GST E-invoicing- a new era of reform

1^st October, 2020 was a crucial date for businesses to implement a major reform in the field of e-invoicing across the country. In recent times the Union of India is going through various structural reforms in the field of taxation and compliances like E-waybill in GST, Faceless Assessment scheme in Income Tax, Inter departmental data exchange etc which clearly shows that the future of taxation and compliance system will be technology driven. Therefore, the need of maintaining stringent compliance is very much needed and it is the for the betterment of the economy also.

E-invoicing is one of the ways of structural reforms implemented by the Central Government. However, the method of implementation and various last moment changes in the midnight of 30^th September could be avoided. From 1^st October, 2020 e-invoicing becomes mandatory for taxpayers having a turnover of Rs. 500 crore or more. Initially the CBIC vide Notification No. 70/2019-Central Tax dated 13^th December, 2019 [ superseded by Notification No. 13/2020-Central Tax dated 21.03.2020] has notified that the registered persons whose aggregate turnover is more than Rs. 100 crores in a financial year shall be liable for issuing e-invoice. However, the said limit of Rs. 100 crores have been enhanced to Rs. 500 Crore by notification No. 61/2020-Central Tax dated 30^th July,2020. Therefore, any registered person whose Turnover in financial year does not cross Rs. 500 crores threshold is not liable for e-invoicing. However, it is not mentioned Turnover in which financial year to be considered. It may happen that the turnover was more than Rs. 500 crores in the financial year 2016-17 but it got reduced in financial year 2019-20 to below Rs. 500 Crores. This was the confusion in the mind of most of business houses as well as the consultants and as a logical approach most of them has considered turnover in preceding financial year. However, in last moment notification on 30^th September 2020 came to public domain in the afternoon, CBIC has amended the phrase “in a financial year” to “any preceding financial year from 2017-18 onwards”. This leads to numerous tax payers under trouble because they were not at all prepared for e-invoicing. This clarification can very well be published in advance so that all tax payers could assess their liability to issue e-invoice.

Now let us understand, what is e-invoice and how that is to be generated. At first, we all thought that e-invoice is a system when all the invoices need to be issued from the GST portal itself. However, that proves wrong when NIC , the first Invoice Registration Portal (IRP) has released the FAQ wherein it was clearly mentioned that the e-invoice system is never going to store any invoice in the portal and invoices need to be generated from the existing accounting/erp system of the taxpayers. As per the notifications issued by the CBIC, every B2B invoices issued by notified taxpayers shall contain the Invoice Reference Number (IRN) and QR Code containing certain specific information about the invoice. QR Code is for departmental ease to track the movement of the goods and verify the details mentioned in the invoice when the goods is in transit. In case of B2C invoice the government has notified that Dynamic QR code shall be generated. However, again by a last moment notification on 30^th September, 2020 generation of QR Code in respect of B2C invoices has been deferred till 1^st December, 2020[ Notification 71/2020-Central Tax dated 30.09.2020].

So, presently one need to generate IRN and QR Code only in respect of B2B Invoices. Apart from B2B invoices all B2B Debit Notes/ Credit Notes or Supplementary invoices shall also contain IRN and QR Code. All export invoices shall also contain the IRN & QR Codes. Therefore, following documents are covered for e-invoicing:

1. B2B Invoices

2. B2B Debit Notes/ Credit Notes/Supplementary Invoices

3. Export Invoices [whether it is export of goods or export of service]

Following are not covered for e-invoicing at present:

1. B2C Invoices [ Deferred till 1^st December, 2020]

2. Bill of Supplies for Exempt/Non GST Supplies

3. Unregistered Debit Notes/Credit Notes

4. Self Invoices for Reverse Charge Mechanism

There are various tools provided by NIC for generation of IRN & QR Code in the invoices including a Bulk IRN generation tool. The user will first generate the invoice/debit or credit notes at the erp/invoicing software. The erp/invoicing software shall fetch the invoice to the Invoice Registration Portal (IRP) maintained by the National Informatics Centre. The IRP will check certain validations from the GSTN system like GSTIN of the supplier and receiver, certain mandatory fields of the invoice and after validations return an Invoice Reference No. [ a 64 character alphanumeric code] and a QR Code on the invoice and the invoice shall be digitally signed by GSTN. The IRP portal shall store the invoice details for 24 hours after which the same shall be updated at the GSTR-1 of the supplier and GSTR 2A of the Buyer. Cancellation of any invoice/debit or credit notes is permissible within 24 hours. The e-invoice i.e invoice with IRN and QR Code shall then be send by the supplier. The e-invoice shall either be digitally or manually signed by the supplier as per requirement of Rule 46 of the CGST Rules, 2017.

For the first month of implementation, the CBIC has provided 30 days time from the Invoice Date within which IRN & QR Code shall be generated by the supplier. However, when the movement of goods is in question, this relaxation shall not provide much peace in the mind of the Tax Payers. Further, it has been clarified by the CBIC that no such relaxation would be available for invoice dated 1^st November or thereafter.

Implication of Non-Compliance to the e-invoice provisions

Non-compliance would result to imposition of penalty under Section 122 of the CGST Act 2017 upon the supplier. Further, as per Rule 48(4) of the CGST Rules the document without IRN/QR code is not treated as an invoice for GST purposes. The first and foremost criteria for availing Input Tax Credit (ITC) as per section 16 of the CGST Act, 2017 is to possess a Valid Tax Invoice. Therefore, if the supplier is non-compliant to the e-invoicing provisions, then the buyer also gets affected because his Input Tax Credit shall be disallowed due to non-possession of valid tax invoice. Therefore, every taxpayer availing Input Tax Credit shall know whether its vendors are required to comply with the provisions of e-invoicing and if so, then whether they are issuing invoices with IRN and QR Code.

On the supplier side, it is very relevant to have a correct Customer Master with proper GSTIN of Customer and Address because once an Invoice got generated with IRN and QR code it shall only be cancelled within 24 hours and not thereafter. However, amendment option shall be open thereafter but that will be through filing of GSTR-1 in the subsequent month.

Some unresolved issues related to GST E-Invoice for which amendments/clarifications still needed from CBIC

1. Rule 53 of the CGST Rules, 2017 is dealing with information necessary to contain in the Debit Notes and Credit Notes. Once CBIC is stating that all B2B Credit Notes and Debit Notes shall contain IRN and QR code, however, Rule 53 is not yet amended to incorporate the same thereby creating an unwanted confusion in the mind of taxpayers. Therefore this rule shall be amended at the earliest.

2. As a very welcome move, CBIC has provided 30days time for the first month of implementation of the e-invoicing system to generate IRN and QR Code for invoice dated October, 2020. However, the last date of filing GSTR-1 of October, 2020 is 11^th November, 2020. Therefore, if the supplier registers the invoice after filing of GSTR-1 then whether the same shall be reported in the GSTR-1 of October,2020 or of November, 2020 that need clarification from the Board.

3. It may happen that due to non-availability of GSTIN one invoice is generated as a B2C invoice and so, no IRN & QR Code is generated on the same. Later on the party informs that the invoice shall be B2B and not B2C and accordingly informs his GSTIN. In pre e-invoicing system we used to amend B2C data in the GSTR-1 and upload the invoice under B2B invoices. But presently, all B2B invoices without IRN & QR Code shall be treated as an invoice and so, eligibility of credit will be an issue on the buyers end. CBIC has not given any clarity in this regard how to rectify this type of errors.

Conclusion

The Objective of implementing e-invoice is to curve out the GST frauds happened in last 3years in respect of availment of Input Tax Credit. Further, other important intension is to make all the invoices across the country a standardized format. As per the recent press conference of GSTN CEO, e-invoice shall be implemented in a phased manner in all the industries and the threshold of Rs. 500 crores shall be withdrawn or minimized in a phased manner. May be down the line within 2 -3 years the e-invoicing system will be settled down in our country and people will become habituated to the system of generating the same.