GST E-Invoicing

‘E-invoicing’ is a measure vide which the invoices will be validated electronically through GSTN for further use on the common GST portal. It is a measure to bridge the gap in data reconciliation to reduce mismatch errors. However, it should be noted that this process is only an authentication measure and not an invoice generation measure.

The Government vide Notification No. 70/2019 – Central Tax dated 13^th Dec 2019 notified registered person having aggregate turnover in a financial year exceeding Rs. 100 Crore, as class of registered person who shall prepare invoice in terms of sub-rule (4) of rule 48 of the said CGST Rules, 2017 (hereinafter “the said Rules”) i.r.o supply of goods or services or both to a registered person.

Vide Notification No 68/2019 – Central Tax dated 13^th Dec 2019, the Central Government inserted sub-rule (4) to Rule 48 of the said Rules, which read as under:

“(4) The invoice shall be prepared by such class of registered persons as may be notified by the Government, on the recommendations of the Council, by including such particulars contained in FORM GST INV-01 after obtaining an Invoice Reference Number by uploading information contained therein on the Common Goods and Services Tax Electronic Portal in such manner and subject to such conditions and restrictions as may be specified in the notification.”

A. Background of E-Invoicing System under GST

The concept of E-INVOICING was first discussed in 35th GST Council Meeting held on 21^st June 2019. The Council decided to introduce electronic invoicing system in a phase-wise manner for B2B transactions to help taxpayers in backward integration and automation of tax relevant processes and to help tax authorities in combating the menace of tax evasion. The Phase 1 was proposed to be voluntary and be rolled out from Jan 2020.

As a progress, the GST Council in its 37th GST Council Meeting held on 20th September 2019, approved the standard of e-invoice. Further, a detailed note explaining what e-invoice is and how will it work along with the e-invoice schema and template, as approved by the GST Council was also released.

At present, there are many accounting software which generate invoices by using their pe-defined formats which could not be understood by the GST System, if reported in their respective formats. Therefore, again the entry was required to be made for reporting details to GST system as part of filing of GST Returns. Adoption of a standard will ensure interoperability of the data.

B. Important terms related E-Invoicing System under GST

1. Invoice Registration Portal (IRP)

The central government vide Notification No. 69/2019- Central Tax, dated 12th Dec 2019, has notified ten sites as CGST Electronic Portal which shall act as IRP. Ten sites serially numbered are from 1 to 10, starting from www.einvoice1.gst.gov.in to  www.einvoice10.gst.gov.in , operational from 1st day of January, 2020.

2. Invoice reference Number (IRN)

This code will be generated by GST Electronic portal by filing the information contained therein by taxpayer. IRN will be based on combination of hash code of GSTIN, Year and Document number and will be unique to the taxpayer.

3. Quick reference code (QR CODE)

The IRP will also generate a QR code containing the unique IRN (hash) along with some important parameters of invoice and digital signature so that it can be verified on the central portals.

C. The Structure of E-Invoicing System under GST

The e-invoicing system majorly consists of two segments:

(a) Invoice Generation

(b) Invoice Reporting

1. Generating the Invoice

The taxpayer shall use his/her accounting software and generate the invoice in a standard format. It can be any software utility that generates invoices like SAP, TALLY, Excel utility etc. The only important point to keep in mind is that the invoice must have all the mandatory parameters as per the standard format. The same has been provided on the GST common Portal and can be accessed through the following link (https://www.gstn.org/e-invoice/).

However, there are certain voluntary parameters also which will vary from industry to industry.

2. Reporting of e- invoice to a central system

Once the invoice is generated, the same shall be converted into JSON format and reported on the Invoice Registration portal (IRP) of GST. The IRP of GST will check from Central Registry to ensure that same invoice from same supplier for same financial year is not being uploaded again. It will compute hash code (an alpha numeric number) based on the supplier’s GST number, Invoice number and Financial Year. The hash code will become the Invoice Reference Number (IRN). The hash code will be unique to each invoice for the entire financial year. Each such code will be saved in a central registry of GST system ensuring same invoice from the same supplier pertaining to same financial year is not being uploaded again. On receipt of confirmation, IRP will generate this hash code, digitally sign the invoice and generate a QR Code. The QR code will contain viral parameters of the invoice i.e., GSTN of seller, Invoice No., Invoice date, Number of line items, HSN No. etc.

This process will capture the invoice feed and as such the invoice data will then be used by GST system for generation of e-way bill (Part 1), updating ANX-1 of the seller and ANX-2 of the buyer.

D. Other Salient Features Of E-Invoice under GST

• Signature: The e-invoice will be digitally signed by the IRP after it has been validated. Once it is registered, it will not be required to be signed by anyone else.
• Company LOGO: The Company’s Logo on the invoice will not be sent to IRP. It will not be part of JSON file to be uploaded on the IRP. However, Accounting software company can provide LOGO in the accounting software so that it can be printed on invoice using the printer.
• QR Code: Once the seller uploads the invoice into the Invoice Registration Portal and the same is registered there, the QR code shall be made available to the seller. He may at his option print the same on the tax invoice. It is to be noted here QR Code on B2C Invoice is mandatory for registered person, whose aggregate turnover in a financial year exceeds Rs. 500 cr, w.e.f 1st April 2020. (Ref: Notification No. 72/2019 – Central Tax dated 13 December, 2019)
• Invoice without IRN:Invoice will be valid only if it has IRN.
• Printing of e-invoice: It will be possible for both the seller as well as the buyer to print the invoice, using the QR code as well as signed e-invoice returned by the IRP.
• Cancellation of e-invoices: The e-invoice mechanism enables invoices to be cancelled but the same shall be compulsorily reported to IRN within 24 hours of cancellation. Any cancellation after 24hrs will not be possible on IRN. However, one can manually cancel the same on GSTN portal before filing the returns. Also, it must be noted that e-invoice cannot be cancelled partially.
• E-invoices for Exports:The e-invoice schema also caters to the export invoices as well. The e-invoice schema is based on most common standard, this will help buyer’s system to read the e-invoice.

E. Benefits Of Implementation Of E-Invoicing System under GST

• One time reporting of B2B invoice data by the supplier to generate GSTR-1 and E-way bill by providing only vehicle details
• Substantial reduction in input credit verification issues as same data will get reported to tax department as well to buyer.
• It will facilitate automatic preparation of GST Returns (ANX 1 and ANX 2) under new Return System.
• Complete trail of B2B invoices will be available, as there will be system level matching of B2B Invoices.
• Invoices uploaded by suppliers for authentication will be automatically shared with buyers for reconciliation.
• The system will auto-match input credit liability with output tax. This will eliminate the use of Fake Invoices for claiming ITC. E-Invoice can be created for Debit/Credit Notes, and other eligible documents.
• E-invoice can be created for Debit/Credit Notes, Invoices and other eligible documents.

Disclaimer: The views, expressions, opinion is solely an interpretation of the author and does not assures of the correctness of interpretation. The author reserves the right not to be responsible for the topicality, correctness, completeness or quality of the information provided above in this article.