Update as on 21-03-2020
1. Government of India vide Notification No 13/2020 has deferred the applicability of provisions of e-invoicing for persons having turnover in excess of 100 Crore till 1st October 2020.
2. Government of India vide Notification No 14/2020 has deferred the applicability of provisions of QR Code for persons having turnover in excess of 500 Crore till 1st October 2020.
‘E-invoicing’ or ‘electronic invoicing’ is a system in which B2B invoices are authenticated electronically by GSTN for further use on the common GST portal.
The concept of e-invoicing in GST means standardizing the format in which electronic data of an invoice will be shared with the other stakeholders in the GST system. Such a standardized approach is adopted to ensure that there is interoperability of invoice data.
The electronic invoicing will be mandatorily implemented from 1 April 2020 for taxpayers with turnover over Rs 100 Crore (vide Notification No. 70/2019)
However, the taxpayers with an annual aggregate turnover of over Rs 500 Crore can voluntarily generate e-invoices starting from 7 January 2020 through APIs. Whereas the taxpayers with the turnover over Rs 100 but less than Rs 500 Crore can join them from 1 February 2020.
The aggregate turnover will include the turnover of all GSTINs under a single PAN, across India.
Need for E-invoice
Currently, the invoices are generated by suppliers with the help of their accounting systems, ERPs, accounting or billing software or excel based tools. Since various suppliers use different accounting systems/ERPs to generate invoices, invoices generated by one software cannot be understood by another software. This is because each software has its own format to store information electronically.
Additionally, the GST system also fails to understand the invoice details reported to it in varied formats through different accounting/billing Softwares. Thus, there was a need to standardize the format of invoices details so as to enhance understanding.
Benefits of e-invoice
E-Invoicing would benefit all the stakeholders under the GST system including buyers, suppliers, and government in the following ways:
- ANX – 1, ANX-2 for filing GST RET – 1 would be automatically populated, thus making the supplier all set for filing GST returns. Similarly, Part A of the E-Way Bill too would be automatically filled, helping to generate E-Waybill with the help of e-invoice data
- Less verification in respect of input tax credit issues as the same data is available both with the tax authorities and buyer
- Invoices will be properly tracked allowing for matching of input tax with the output tax at the system level itself. This will help in reducing tax evasion.
- Fake invoices would no longer be issued as invoices have to be reported to IRP for authentication
- E-invoices created on one software can be read by another, allowing interoperability and help reduce data entry errors.
- Lesser possibility of audits/surveys by the tax authorities since the information they require is available at a transaction level.
Functioning of the e-invoicing system
The functioning of the e-invoicing system involves two parts:
- Generation of invoice in a standard format
- Reporting of e-invoice to a central system
a. Invoice Generation and its Reporting to IRP by the Supplier
Suppliers would continue to generate invoices from their own billing software/ERPs or excel based tools under the e-invoicing system. However, this invoice must be in accordance with standards rolled out by GSTN under e-invoicing.
Further, it must be noted that the billing software of suppliers must be capable of generating invoices in the JSON file format. This is because invoices in JSON format only can be uploaded to the IRP(Invoice Registration Portal).
Vide notification no 69/2019, the Central Government, has notified the following as the Common Goods and Services Tax Electronic Portal for the purpose of preparation of the invoice:-
Now, there are small business owners, having an annual turnover of less than Rs. 1.5 crores, using tools that do not generate invoices in JSON. In such cases, they can use the off-line template provided by GSTN for furnishing invoice details and then report the same to IRP.
b. Generation of Unique Invoice Reference Number (IRN)
IRN is typically generated by the IRP after the supplier uploads the invoice to IRP. However, the suppliers/taxpayers too can generate IRN and submit the same to the IRP along with the invoice.
This step is not mandatory and is totally a matter of choice on the part of the supplier. Technically, IRN is a hash of three parameters generated using a standard and a hash generation algorithm. There are basically three parameters that are used in generating IRN. These include:
- GSTIN of the supplier
- Invoice Number of Supplier
- Financial Year
The GSTN has specified the IRN generation algorithm to be used in its e-invoice standard. Further, it has also asked the accounting or billing software providers to incorporate this algorithm into their software.
c. Uploading E-Invoice in JSON to IRP
The supplier then uploads the e-invoice in JSON file format to IRP along with IRN if so generated. The supplier can choose to upload the invoice directly on the portal, may seek the help of a GST Suvidha Provider or use a third-party app for the same.
d. Generation of IRN, QR Code and E-Signing of Invoice by the IRP
After submitting the e-invoice to the IRP, the IRP will generate IRN.
The Government vide Notification No. 72/2019 notifies that a B2C invoice issued by a registered person, whose aggregate turnover in a financial year exceeds five hundred crore rupees, shall have a Quick Response (QR)code w.e.f 1st April 2020.