E-Invoicing, as defined by GST law, refers to the electronic generation of invoices for B2B transactions that are required for certain GST-registered businesses, similar to the use of e-way bills for the transportation of goods. E-invoicing is a system implemented under GST that requires businesses to register all B2B and Export invoices with the government's Invoice Registration Portal (IRP) to obtain a unique identification number, called the Invoice Reference Number (IRN), and a digitally signed QR code. This ensures that all invoices have been authenticated and have a verified IRN and QR code printed on them. Once an invoice has been authenticated, its details will be immediately available on the GST and EWB portals in real-time.
How to generate an E-invoice
A GST e-invoice system is composed of two components:
The exchange of information between the business and the Invoice Registration Portal (IRP)
The interactions between the IRP, the GST/ e-Way Bill systems, and the customer.
Generating an e-invoice
Taxpayers will continue to generate invoices as usual, but now the process of reporting will be done electronically. Taxpayers must comply with the e-invoice schema and submit the required information accordingly. The following are a list of mandatory and optional parameters:
➙ Transaction information such as tax scheme and supplier type
➙ Document information including type, number and date
➙ Supplier information including legal name, GSTN address, location, PIN code and state code
➙ Buyer information including legal name, GSTN number, address, location, state code and PIN code
➙ Dispatch details (mandatory if different from supplier information)
➙ Shipping information (mandatory if different from buyer address)
➙ Item-related information such as service/goods, HSN code, total amount, GST rate, assessable amount, and total item value
➙ Batch number (if items are being moved in batches)
➙ Invoice details including assessable values and total invoice value
The Council has also listed optional parameters that may change based on the needs of the business. Once the invoice fields have been determined, a taxpayer must determine if their accounting or billing software can create a JSON file which can then be uploaded to the Invoice Registration Portal (IRP).
Creating a unique IRN
The Invoice Registration Portal (IRP) will create a hash parameter based on the information provided by the seller, such as GSTIN, document type, document number, and fiscal year. The IRP will then verify that the invoice does not already exist in the Central Registry, and upon confirmation, the IRP will add its own signature and a QR code to the invoice's JSON data. The hash generated by the IRP will serve as the Invoice Reference Number (IRN) for the e-invoice.
Updating the invoice to the GST and e-way bill systems
The process of sending a digitally signed JSON containing an IRN to the seller is initiated. Once the invoice data is uploaded, it is shared with the GST and e-Way Bill system. This updates the GSTR-1 for the seller and the GSTR-2A for the buyer, which aids in determining liability and ITC. Additionally, the GST e-invoice schema includes details such as the Transporter ID or Vehicle number, which are used to generate an e-Way Bill. It's important to note that the government's tax portal does not generate the e-invoice, it is instead created by the seller's accounting/billing software and their ERP systems. The role of the IRP is limited to receiving, validating, and digitally signing the invoices uploaded by the seller.
Benefits of the E-invoicing System
➤ E-invoicing enables suppliers to have real-time visibility of their invoices, allowing for quicker access to input tax credit.
➤ E-invoicing streamlines the invoice reporting process by requiring taxpayers to only report invoices once, through the Invoice Registration Portal (IRP). The IRP will authenticate the invoice and assign it a unique Invoice Reference Number (IRN). This eliminates the need for manual reporting, as the invoice details will automatically be populated in the GSTR-1 return after authentication.
➤ Through e-invoicing, generating an e-way bill becomes more efficient as the taxpayer only needs to update the vehicle details. The details in Part-A of the e-way bill will automatically be populated from the e-invoice that has been authenticated on the GST portal.
➤ When an e-invoice is uploaded to the GST portal for authentication, a copy of it will also be sent to the buyer via email, which is mentioned on the e-invoice. This allows the buyer to easily match it against their purchase order, and accept or reject the invoice in real-time.
➤ Real-time availability of data with tax authorities will lead to a reduction in frauds.
➤ The e-invoicing system allows for the centralized upload of invoices on a common portal, which facilitates multiple reporting purposes. Once an invoice has been authenticated, it will be automatically transferred to both the GST portal and e-way bill portal in real-time. This eliminates the need for manual data entry when filing GST returns and reduces the risk of errors.
Entities/sectors exempted from e-Invoicing.
The exemption from e-invoicing is with respect to the entity and not with respect to the nature of supply/transaction. They are –
(a) Special Economic Zone Units
(c) Banking companies or financial institutions, including a Non-Banking Financial Company (NBFC)
(d) Goods Transport Agency (GTA) supplying services in relation to transportation of goods by road in a goods carriage
(e) Suppliers of passenger transportation service
(f) Suppliers of services by way of admission to exhibition of cinematograph films in multiplex screens
(g) Persons registered in terms of rule 14 of CGST Rules (OIDAR)
(h) Government department
(i) Local authority
E-Invoicing is intended to improve compliance with GST laws by providing a more efficient and accurate way of tracking transactions and ensuring that the correct taxes are being paid. It allows for tax authorities to have a comprehensive record of B2B invoices from taxpayers, as they will be uploaded onto the GST portal. This is due to the fact that invoices are generated prior to any transaction occurring, reducing the chance for manipulation. Additionally, the system can detect fraudulent invoices by comparing the input tax credit to output tax on the GSTN portal, thereby preventing tax evasion.