In its 37th meeting, the GST Council proposed the introduction of electronic invoicing or e-invoicing. After consulting with various trade/industry bodies including FICCI, ASSOCHAM, etc. as well as the ICAI, a standard for e-invoice has been finalized. This will ensure the interoperability of e-invoices across the entire GST ecosystem which means e-invoices generated by one software can be read by any other software, eliminating the manual entry of data. Apart from bringing efficiency into business processes, e-invoicing is expected to reduce the compliance burden for taxpayers.
Presently, taxpayers have to separately report invoice data for GST return and e-way bill as both have different formats. This has a lot of drawbacks such as errors during manual processing, excessive paper use, and generation of fake invoices by fraudsters. Hence, an e-invoicing standard was the need of the moment to reduce manual data entry and ensure interoperability between buyers’ and suppliers’ billing/accounting system.
What is an e-invoice under GST?
Contrary to the prevalent myth, the e-invoicing system does not mean taxpayers need to generate invoices from a central portal. In reality, e-invoicing refers to the system in which all B2B invoices are electronically uploaded and validated by a designated portal. Thereafter, an identification number will be issued by the Invoice Registration Portal (IRP) which will be managed by the GST Network (GSTN).
What are the benefits of e-invoicing system for taxpayers?
The main advantage of e-invoicing is that the data generated by the IRP can further be used by the common portal and e-way bill portal, ensuring transparency and proof. The data from accounting software or ERP will seamlessly be transferred to the e-invoice system, which prevents the duplicity or double entry of an invoice. There will be a significant reduction in input credit verification issues which will lead to faster and accurate credit availability to the recipient.
What businesses are required to generate an e-invoice?
GST Council in the 39th meeting held on 14th March 2020 at New Delhi Starting dates for implementation of e-invoicing and QR Code to be extended to 01.10.2020, the e-invoicing system in GST will be made mandatory for all taxpayers. However, to help businesses to easily adapt to the new system of electronic invoicing, the government has approved the introduction of e-invoicing in a phased manner. Businesses having an annual aggregate turnover of over ₹500 crores can generate e-invoices voluntarily from 7th January 2020 through APIs. Whereas those with the turnover of over ₹100 crores but less than ₹500 crores can starting generating e-invoices from 1st February 2020.
Note: Certain class of registered persons (insurance company, banking company, financial institution, non-banking financial institution, GTA, passenger transportation service, etc.) to be exempted from issuing e-invoices or capturing dynamic QR code;
How to generate an e-invoice?
For taxpayers, the generation of e-invoices will become part of their business process. They will be required to report the e-invoice to the IRP, which will then generate a unique Invoice Reference Number (IRN) and digitally sign the e-invoice and also generate a QR code. The QR (Quick Response) code will contain vital parameters of the e-invoice and return the same to the taxpayer who generated the document in the first place.
- First, a supplier will create an invoice in the prescribed format (e-invoice schema) using the accounting software that can generate invoices in such format. Then, the JSON file of the invoice will need to be uploaded to the IRP.
- Next, the IRP will generate a unique IRN, while also digitally signing the e-invoice and generating a QR code. Once the invoice is uploaded to the IRP, it computes a hash (an alpha-numeric number) based on the supplier’s GSTIN, invoice number and the financial year. The hash then becomes the IRN which is unique to each invoice for the entire fiscal. Only an e-invoice signed by the IRP is considered valid under the GST laws. A QR code is also generated by the IRP containing vital details such as GSTIN of supplier and buyer, invoice number and invoice date, and the line number of items.
- Finally, the IRP will send the e-invoice data with a digital signature and QR code to the buyer and supplier on their email address, if provided on the invoice. Also, the IRP will share the uploaded invoice data with the common GST portal and e-way bill system.
After receiving the e-invoice data, the GST system validates and makes the data available in ANX-1 (annexure of outward supplies) for the supplier and ANX-2 (annexure of inward supplies) for the buyer. It will also calculate tax liability and input tax credit (ITC). Meanwhile, the e-way bill system uses the received data to create Part-A of the e-way bill. Only, the vehicle number will be required to be filled in Part-B on the e-way bill.
The introduction of e-invoicing will not change the way a taxpayer interacts with his/her ERP/Accounting Software. Moreover, all the changes will need to be made by the software provider in software to facilitate the reporting at Invoice Reporting Portal. E-invoicing system will bring accuracy, promote automation, eliminate paper use, improve capital management, and improve supplier/buyer relationship.
Note: E-Invoice – Invoice Registration Portal
- CGST Notification 69/2019 notifies an e-invoicing portal that will accept e-invoices, verify the invoice and generate a unique Invoice Reference Number. The list of websites of this e-invoice portal are:
- www.einvoice1.gst.gov.in
- www.einvoice2.gst.gov.in
- www.einvoice3.gst.gov.in
- www.einvoice4.gst.gov.in
- www.einvoice5.gst.gov.in
- www.einvoice6.gst.gov.in
- www.einvoice7.gst.gov.in
- www.einvoice8.gst.gov.in
- www.einvoice9.gst.gov.in
- www.einvoice10.gst.gov.in
This portal is also called Invoice Registration Portal (IRP). The first IRP authorized by the Government of India is the National Informatics Centre (NIC).
Author Mr Kapil Rana is Chairman and founder of HostBooks Limited
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