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e-Invoice under GST

Updated: Jul 16, 2023


What are e-invoices under GST?


e-Invoice known as ‘Electronic invoicing’ is a system in which all B2B invoices are electronically uploaded and authenticated by the designated portal. Post successful authentication, a unique Invoice Reference Number (IRN) is generated along with a QR code that needs to be printed on the invoice.


Why e-Invoicing is introduced?


Today, there are hundreds of accounting/billing software that generate invoices and all of them have their own formats to store the information.

Owing to this, the GST system can’t read and understand these invoices, although the information in the invoice remains the same.

A need was felt to standardize the format in which electronic data of an invoice will be shared with others to ensure there is interoperability of the data.


How is e-invoice different from the current practice of invoicing?


The change is that the seller needs to print the QR code and IRN number on the invoice before issuing it to the buyer.


What are the benefits of e-Invoice?


The following are some of the key benefits of e-invoicing:

  • Reduces reporting of the same invoice details multiple times in different forms. It’s just a one-time upload and everything, as required, will get pre-populated.

  • Part-A of the e-Way bill will be auto-captured and only transporter details are required to be updated.

  • On uploading of invoices, the B2B details will be auto-captured in GSTR-1 return.

  • Substantial reduction in input credit verification challenges as the same data will get reported to the tax department as well to the buyer in his inward supply (purchase) register (GSTR-2A).

  • On receipt of info through the GST System, a buyer can do a reconciliation with his Purchase register and accept/reject it on time under New Return.

  • Complete trail of B2B invoices and system-level matching of input credit and output tax helps to reduce tax evasion.

  • Increase efficiency in tax administration by eliminating fake invoices.


When will e-invoicing be introduced?


To ensure that businesses get enough time to adapt to the new system of electronic invoicing, the GST Council has approved the introduction of e-invoicing in a phased manner.

  • For taxpayers with a turnover of ₹500 crores and more, e-invoice is already introduced from 1st October 2020.

  • For businesses with a turnover of ₹100 crores and more, it is applicable from 1st January 2021.

  • For businesses with a turnover of ₹50 crores and more, e-invoicing is applicable from 1st April 2021.

  • For businesses with a turnover of ₹20 crores and more, e-invoicing is applicable from 1st April 2022.

  • For businesses with a turnover of ₹10 crores and more, e-invoicing is applicable from 1st October 2022.

  • For businesses with a turnover of ₹5 crores and more, e-invoicing is applicable from 1st August 2023.

Note: The Turnover limit for applicability of E-Invoicing provisions for registered Taxpayers is in any of the preceding 3 Financial Years.


Who are eligible for an e-invoice?


Electronic invoicing applies to all the businesses that are registered under GST and issues B2B invoices in a phased manner as notified by the Government.


Is e-invoicing mandatory?


Yes, it is mandatory for all the businesses who fall under the ambit of e-invoicing and need to issue an e-invoice for all B2B supplies.


What type of documents are to be reported to the GST system?


The following documents are covered under the concept of e-invoice. Meaning the creator of these documents needs to upload them to the IRP (Invoice Registration Portal) system.

  • Invoice by Supplier

  • Credit Note by Supplier

  • Debit Note by Supplier

  • Invoice cum bill of supply

  • Any other document as required by law to be reported by the creator of the document.

What are the modes of generating e-Invoice?


Multiple modes will be made available so that the taxpayer can use the best mode based on his/her need. The following are different modes of generating e-Invoice?

  • Web-Based

  • API Based

  • SMS Based

  • Mobile App

  • offline tool based

  • GSP based.

What is the IRP in e-Invoice?


In the e-invoice system, the moment you create an invoice for your customer, it should be uploaded to IRP (Invoice Registration Portal) where the validation will be done, and a unique number called IRN (Invoice Reference Number) along with the QR code will be issued. IRP (Invoice Registration Portal) is a designated portal designed to accept, validate and authenticate the invoice.


What is an IRN (Invoice Reference Number)?


IRN is known as “Invoice Reference Number” is a unique invoice number generated by the Invoice Register Portal (IRP) on uploading the invoices electronically. An invoice remains valid only if it has IRN and QR code that is authenticated by the IRP (Invoice Registration Portal). IRN is also referred to as ‘Hash’ in technical terms.


How does the e-Invoice system work?

The above illustrative diagram of the e-invoice system is explained below:

  • The supplier generates the invoice JSON in the prescribed format. It can be either the ERP software generates the e-invoice JSON or you can use the offline utility tool to do it.

  • The JSON is uploaded to IRP (Invoice Register Portal) by the supplier. If the ERP software is integrated with IRP via GSP, the upload of the JSON file will be automated, the meaning system sends the required details directly to the IRP portal.

  • IRP validates the JSON generated by the ERP Software

  • On successful validation, IRN is generated. Also, the invoice is digitally signed and a QR code is added by IRP.

  • The digitally signed e-invoice JSON along with QR code will be sent to the supplier who in turn will print these details on the invoice. In the case of an integrated environment of ERP and IRP via GSP, the software will automatically fetch and print such details.

  • The signed e-invoice data along with IRN (same JSON data returned by the IRP to the seller) will be sent to E-Way Bill System and to the GST System.

  • Using the JSON data received from IRP, the e-invoice system will auto-populate the Part-A of e-way. If the complete details of the e-way bill (Part -A and Part-B) are available with the seller at the time of generation of the e-invoice, the e-way bill will be generated automatically, and e-invoice data will also capture the e-way bill number.

  • Similarly, the GST system will auto-populate the details in GSTR-1 and GSTR-2A.

  • Buyer will get real-time visibility in GSTR-2A for confirming the ITC of the invoice uploaded by the supplier.

Conclusion


With e-invoice already being implemented for bigger businesses and nearing the deadline of implementing e-invoicing for 5 crores and above businesses, it is a necessity for the business to have an accounting or ERP software that will help you seamlessly generate e-invoice without impacting the way you use to operate your business. While the applicability of the e-invoice is for the business of more than 5 crores from 1st August, 2023, the long-term vision of the council is to implement the new e-invoicing system for all taxpayers irrespective of the turnover threshold.

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