The introduction of the E-Invoicing system by the Indian Government is of significant importance to business establishments. In a notification issued by The Central Board of Indirect Taxes and Customs (CBIC), from 1st January 2021 onwards, e-invoicing has been made mandatory for business-to-business (B2B) transactions for taxpayers turnover exceeding Rs.100 crore. The businesses with a turnover of more than Rs.50 crore were brought under the e-invoicing system from 1st April 2021 onwards. Thus business concerns must understand the various implications of the e-invoicing announcement.
Understanding the E-Invoicing system
E-invoice meaning Electronic invoicing, is the system by which business to business invoices are verified electronically by the Goods and Service Tax Network for further processing on the GST portal. In this method, a unique number will be generated against each invoice. This process is performed by the Invoice Registration Portal (IRP) that the Goods and Service Tax Network operates. As part of this process, the invoice details will be sent on a real-time basis from IRP to both GST as well as the E-way bill portal.
11 Key benefits from E-Invoicing for your business
Let’s delve deep into the various advantages that E-invoicing can bring for your business concern.
1. Live tracking of invoices – With the E-invoicing system, now you can track the invoices generated by your suppliers on a real-time basis. The process speeds up the availability of Input Tax Credit (ITC).
2. Eliminates the manual reporting process – As a taxpayer, you need to report the invoices only once under this system. In turn, it gets validated by the Invoice Registration Portal and generates an Invoice Reference Number (IRN). On completion of the authentication process, the information will be populated automatically to the GSTR-1 return. Hence, the system’s major advantages are that it involves only one-time reporting and removes the manual reporting process associated with the previous system.
3. Makes it easy for buyers – When the e-invoice is updated on the GST portal for validation, it will be sent to the buyer on his e-mail id stated in the e-invoice. This process enables the buyer to reconcile the purchase order with the e-invoice. It also helps him to accept or reject the invoice as and when it is processed.
4. Cost reduction – Unlike the earlier days, there is no need to take printouts and send the invoices by courier to the recipients. Hence electronic invoicing comes with the benefit of saving money associated with paper and courier charges.
5. E-way bill generation simplified – Now, for creating an e-way bill, you just have to update the vehicle details. The contents in Part-A of the E-way bill will be updated automatically from the e-invoice validated by the GST portal.
6. Eliminates frauds – Since the tax authorities have access to live data, it will considerably decrease fraud.
7. Facilitates interoperability – Since the e-invoices are produced in a standardised format, the invoices created by a particular software can be read by any other software. Hence, the feature of interoperability enables smoother processing of transactions.
8. Cuts down mistakes in data entry – Under this process, the invoice will be updated on the common portal that enables multipurpose reporting. As discussed earlier, once authentication of all the invoices is completed, they will be transferred on a live basis to both the GST portal and the E-way bill portal. Since the data is getting populated automatically, it will help you get rid of the manual data entry involved in filing GST returns. One more advantage is that it eliminates the chances of errors caused while entering data manually.
9. Cuts down tax evasion – The chances of manipulating invoices is quite less under this system. The reason is that there is live access to data, and before processing a transaction, the invoices will be generated. The system also eliminates the chances of creating GST invoices that are fake. One more benefit is that only Input Tax Credit that is genuine can be claimed. As the ITC and the details related to output tax are readily available to the tax officials, it becomes easy for them to curb the fake input credit.
10. QR codes make it easier – For calculating the amount of Input Tax Credit, it is necessary to possess the GST invoices. A taxpayer may misplace the invoice that was generated. In some cases, you may need extra copies of the same invoice. The QR code will be quite helpful in such situations. Just by scanning the QR code, the invoice can be created any number of times and produced in a PDF format.
11. Facilitates better control – Since all the information is stored on a single portal, the details can be accessed from anywhere, anytime. The analytics and automated reports make it easy to get an overview of the entire information.
How to generate E-Invoice?
Let’s go through the various steps involved in creating an e-invoice.
Step 1 – Create an invoice on the taxpayer’s ERP
As in the previous system, taxpayers will continue to generate invoices. However, since the reporting is done electronically, there are some criteria to be met. Now you have to follow the E-invoice schema, and there are some mandatory and non-mandatory details to be submitted. Let’s check the mandatory fields of an invoice that applies to the supply of goods.
The seller has to keep in mind that the accounting or billing software can generate a JSON file of the final invoice. Using the following methods, a seller can create a JSON file by including the e-invoice schema and the compulsory parameters.
- Any accounting or billing system that provides this service.
- A utility using which interaction is possible with the accounting or billing system. It can also be an ERP system, such as a mobile app or an Excel or Word document.
- An offline tool where invoices can be created by typing in invoice data.
Step 2 – Generating a unique IRN
For each document submitted, the e-invoice system generates a 64 character Invoice Reference Number (IRN or hash), a unique number. Currently, there are two methods for generating the IRN. They are i.) Offline and ii) Using API (It can be done through GSP integration, through direct integration or an enabled sister concern’s GSTIN). For more details on the procedure to be followed, please refer to the document.
Step 3 – Generating a QR code
Once the Invoice Reference Number is generated by the e-invoice system, digitally sign both IRN and the Quick Response (QR code). The QR code that is digitally signed can be accessed on both the central portal and also using offline apps.
Since E-invoicing is a new system that the Indian government has introduced, many taxpayers are still unaware of the nitty-gritty involved. We hope the above document will serve as a handbook for all those who are new to the E-invoicing system and help them generate an e-invoice without any hiccups.
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Q. Is it mandatory to have a QR code for e-invoice?
Ans. Yes, It is mandatory for all those registered persons who fall under the ambit of the new e-invoicing rules.
Q. Can I generate an e-invoice after the invoice date?
Ans. Yes, You can generate an IRN even after the date of the invoice. However, it is not recommended, as it will violate the Time of Supply rules. Moreover, without the IRN, the invoice with you will be invalid.
Q. Is it mandatory to create an e-invoice for B2C?
Ans. As per the GST Notification 89/2020, from 1st April 2021 onwards, it has been made compulsory to print the self-generated QR code on all B2C transactions.
Q. What will happen if I don’t generate an e-invoice?
Ans. Failure to issue an e-invoice is an offence, and it can attract a fine of 100% of the tax due or Rs.10,000, whichever is higher.