GST Council in its 37th Council meeting has approved the standard of E-Invoicing. We will understand here the basics of E invoicing.
If an invoice is generated by a software on the computer or Point of Sales (PoS) machine then does it become an e-invoice? Is e-invoice as a system where taxpayers can generate the invoices centrally? Many such questions are raised when e-invoice gets discussed.
E-invoice does not mean generation of invoices from a central portal of tax department, as any such centralization will bring unnecessary restriction on the way trade is conducted. In fact, taxpayers have different requirements and expectation, which can’t be met from one software generating e-invoices from a portal for the whole country. Invoice generated by each software may look more or less same, however, they can’t be understood by another computer system even though business users understand them fully. For example, an Invoice generated by SAP system cannot be read by a machine which is using ‘Tally’ system. Likewise there are hundreds of accounting/billing software which generate invoices but they all use their own formats to store information electronically and data on such invoices can’t be understood by the GST System if reported in their respective formats. Hence a need was felt to standardize the format in which electronic data of an Invoice will be shared with others to ensure there is interoperability of the data. The adoption of standards will in no way impact the way user would see the physical (printed) invoice or electronic (ex pdf version) invoice. All these software would adopt the new e-Invoice standard wherein they would re-align their data access and retrieval in the standard format.
However, users of the software would not find any change since they would continue to see the physical or electronic (PDF/Excel) output of the invoices in the same manner as it existed before incorporation of e-Invoice standard in the software. Thus the taxpayer would continue to use his accounting system/ERP or excel based tools or any such tool for creating the electronic invoice as s/he is using today.
To help small taxpayers adopt e-invoice system, GSTN has empaneled eight accounting & billing software which provide basic accounting and billing system free of cost to small taxpayers. Those small taxpayers who do not have accounting software today, can use one of the empaneled software products, which come in both flavors, online (cloud based) as well as offline (installed on the computer system of the user).
In short, E-Invoice is mechanism only specify invoice schema and standard for each data exchange among all accounting/billing software and all businesses.
E-invoice format issued by GSTN have some mandatory fields and some non-mandatory fields
E-way Bill will also be created through E-Invoicing data only vehicles details needs to be updated.
Here once invoice which will be uploaded by supplier on GST system for authentication will be further shared with corresponding buyer on his mail id mentioned on e-invoice, hence buyer can do reconciliation with his purchase order and accept/reject on real time under New Return.
System level matching will be done for input credit and output tax.
E-Invoicing will be the responsibility of the taxpayer who will be required to report the same to Invoice Registration Portal (IRP) for authentication, which in turn will generate a unique reference number (IRN) and digital sign the e-invoice and also generate a QR code and will return the invoice to the seller. IRP will also send the digital signed e-invoice to the recipient of the document on the e-mail provided in the e-invoice.
Step-1: Seller will create his invoice in his accounting or billing system.
Supplier’s software would generate a JSON against each B2B invoice that will be further uploaded onthe IRP Portal. IRP (Invoice Registration Portal) will only take the JSON of the e-invoice.
Step-2: In next step is to generate Invoice Reference Number (IRN)
Step-3: is to upload JSON of the e-invoice into the IRP by the seller. JSON may be uploaded directly on the IRP or through GSP’s or through any other third party.
Step-4: IRP will generate the Hash or validate the hash of the uploaded JSON, if uploaded by the supplier. Upon authenticate the same with central registry of GST System IRP will add its signature on the invoice data and as well as QR code to the JSON.
Hash computed by the IRP will become the IRN (Invoice Reference Number) of the E-Invoice.
It shall be unique to each invoice and hence be the unique identity for each invoice for the entire financial year in the entire GST System for a taxpayer.
Step-5: it involves sharing of uploaded data with GST and E-Way bill system
Step-6: Here IRP will return the digitally signed JSON with IRN back to the seller along with a QR code. The Registered invoice will also be sent to the seller and buyer on their mail ids as mentioned in the invoice.
E-Invoice cannot be partially cancelled; it has to be fully cancelled.
E-Invoice mechanism have an option to cancel the invoice within 24 hours of registration of IRP. Any cancellation after 24 hours could not be possible through IRN, taxpayer have to manually cancel the same on GST Portal before filing the return.
E-Invoice mechanism expected to be rollout in phases from 1 Jan 2020 on voluntary basis. It will be mandated in phased manner.