Currently, businesses generate invoices through various softwares and the details of these invoices are manually uploaded in the GSTR-1 return. The invoice information is thereafter reflected in GSTR-2A for the recipients for viewing only. On the other hand, the consignor or transporters generate e-way bill again by importing the invoices in excel or JSON manually.
Considering the above, the GST Council in its council meeting, had decided to implement a system of e-invoicing, which will be applicable to specified categories of persons.
E-invoicing or electronic invoicing is a system to generate an electronic document containing transaction information between a buyer and a seller. The Invoice Registration Portal (IRP) gives an identification number to these electronic invoices. The Invoice Reference Number (IRN) generated by IRP will be used to transfer all the invoice information to the GST portal and the e-way bill portal.
The GST e-invoicing system will be implemented from October 2020 for those taxpayers whose turnover is Rs 500 crore or more. Earlier, it was planned to implement e-invoicing for businesses with turnover of Rs 100 crore or more in a year.
Benefits from implementing the system of GST E-Invoicing
- Today, a transaction is done without any proof of exchange between the buyer & seller. With e-invoicing, the moment an invoice is made, it will be uploaded to GSTN portal where pre-validation will be done and a unique number called IRN will be issued. Once IRN is issued, the tax invoice will be shared with the recipient also.
- With the real time tracking of invoices by the vendors and the government, it will result in a reduction of frauds and fake GST invoices.
- The system will boost the automation of GST return filing process. E-invoicing can bring ease, speed and accuracy to the return filing process.
- Since the input credit can be matched with output tax details, it becomes easier for GSTN to track fake tax credit claims.
- Updating GST Returns also saves lot of time, human errors for data entry and also avoids major reconciliation issues.
Procedure for generation of E-Invoice under GST:
- Businesses must generate the e-invoices in the standard format (JSON) prescribed by the GST Network.
- After the generation, the invoice (JSON format) will be updated on the Invoice Registration Portal (IRP) either directly or through third party provided apps.
- The IRP will assign an IRN to the invoice and digitally sign it.
- Following this, the IRP will generate a QR code containing the important information of the invoice.
- Finally, the e-invoice will be emailed to the seller and the recipient of the document.
What is QR Code:
QR code will enable quick view, validation and access of the invoices from the GST system. It will be generated by IRP after uploading JSON of invoices. The QR code will consist of the following e-invoice parameters:
- GSTIN of supplier
- GSTIN of Recipient
- Invoice number as given by Supplier
- Date of generation of invoice
- Invoice value (taxable value and gross tax)
- Number of line items.
- HSN Code of main item (the line item having highest taxable value)
- Unique Invoice Reference Number.
How will e-invoicing mechanism gets merged with the GST Return System?
The invoices will get auto-populated on the relevant GST return once they are signed and verified by the invoice registration system. Once document verification is done, the invoices will get directed to the recipient of supply for re-confirmation. The prime objective of the law is to auto-populate the taxpayer’s invoice details to his GST returns and reduce the chances of errors while reconciliation.
Other Important Points:
- E-invoice generated is not required to be signed again once it is digitally signed by the IRP after validation.
- Default currency of E-invoice will be INR.
- E-invoice can be printed. It is valid only if it has IRN.
- IRN shall be generated against a single invoice at a time and cannot be bulk generated.
- A maximum of 100 line items can be incorporated in each e-invoice
- The e-invoice mechanism enables invoices to be cancelled. This will have to be reported within 24 hours, else it cannot be cancelled. However, one can manually cancel the same on GST portal before filing the returns.
- E-invoice will not replace E-way bill. For transportation of goods, the e-way bill will continue to be mandatory.
Challenges to be addressed:
- The key issues that companies are struggling with is that, firstly, the government has not run a comprehensive pilot programme to smooth out the recurring issues.
- The e-invoice structure is creating numerous issues for some taxpayers because they have to change the templates they use and, in some cases, the way they do business.
- Cancelling or amending invoices under the e-invoicing system is also another pain point for many companies.
- Another important factor that all businesses need to consider is how they are going to electronically store their invoices and whether the government is prepared from an IT side to handle e-invoicing.
In case of any queries, suggestions, the author can be reached at [email protected]