What is an e-invoice in GST?
E-invoicing is a system in which B2B invoices are electronically authenticated by the GST Network (GSTN) for use on the common GST portal. With this system, every invoice will be assigned a unique identification number by the Invoice Registration Portal (IRP), which the GSTN will manage.
Once the invoice is authenticated, a unique Invoice Reference Number (IRN) is generated for each invoice by the IRP (Invoice Registration Portal). Along with the IRN, each invoice is digitally signed and added with a QR code. It is also known as e-invoicing under GST.
Let’s Explore the Reasons Behind the Adoption of e-Invoicing.
E-invoicing helps to bridge a significant gap in data reconciliation under GST, which results in fewer mismatch errors. With e-invoicing, invoices created on one software can be easily read and understood by another, improving interoperability and reducing data entry errors. Additionally, e-invoicing enables real-time tracking of invoices prepared by suppliers, further streamlining the invoicing process.
The Advantages of e-invoicing
E-invoicing is an electronic method of creating and sharing invoices between businesses. It offers several benefits over traditional paper-based invoicing methods. Some of the critical advantages of e-invoicing include the following:
- One-time reporting of B2B invoices at the time of generation, which reduces the need for multiple-format reporting
- GST returns can be prepared under the new GST system using the data from e-invoices.
- E-way bills can also be generated using e-invoice data.
- Minimal need for data reconciliation between the books and GST returns filed.
- Supplier invoices are tracked in real time, and input taxes credits are made more readily available, leading to fewer verification issues with input tax credits.
- Automation of the tax-filing process
- Reduction in fraud as the tax authorities will also have access to data in real time.
- Elimination of fake GST invoices
By implementing e-invoicing, businesses can streamline their invoicing process and improve compliance with tax regulations. It also eliminates the need for manual data entry, reduces errors and fraud, and enables real-time invoice tracking, leading to input tax credits availability faster.
How does e-invoicing differ from current invoicing practices?
E-invoice is a system in which the invoice needs to be electronically uploaded and authenticated with a unique invoice reference number (IRN) and digitally signed QR code. The main change is that the seller needs to print the QR code and IRN number on the invoice before issuing it to the buyer. Businesses that use ERP/business management software that connects seamlessly with the IRP system and automatically prints the QR code and IRN on the invoice will find it easy to manage e-invoice requirements without many changes to their business process.
Is e-invoicing effective at curbing tax evasion?
E-invoicing in India is expected to curb tax evasion by improving the transparency and traceability of transactions. The e-invoicing system in India captures real-time invoice data and transmits it to the government’s e-way bill portal, which is accessible by tax authorities. Such allows real-time transaction monitoring and helps identify discrepancies and potential tax evasion.
Additionally, the e-invoicing system also generates a unique invoice reference number (IRN) and a digital signature for each invoice, which helps to ensure the authenticity of the invoice and the integrity of the data. These will make it easier for businesses to issue fake invoices or manipulate the data. Overall, e-invoicing is expected to improve compliance, reduce the scope for tax evasion, and increase revenue collection for the government in India.
What are the mandatory fields for an e-invoice?
An e-invoice now requires the completion of 30 mandatory fields, as opposed to the previous requirement of filling 50 fields.
|Document Type Code||This section specifies the document type’s code|
|Supplier Legal Name:||The name of the supplier is according to the PAN card details.|
|Supplier GSTIN||The section supplier fills GSTIN number for the e-invoice.|
|Supplier Address||The full address of the supplier, including flat number, building no. etc.|
|Supplier Place||Suppliers must specify their city, village, State and Pincode.|
|Supplier State Code||Select the state code in this section.|
|Supplier Pincode||The six-digit pin code of the supplier’s address needs to be filled in|
|Document Number||A unique invoice number that makes sense to the business. It has to be sequential for easy identification.|
|Preceding Invoice Reference and Date||The original invoice details are being edited using a document such as a credit note|
|Document Date||The date on which the invoice was issued|
|Recipient Legal Name||The buyer’s name is specified as per his PAN card|
|Recipient’s GSTIN||The buyer’s GSTIN number is to be specified|
|Recipient’s Address||The buyer must fill in the address per the specified details.|
|Recipient’s State Code||The place of supply has to be specified.|
|Place of Supply State Code||The State of the recipient has to be selected.|
|Pincode||The location of the recipient has to be selected.|
|Recipient Place||The recipient’s village/town/city must be specified.|
|Invoice Reference Number or IRN||The supplier leaves the field empty at registration time; GSTIN generates a unique number when the e-invoice is uploaded on the GSTN portal. As the e-invoice is accepted, acknowledgement is sent. Before using an e-invoice, the IRN must be displayed on it.|
|Shipping To GSTIN||GSTIN of the person to whom the item is delivered to be shared|
E-invoicing: when did it start?
The GST Council has implemented a phased roll-out of e-invoicing to provide businesses with ample time to adjust to the new system and ensure a smooth transition.
- Businesses with an annual turnover exceeding 500 crores: Oct 1 2020
- Companies with a yearly turnover exceeding 100 crores: Jan 1 2021
- Companies with an annual turnover exceeding 50 crores: Apr 1 2021
- Companies with an annual turnover exceeding 20 crores: Apr 1 2022
- Companies with a yearly turnover exceeding ten crores: Oct 1 2022
Note: The recent update states that e-invoicing will be mandatory for businesses with a turnover exceeding ten crores from Oct 1 2022.
What are the different methods available for generating an e-Invoice?
Multiple modes will be available for the taxpayer to choose from based on their specific needs. These include:
- API Based
- SMS Based
- Mobile App
- offline tool based
- GSP based
Types of Documents Required for Reporting to the IRP (Invoice Reference Portal)
Under e-Invoicing, the following documents are covered:
- Invoices issued by the supplier
- Credit notes issued by the supplier
- Debit notes issued by the recipient
- Any additional documents, as mandated by law to be reported by the document creator
How does e-invoicing generate and upload?
Easy steps to generate an e-invoice in India:
Step 1: Generation of e-invoice
- Taxpayers will generate invoices in their ordinary course of business.
- Invoices must be reported electronically, following the e-invoice schema with mandatory parameters.
- Mandatory fields include invoice type, invoice number, invoice date, supplier and buyer details, dispatch and item details, tax amount and scheme, and details of goods.
- Sellers must ensure their accounting/billing software can generate a JSON of the final invoice.
- JSON can be generated using an accounting/billing system, ERP, excel/word document, or a mobile app
Step 2: Generation of unique IRN
The supplier can generate a ‘hash’ based on specific parameters, such as GSTIN, invoice number, and financial year.
The prescribed algorithm, such as SHA256, must be used for hash generation
If the hash is validated, it will become the Invoice Reference Number (IRN) of the e-invoice
Step 3: Uploading the JSON
JSON of a final invoice can be uploaded directly on the IRP, through GST Suvidha Provider (GSP), or third-party apps
The supplier can also upload the hash along with the JSON onto the IRP if generated by him.
Step 4: Hash generation/validation
- The IRP will generate a hash for invoices uploaded without the hash
- IRP will validate the hash/IRN against the Central Registry of the GST System to ensure that the IRN is unique
- Once validated, the hash/IRN is stored in the Central Registry, and a QR Code is generated
- IRP will digitally sign the invoice and make it available to the supplier
- IRP will also send the e-invoice via e-mail to the buyer and seller.
In what ways will e-invoicing be integrated with GST returns?
An e-Invoice will only be uploaded to the GST return after it has been validated and registered by the invoice registration system. Once this process is completed, the invoice will be available for the recipient to view and act on in the new return system.
The tax department aims to make the GST return process more efficient by pre-populating the returns, which will decrease reconciliation issues. By implementing e-Invoicing, the invoice data can be automatically entered into the appropriate tables of the tax returns, eliminating the need for manual data entry.
The standard e-invoice contains the following information
According to the GSTN’s draft format, an e-Invoice will include the following components:
This section will feature each field’s technical field name and description, indicate if an area is mandatory or optional, and provide sample values and explanatory notes.
Masters will outline the pre-defined inputs for specific fields determined by GSTN, including areas such as UQC, State Code, invoice type, and supply type.
The template adheres to GST regulations and allows the reader to understand the terms used in other sheets. Mandatory fields are indicated in green, and optional fields are marked in yellow.
Changing an e-invoice: what is the process?
The GST portal is the only place where an e-invoice can be amended.
Type of business to whom will the e-invoice apply?
It is currently mandatory for businesses with a turnover exceeding 20 crores to implement e-invoicing from Apr 1 2022. In a recent update, e-invoicing is now compulsory for companies with a turnover exceeding ten crores from Oct 1 2022.
Are business types exempt from e-invoicing requirements?
E-invoicing is a mandatory compliance requirement for businesses in India to improve the transparency and efficiency of financial transactions. The Indian government has established a required e-invoicing compliance threshold. This threshold is set at ten crores in annual turnover; however, effective Jan 1, 2023, it is reduced to 5 crores. Any business whose yearly turnover exceeds five crores will be required to generate and submit e-invoices through the government’s designated e-invoicing portal.
Companies with a turnover of fewer than five crores are currently not required to comply with e-invoicing regulations. Still, these businesses need to stay informed and updated about the latest e-invoicing compliance requirements, as the threshold for mandatory e-invoicing compliance is subject to change.
What method was used before e-invoicing to issue invoices?
Before e-invoicing was introduced, businesses could use third-party software to generate invoices. These invoices would then have to be manually uploaded by the company onto the GSTR-1 return. This information would then automatically be reflected on the GSTR-2A form, which is a view-only form. The transporters were responsible for manually importing the invoices to generate e-way bills.
How do you upload an e-invoice?
The seller must upload the e-invoice electronically to the government’s Invoice Registration Portal (IRP) system. This process generates a QR code and an Invoice Reference Number (IRN) that the seller must include in the physical copy of the invoice given to the recipient, thus enabling the government to track and verify the invoice information easily.
E-invoices require specific types of documentation to be reported to GST.
The following documents are covered under the concept of e-invoice. They need to be uploaded to the IRP system: Invoice by Supplier, Credit Note by Supplier, Debit Note by Supplier, and any other document as required by law to be reported by the creator of the paper.