Change is inevitable, they say. The phrase fits perfectly for e-invoicing under GST. Since its inception in October 2020, e-invoicing has undergone multiple changes. The latest guidelines released by the Goods and Services Tax Council mandated that businesses with an annual turnover of Rs 10 crore and above must generate invoices for business-to-business transactions from October 1, 2022. Previously the GST council mandated all businesses with an annual turnover of 20 crores or above to create invoices for B2B transactions by April 1, 2022.
Are you confused about the whole process of e-invoicing under GST? Looking for answers that will clear all your doubts about GST e-invoice? Read this blog entirely to understand everything about e-invoicing under GST.
What is E-Invoicing?
E-invoicing or electronic invoicing is a digital document that is exchanged between the buyer and the seller. Furthermore, the e-invoice is authenticated by the Goods and Services Tax Network (GSTN). The Invoice Registration Portal (IRP) of GST seamlessly integrates Input Tax Credit, GST filing, and an e-way billing system. This helps provide interoperability between the buyer and the seller and makes the end-to-end communication between them hassle-free.
E-Invoicing Under GST – The Beginning
To better understand e-invoicing, let us take you a few years back. On September 20, 2019, the GST Council, in its 37th meeting, made e-invoicing mandatory for B2B transactions for companies with an annual turnover of Rs 500 crores or above from October 1, 2020. In the second phase, this was extended to companies with an annual turnover of Rs 100 crore or above from January 1, 2021.
As we mentioned earlier, all companies with an annual turnover of Rs 10 crore or above are now mandated to generate invoices for B2B transactions. Here’s a detailed table that explains how e-invoicing was rolled phase-wise over the years:
Date of Effect
|Phase 1||October 1st, 2020||500 crores|
|Phase 2||January 1st, 2021||100 crores|
|Phase 3||April 1st, 2021||50 crores|
|Phase 4||April 1st, 2022||20 crores|
|Phase 5||October 1st, 2022||10 crores|
How Did the System Work Previously?
Before the new return system was rolled out, the sellers had to report the generated invoices in two different systems. These systems were: the GST portal and E-Way bill.
Previously, businesses generated invoices in separate software and fed them into the GSTR 1 return using an API. The information will then be reflected on GSTR-2A, and recipients can access it with ‘view only’ permission. Same way, transporters must generate an e-way bill. They can generate it directly or manually import the invoices into an excel sheet or JSON. The entire process is both laborious and filled with plenty of paperwork. The government rolled out the new return system to end this long, tiring process.
Why Do You Need a Standard Invoicing System?
Tax departments globally are implementing a standard invoicing system to ensure all invoices can be ready easily in a central system. Also, having a standard format allows the invoices to be easily shared.
How to Generate E-Invoices Under GST?
The first step is generating an e-invoice. The e-invoice generation process is normal, but the important step here is reporting, which is done electronically. First, raise the invoice in your firm’s billing and accounting software. While generating the invoice, you must follow the e-invoice schema and fill out all the mandatory fields. Other than the mandatory fields, there are optional parameters that you will be filing out. Here is a list of mandatory parameters:
- Document details
- Transaction details
- Supplier details (GSTN number, address, etc.)
- Buyer information (GSTN number, address, pin code, etc.)
- Dispatch address details (If it is different from supplier details, it is mandatory)
- Item details
- Invoice details
- Batch number (if applicable)
After filling out the mandatory invoice fields, you should then use your accounting or billing software – based on which one can create a JSON file – and upload it to the IRP.
Generating a unique IRN
The IRP creates a hash parameter based on information like GSTIN, document type, document number, etc. At the same time, the IRP ensures that the same invoice exists in the central registry. If there are no duplicates, the IRP will add a QR code and signature on the JSON data of the invoice. This hash generated by the IRP is Invoice Reference Number or IRN. The IRN is a unique number that is allotted to every valid invoice.
Updating the e-way bill system and GST
The JSON file that is digitally signed is then sent to the supplier. The invoice data is then shared with e-Way systems and GST. The GST system will then update the GSTR-1 for the seller and GSTR-2A for the buyer. Also, the system will generate the e-Way Bill from the Transporter ID and Vehicle Number provided in the GST e-invoice schema.
Remember, it is not the job of the government portal to generate an invoice. The invoice is created by the seller’s accounting or billing software. The IRP will just validate and digitally sign the invoice.
How to Register for an E-Invoicing System
If you are a GST-registered taxpayer and if you have a valid GSTIN number, registering on the e-invoicing portal is no biggie. You can also use your e-Way bills credentials to sign up for the e-invoicing portal.
However, if you are not registered in the e-Way bill portal, you can directly register in the e-invoicing system. Also, you must have a GSTIN number and a mobile number registered to the GST portal. Here’s a step-by-step guide on how to register for an e-invoicing system:
Step 1: First, go to the e-invoicing portal. Next, click on ‘Registration’ and ‘Portal Login‘ from the dropdown.
Step 2: You will be directed to the page where you need the GSTIN number and the captcha. Here enter the ‘GSTIN number‘ of your business and the correct ‘captcha‘ and select go.
Step 3: The screen containing applicant details like trade name, address, city, pincode, email ID, mobile number and others will be displayed. Verify the details and click send OTP.
Step 4: On the mobile number you have registered for the GSTIN, you will receive an OTP. Enter the OTP and click on ‘Verify OTP‘.
Step 5: After the OTP verification, you will be asked to create a username and password. Re-enter your password to confirm it and click save.
Step 6: Enter the newly-created credentials to access the e-invoicing system.
What are the Benefits of Having an E-Invoicing System?
Here are some of the benefits of GST e-invoice:
- E-invoices allow interoperability between businesses
- It helps you with data reconciliation and eliminates mismatch errors
- You can now track e-invoices in real-time
- In tax return forms, the e-invoice details will be auto-populated, which means filling out your tax return forms are no longer a hassle
- Timely input tax credit
- The e-invoice details will be auto-filled in the e-Way bills. You do not have to enter the data manually
How Can E-Invoicing Curb Tax Evasion?
Since its introduction a few years back, e-invoicing has been essential in curbing tax evasion. Here is how it is used in curbing tax fraud:
- Since the invoices are generated through the GST portal, the tax authorities can track transactions in real-time.
- The introduction of e-invoicing has eliminated the possibility of manipulating invoices.
- The system can now easily identify fax invoices
E-Invoicing Under GST – Frequently Asked Questions
What are the transactions or supplies covered under e-invoicing?
For a seller, e-invoicing applies for the following transactions:
- SEZ transactions
- B2B Transaction
- Export transactions
What type of documents are reported to the IRP?
Here’s the list of documents that will be covered under the e-invoicing system:
- Debit notes
- Credit notes
Note: Businesses must also submit any document notified under the GST law
Is e-invoicing applicable to B2C?
No. E-invoicing, as of now, does not apply to B2C businesses.
Who is exempted from e-invoice?
Regardless of their turnover, all persons listed under 54(2),(3),(4), and (4A) of the Central Goods and Services Tax Rules, 2017, are exempted from e-invoice. They are:
- Insurance companies, financial institutions, banking companies and NBFCs
- Goods Transport Agencies
- Special Economic Zone (SEZ) units
- Passenger or transportation services
How to make corrections to the e-invoice after generating IRN?
You cannot edit or correct invoices once an IRN is generated. You can only cancel it. Also, you can cancel it only within 24 hours of IRN generation.