E-invoicing is the electronic generation and authentication of invoices using a standardised format compatible with any software. Its implementation under GST applies to businesses surpassing a specified annual aggregate turnover. The primary goal of e-invoicing is to enhance the efficiency and transparency of invoicing processes while alleviating the compliance burden for taxpayers.
This blog post explores the E-invoice integration for services and underscores digital invoicing benefits for service providers. Additionally, it addresses frequently asked questions and challenges associated with e-invoicing. Continue reading to gain insights into this transformative invoicing approach.
E-invoicing under GST
An electronic or e-invoice is a digital confirmation validating a financial transaction between a purchaser and a supplier, officially approved by a government tax portal. The concept of e-invoicing involves the digital preparation of business-to-business (B2B) invoices formatted and authenticated by the Goods and Services Tax Network (GSTN). This system ensures businesses follow a uniform format when reporting their invoices to GST authorities.
In August 2019, the government released a draft of the e-invoice for public review. Subsequently, the GST Council modified the draft to align it with regulatory requirements. The standardised e-invoice format facilitates compliance and enhances transparency within the GST ecosystem, encompassing various industries.
Importance of E-invoicing
Before the implementation of e-invoicing, businesses created invoices using multiple software, and the details of these invoices were manually uploaded in the GSTR-1 return or through ERP systems.
Upon the filing of GSTR-1 by the respective suppliers, the invoice information would be reflected in GSTR-2B for the recipients. Simultaneously, consignors or transporters had to generate e-way bills manually, importing the invoices in Excel or JSON format or via ERP.
With the introduction of the e-invoicing system, the process of generating and uploading invoice details remains unchanged. This is achieved by directly importing the Excel tool/JSON or API integration or through a GST Suvidha Provider (GSP). This streamlined data flow applies not only to GSTR-1 preparation but also to e-way bill generation. The e-invoicing system emerges as a pivotal tool in facilitating these processes.
Additionally, E-voice integration with services further enhances the efficiency and accuracy of the invoicing system, extending its benefits across a broader spectrum of business transactions.
Documents necessary for E-Invoicing
- Invoices issued by the supplier
- Credit notes issued by the supplier
- Debit notes issued by the recipient
- Any other document specified under the Goods & Service Tax Act requiring reporting as an E-Invoice by the document creator
Steps to get an Invoice under GST
- Generate a regular invoice on the software: Provide necessary details such as billing name and address, supplier’s GST number, transaction value, item rate, applicable GST rate, tax amount, etc.
- Raise the invoice on the ERP or billing software: Upload the invoice details, especially mandatory fields, to the Invoice Registration Portal. This can be done using a JSON file, through an application service provider (such as an app or a GST Suvidha Provider), or directly via API.
- Generate the Invoice Reference Number (IRN): The Invoice Registration Portal validates key details of the Business-to-Business invoice, checks for duplications, and generates an Invoice Reference Number (IRN) as a unique identifier.
- Create a QR code in Output JSON: Once the IRN is generated, the Invoice Registration Portal digitally signs the invoice and creates a QR code in Output JSON format. If the supplier has provided their email ID in the invoice, they receive an intimation of the E-Invoice generation via email.
- Send details to the GST Portal and E-Way Bill Portal: The Invoice Registration Portal sends authenticated invoice details to the GST Portal, auto-filling the seller’s GST Return form (GSTR-1). Additionally, the details are sent to the E-Way Bill Portal for seamless integration with the E-Way Bill generation process.
Taxpayer Categories exempted from generating e-invoices under GST
- Insurance companies, banking entities, and financial institutions, including NBFCs.
- Goods Transport Agencies (GTAs).
- Registered entities providing passenger transportation services.
- Registered entities providing services related to admission to the exhibition of cinematographic films in multiplex services.
- SEZ units (excluded via CBIC Notification No. 61/2020 – Central Tax).
- Government departments and local authorities (excluded via CBIC Notification No. 23/2021 – Central Tax).
- Entities registered under Rule 14 of CGST Rules (OIDAR).
Advantages of E-Voicing
Real-time tracking of invoices:
E-invoicing enables the real-time tracking of invoices prepared by a supplier, ensuring faster availability of input tax credit (ITC).
One-time reporting of B2B invoices:
With e-invoicing, a taxpayer reports invoices just once and obtains authentication from the Invoice Registration Portal (IRP), which issues the Invoice Reference Number (IRN). Authenticated details are then auto-populated into the GSTR-1 return, streamlining the previous manual reporting process.
Easy creation of e-way bill:
e-Invoicing simplifies e-way bill generation by requiring the taxpayer to update vehicle details. Part A of the e-way bill auto-populates from the e-invoice authenticated on the GST portal.
Benefits for services through Digital Invoicing:
The e-invoicing system extends specific benefits for services, promoting efficiency and accuracy in the invoicing process.
Helps the buyers:
Once uploaded on the GST portal for authentication, the e-invoice is emailed to the buyer. This allows the buyer to reconcile purchase orders with the e-invoice and promptly accept or reject the invoice in real-time.
Reduction in frauds:
Real-time availability of data with tax authorities through e-invoicing contributes to significant reduction in fraudulent activities.
Reduction in data entry errors:
The e-invoicing system involves uploading invoices on a common portal, enabling multipurpose reporting. Authenticated invoices are transferred to the GST portal and e-way bill portal in real time, eliminating the need for manual data entry during GST returns and reducing data entry errors.
Services e-invoice advantages:
The benefits of e-invoice for services include improved efficiency and compliance within the system.
Integration in service billing:
Integrating e-invoicing in service billing streamlines processes, enhancing overall efficiency and accuracy in service-related transactions.
Digital transformation in billing:
Embracing e-invoicing represents a digital transformation in billing practices, aligning with modern technological advancements and improving overall billing efficiency.
E-invoicing transcends being merely a technical solution; it represents a strategic opportunity for businesses to enhance their performance and competitiveness in the digital economy. Embracing e-invoicing enables service providers to elevate customer service, streamline operations, and optimise cash flow. For customers, the advantages include expedited and simplified invoice verification, payment, reconciliation processes, heightened visibility, and control over spending and budget management.
E-invoicing is a mutually beneficial solution for service providers, customers, government, and society. This innovative approach enhances the efficiency and effectiveness of invoicing and taxation systems, fostering the growth and development of the digital economy. Beyond being a mere compliance requirement, e-invoicing emerges as a competitive advantage for businesses striving to thrive in the digital era.
Frequently Asked Questions(FAQs)
Is E-invoicing a win-win solution for all stakeholders?
E-invoicing is a win-win solution for service providers, customers, government, and society. It enhances operational efficiency, compliance, and competitiveness in the digital landscape.
Is E-invoicing only a compliance requirement?
E-invoicing is not solely a compliance requirement but also a competitive advantage for businesses aiming to thrive in the digital era. It contributes to efficiency, effectiveness, and growth.