E-Invoicing under GST
E-invoicing has been the biggest and one of the most talked-about changes when it comes to GST in 2020. Invoicing practices have been quite industry specific. Despite the proprietary ways of preparing invoices, unified approach of e-invoicing was taken in good spirit by the overall taxpayers. And recently companies with turnover more than Rs. 100 CR have also gone LIVE with E-invoicing mandate from 1st January 2021 after successful adoption by companies with turnover of more than Rs. 500 CR (that went LIVE from 1st October 2020).
Let us understand E-Invoicing under GST and its applicability with following heads/parameters:
- E-Invoicing – How it began, how it is going
The first committee was set-up in May 2019 to discuss the usability of E-Invoicing and prepare an e-invoicing implementation plan for India considering global implementations. Since the committee gave its recommendations, several drafts of E-Invoicing Specifications were issued and finally the E-Invoice Schema was released in January 2020. The mandate was supposed to go LIVE from 1st April 2020. However the mandate was pushed to 1st October 2020 vide 39th GST Council meeting happened on 14h March 2020. The mandate finally went LIVE from 1st October 2020 in a phased manner.
- Why E-Invoicing
E-Invoicing is increasingly mandated by governments across the globe particularly due to GST evasion.
Tax leakage and fraud using fake invoices have been an issue the government is trying to fight even before the GST era. E-invoicing in India is proposed to put an end to this by mandating authorization of every invoice from the government portal. Real time invoice reporting discourages subsequent fraudulent changes/adjustments.
Besides plugging the tax leakage, the implementation of the e-invoicing under GST shall be beneficial for the taxpayers as well.
Some of the key benefits are:
- One-time reporting of the invoicing details for all your GST filings
- Seamless generation of E-way Bill with Part A and Part B slip
- The standard invoicing system means interoperability between multiple software
- Real-time tracking of invoices prepared by the supplier
- Minimized invoice mismatches during reconciliation
- Easy and Precise ITC claim
- What is E-invoicing and an e-invoice under GST?
E-invoicing aka Electronic Invoicing is an electronic authentication mechanism under GST. Under the mechanism, all the B2B and Export invoices generated by a business need to be registered with the Government system i.e. the Invoice Registration Portal (IRP) and obtain a unique identification number for every invoice called Invoice Reference Number (IRN). Along with IRN, the IRP will also create a digitally signed QR code with select details from invoice and digitally sign the uploaded invoice data.
Thus, an e-invoice is a document which has an IRN associated with it and the digitally signed QR code printed on it.
Once an IRN is generated and invoice has been authenticated, its details shall be made available on the GST portal and EWB portal in real-time.
- Who needs to generate an E-Invoice?
On the basis of Aggregate Annual Turnover (AATO):
E-Invoice has been introduced in the country in a phased manner based on the Aggregate Annual TurnOver of the companies. The first phase went LIVE for companies with turnover more than 500 CR on 1st October 2020. The second phase went LIVE for companies with turnover more than 100CR on 1st January 2021. The talks suggest that soon the Phase 3 is expected to be launched covering remaining taxpayers.
Section 2(6) of the CGST Act: “(6) “aggregate turnover” means the aggregate value of all taxable supplies (excluding the value of inward supplies on which tax is payable by a person on reverse charge basis), exempt supplies, exports of goods or services or both and inter-State supplies of persons having the same Permanent Account Number, to be computed on all Indiabasis but excludes central tax, State tax, Union territory tax, integrated tax and cess; “
On the basis of FY:
As per the Not. No. 13/2020 amended vide Not. No. 70/2020 and Not. No. 88/2020, AATO in any preceding Financial Year from 2017-18 onwards needs to be considered to ascertain the applicability of E-Invoicing mandate. The AATO is as per GST Returns. GST System has also given a facility to check the applicability on the E-Invoice Portal.
On the basis of Entity Type:
E-invoice can be generated only by suppliers. The recipients and transporters cannot generate E-Invoice. E-commerce operators can generate e-invoices on behalf of the sellers on their platforms. To know about E-Invoicing for E-commerce Operators.
- Who need not generate an E-Invoice?
The following persons are excluded from issuing e-invoice vide GST notification No. 13/2020-Central Tax dated 21st Mar’ 2020:
- Insurance company
- Banking company
- Financial Institution
- Supplier of passenger transportation services
- Supplier of services by way of admission to the exhibition of cinematograph films in multiplex screens
- Special Economic Zones (SEZs) Units (Notified vide Notification No. 13/2020 and 61/2020- Central Tax): As per the notifications, exclusion is for SEZ Unit and not for SEZ Developers. Read article E-Invoicing and SEZfor more details.
(Rule 54 read with Not. No. 14/2020-CT)
- What type of documents to be reported to GST System under E-Invoicing?
The taxpayers need to report the following documents to the e-invoice system.
- Invoice by Supplier
- Credit Note by Supplier
- Debit Note by Supplier
Thus, Bill of Supply and Delivery Challan/Job Work Challan need not be reported under E-Invoicing.
- What type of transactions need to be reported under E-Invoicing
E-Invoicing is applicable only to B2B Business to Business (including B2G –Business to Government) transactions .B2B Supplies include domestic supplies as well as Exports (including Deemed Exports), Supplies to SEZ B2B Reverse Charge Invoices and Supplies through E-commerce Operators are covered under E-Invoicing.
Applicability for e-invoicing and RCM transactions
- If transaction through E-commerce comes under RCM then these transactions are also covered under GST E-invoicing. And E-commerce operator can also generate IRN for the same.
- If we see here, GTA comes under RCM notified services but it is exempted as of now from E-invoicing. SEZ units are exempted from E-invoicing however the SEZ developer needs to generate IRN as they fall under E-invoice mandate.
Know more about e-invoicing and Reverse Charge Mechanism transaction
E-invoicing is not required for B2C – Business to Consumer transactions. However, for taxpayers with AATO above Rs 500 Cr, the invoices need to have self-generated QR Code.
Import transactions are also not covered under E-Invoicing.
- How to generate an e-invoice?
An invoice is created from the taxpayers system itself which then is sent to Invoice Registration Portal (IRP) for authorization. Once authorized, the invoice data is updated with IRPs digital signature and a QR Code along with Invoice Registration Number (IRN). This is termed as an E-Invoice.
Know more about step for e-invoice generation.
- What are the data points required for generating an e-invoice?
The data-points needed to generate an e-invoice are based on the e-invoice schema and e-invoicing template . The total number of data fields in e-invoice standard schema is about 140, of which approx. 50 are mandatory or mandatory subject to certain conditions.
The mandatory data includes details like buyer and supplier details, invoice value, tax rate, description and HSN of goods or service, taxable value and tax amounts. Optional data fields are payment related such as bank account no, mode of payment, pre-tax values, reference document number etc.
The maximum number of line items allowed per e-invoice is 1000. In case there is no value to be given under any of the mandatory fields then a ‘Nil’ value should be passed for that field for a successful IRN generation.
- Can you generate E-Way Bill along with E-Invoice?
Generation of E-way Bill is now inter-twined with E-Invoicing. IRP can be used to generate not only IRN but also E-way bills, for the documents that qualify. Thus, depending on the data sent, the IRP system returns IRN or E-way Bill Number or both. If the taxpayer sends transportation details along with invoice details, IRP communicates with E-Way Bill portal in real-time and generates E-Way bill. Read E-invoicing and E-way Bill: Generating E-way Bill using IRP for more details.
- What is QR Code? How is it relevant under E-Invoicing mandate?
On successful registration of Invoices on IRP, the IRP provides a digitally signed QR Code along with unique IRN and digitally signed full invoice data. The IRN QR Code generated for B2B transactions have select information from the invoice. The structure of QR code for B2B invoice or transaction remains same for any document which has been registered with IRN and generated by any entity. The values corresponding to these standard fields differ based on the content of the invoice.
- Is the QR Code for B2C Invoices related to E-Invoicing?
While the notification regarding applicability of QR Code on B2C Invoices came along with E-Invoice notifications, these two are completely unrelated. Taxpayers with AATO above Rs 500 Cr need to have a self-generated QR Code on B2C invoices which can facilitate easy payment options for customers such as scan an pay. E-invoicing and QR Code for B2C Invoices was mandated in light of moving towards a digital economy.
- What should a recipient of e-invoice look for?
Now on, the e-invoice received from the suppliers (to whom the mandate is applicable) will have the extra-information related to invoice reference number (IRN). Hence, the recipients of e-invoices need to be vigilant of applicability of e-invoicing mandate to their vendor list. Not only this, the recipients also need to know beforehand, which documents like CDN, DBN and invoices etc are expected to carry IRN.
- How will e-invoicing impact purchase cycle?
Now as a recipient of standard e-invoices, the recording of purchase invoices in the accounting systems can be automated and this itself can result in achieving higher efficiency and accuracy of data in source systems. Additionally, IRN being unique to every invoice can be useful for picking up comparable invoices and thus be beneficial for reconciliation and ITC computation. Read more on E-invoicing-Will it Simplify or Complicate your Purchase Cycle?
- What software/application can be used to generate an E-invoice under GST?
As opposed to the contemporary belief that an E-invoice has to be generated on the common portal, an E-invoice can be generated through any software/tool that supports the given e-Invoicing format. It is important to prepare the system to send and receive invoice data.
It is important to note that the invoice generation will continue to be done by taxpayers. For generating IRN, taxpayers can opt for solutions which can be embedded in their current invoicing processes or use manual generation options. However, there are many tasks post IRN generation i.e. getting invoice printed with QR code, checking its auto-population in GSTR 1 etc. and hence it is recommended to choose a solution which can provide for all needs around e-invoicing and GST compliance.