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E-invoice under GST (E-invoicing)

During the 35th GST Council meeting, it was recommended to implement an e-invoicing system under GST. E-invoicing is shortly known as an e-invoice. E-invoice is a system thru which typically (normally) generated invoices are electronically authenticated by GSTN.

It is a general perception that e-invoice means generation of invoice through GST portal. But, in fact, e-invoicing is just a system, wherein, the normally generated invoice is to be uploaded to Invoice Registration Portal (i.e., IRP) for electronic authentication of the same. The present article briefs the basic of e-invoicing under GST.

Stage-wise application of e-invoice under GST

Being one of the biggest reform under GST, e-invoicing is introduced in a stage-wise manner. Various stages of application of e-invoice are tabulated hereunder-

Application of e-invoice

Date from which e-invoice is applicable

E-invoicing is made applicable to the taxpayer having an aggregate turnover exceeding INR 500 Crores in a financial year. Notably, such taxpayer is required to generate e-invoice only in B2B transactions (supply of goods/ services to the registered person).

Notification no. 70/2019- Central Tax dated 13th December 2019 read with notification no. 13/2020- Central Tax dated 21st March 2020.

1st October 2020

Vide notification no. 88/2020- Central tax dated 10th November 2020, e-invoicing is made applicable to all the taxpayers having an aggregate turnover exceeding INR 100 Crores in a financial year. Here also only B2B transactions are covered.

1st January 2021

Further, as per notification no. 05/2021- Central tax dated 8th March 2021, e-invoice is now made mandatory for all the taxpayers having an aggregate turnover exceeding INR 50 Crores in a financial year. It also covers the B2B transactions only.

1st April 2021

 

What documents are presently covered under e -invoicing?

Below documents issued by the notified class of taxpayers (to registered persons (B2B) or for the purpose of Exports) are covered for the purpose of e-invoicing.

i. Invoices

ii. Credit Notes

iii. Debit Notes

Though different documents are covered, for ease of reference and understanding, the system is referred as ‘e-invoicing’. Below is the relevant notification governing the applicability of e-invoicing.

NOTIFICATION No. 13/2020–Central Tax

21st March, 2020

G.S.R. 196(E).-In exercise of the powers conferred by sub-rule (4) of rule 48 of the Central Goods and Services Tax Rules, 2017(hereinafter referred as said rules), the Government on the recommendations of the Council, and in supersession of the notification of the Government of India in the Ministry of Finance, Department of Revenue No. 70/2019 – Central Tax, dated the 13th December, 2019, published in the Gazette of India, Extraordinary, Part II, Section 3, Sub-section (i) vide number G.S.R. 926 (E), dated the 13th December, 2019, except as respects things done or omitted to be done before such supersession, hereby notifies registered person, other than 7[a government department, a local authority,1[a Special Economic Zone unit andthose referred to in sub-rules (2), (3), (4) and (4A) of rule 54 of the said rules, whose aggregate turnover in 3[any preceding financial year from 2017-18 onwardsexceeds 6[fifty crore rupees], as a class of registered person who shall prepare invoice and other prescribed documents, in terms of sub-rule (4) of rule 48 of the said rules in respect of supply of goods or services or both to a registered person 4[or for exports].

 

Categories of persons exempt from e-invoice

Notification no. 13/2020- Central Tax dated 21st March 2020, exempted following categories of the person from issuing e-invoice-

  • A banking company,
  • A financial institution,
  • A non-banking financial company (NBFC),
  • A person engaged in providing passenger transportation service,
  • An insurer,
  • A goods transport agency (i.e., GTA) supplying service,
  • A person engaged in providing services in terms of admission of the exhibition of the cinematograph films in the multiplex screen,

Additionally, vide notification no. 61/2020-Central Tax dated 30th July 2020, the special economic zone unit (SEZ) is also exempted from e-invoice.

Further, as per notification no. 23/2021-Central Tax dated 1st June 2021, a government department and a local authority are also exempted from following e-invoice procedure under GST.


E-invoice vis-à-vis IRN

IRN will be generated for each and every invoice uploaded to the e-invoice portal. IRN is an abbreviation of Invoice Reference Number. Structurally, IRN is a 64 characters long number fixed to each invoice being uploaded to the e-invoice portal. IRN is uniquely generated using the hash generation algorithm.

The formation of 64 characters long number (i.e., IRN) is explained hereunder-

Sr. No.

Parts of IRN

Description

1

Supplier’s GSTIN (i.e., Goods and Services Tax Identification Number).

It is a 15-digit number issued to every GST registered person.

2

Financial Year

Financial Year (format YYYY-YY) in which the respective invoice is generated.

3

Document Type

It represents the type of the document i.e., whether the document is invoice or debit note or credit note.

Accordingly, the format used is-

  • INV is used for Invoice;
  • DBN is used for Debit Note; and
  • CBN is used for Credit Note.

4

Document Number

This is a number printed on the respective document.

 

Steps for generating e-invoice

STEP 1 – Generation of normal invoice-

The taxpayer is firstly required to generate a normal invoice using respective ERP/ accounting software. However, the taxpayer has to ensure that the normal invoice should contain the following set parameters (i.e., e-invoice schema)-

  • Document Type Code,
  • Supplier’s details like-
    • Legal Name,
    • GSTIN,
    • Address,
    • Place,
    • State Code, and
    • PIN Code.
  • Document Number,
  • Preceding Invoice Reference and date,
  • Document Date,
  • Recipient’s details like-
    • Legal Name,
    • GSTIN,
    • Place,
    • Address, and
    • State Code.
  • Place of Supply State Code,
  • PIN Code,
  • Invoice Reference Number (i.e., IRN),
  • Shipping To – GSTIN,
  • Shipping To – State; PIN Code and State Code,
  • Dispatch From – Name; Place; Address; and PIN Code,
  • Service (Y/N),
  • Supply Type Code,
  • Item Description,
  • HSN Code,
  • Item Price,
  • Assessable Value,
  • GST Rate,
  • Value of IGST; CGST and SGST,
  • Total Invoice Value. 

STEP 2 – Generation of (JavaScript Object Notation) JSON file-

ERP/ accounting software used for the preparation of the normal invoice should have the feature of generating JSON file. The normal invoice so prepared at STEP 1 should be converted into a JSON file.

STEP 3 – Uploading the JSON file-

Now, the JSON file, generated at STEP 2, needs to be uploaded on IRP (i.e., Invoice Registration Portal). The JSON file can be uploaded using any of the following ways-

  • Direct upload on IRP;
  • Uploading through GST Suvidha Provider (i.e., GSP); or
  • Via third party apps (which also includes API).

STEP 4 – Generation of IRN-

On uploading of JSON file, IRP will carry out a duplication check. Thereafter, IRP will generate a unique IRN.

 

Highlighting benefits of e-invoicing

Some of the benefits of e-invoicing are highlighted hereunder-

  • The biggest advantage of e-invoice is that it surely results in the reduction of frauds as well as reduction in generation of fake invoice under GST.
  • Real-time tracking of invoice under e-invoicing will allow faster availability of ITC to the buyers.
  • Auto-population of e-invoice details in GST returns, will enable faster filing of returns under GST.
  • It will reduce the chances of data entry errors since invoice generation by one software will be read by another software which allows interoperability.

 

Drawbacks spinning around e-invoicing under GST

Some of the drawbacks of e-invoicing systems are-

  • The taxpayer will have to carry out crucial changes in the ERP/ accounting software.
  • The compliance cost is likely to increase more due to e-invoicing.
  • Since only B2B transactions are to be reported under e-invoicing, the taxpayer will have to segregate B2B and B2C transactions. This will also increase fraudulent generation of B2C transaction invoices.

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Author:

CA Poonam Gandhi


Jun 19, 2021

Comments


As per study added by Value Market Research, E-invoicing is an electronic billing system in which invoices are authenticated electronically by GSTN for use on the common GST portal. E-invoicing is a rapidly expanding technology. Accelerating the digitization of business, reporting, inventory, fiscal, trade and the logistical document is driving the growth of the market. See More @ https://www.valuemarketresearch.com/report/e-invoicing-market
By: Sarita Sonavane | Dt: Jul 12, 2021


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