IRN date |
Benefits of e-invoicing
E-invoicing would entail following benefits;
1. Elimination of repeated reporting of invoice data on portal
2. Minimization of invoice mismatches during reconciliations
3. Inter-operability amongst different software
4. Real time tracking of invoices prepared by the suppliers
5. Automated return filing process including updates in Part A of EWB-1
6. Easy and precise claims of ITC
7. Lesser possibility of audit, surveys etc. by tax authorities as all the information is available with them
8. Identification of revenue leakages
Conclusion
Introduction of e-invoicing mechanism is expected to help taxpayers by reducing compliance burden on them by eliminating duplication of efforts, reconciliations, accurate ITC claims etc. On the other hand, it will also help tax authorities in identifying revenue leakages (if any), invoice tracking and to regulate the trade and business from the legal compliance perspective. Further also, in the present day scenario where there are voluminous transactions undertaken on daily basis, it is practically impossible for one to handle this manually. Hence, system of e-invoicing should definitely bring a great amount of stability and ease of doing compliance, considering the number of stringent compliances a business has to do in today’s scenario.
However, the success of the system shall depend upon a robust technology which should ensure no gaps and hick ups in operations as in today’s world invoicing is the most important and vital part of the organizational process without which one cannot expect the business to run smoothly. Any issues in the system of e-invoicing shall send the whole business for a walk with associated huge losses and cost of recoveries.
Disclaimer : The details shared herein are based on the information as is available in public domain as on the date of this publication and is for reader’s guidance and information purposes only. Although care has been taken in compiling and checking the information contained herein, however, we make no representations or warranty of any kind, express or implied, regarding the accuracy, adequacy, validity, reliability or completeness of any information. It is further advised that the information above should not be treated as legal advice and should not be acted upon in business scenarios. An appropriate legal/professional advice should be taken prior to acting upon the above while undertaking business transactions.
Author Bio
FAQ No. 1 and 2 are totally incorrect after N/N. 70/2020 – CT.