There has been a lot of talk about electronic invoicing ever since the GST Council approved the applicability of e-invoicing. The GST Council authorized the use of electronic invoicing at its 37th meeting in September 2019, with the primary goal of making sure that all parts of the GST ecosystem can communicate with each other.
Businesses must ensure that they fully understand the invoice and all associated changes, including e-invoicing, to be sufficiently ready for e-invoicing applicability.
We will review all the details of the GST e-invoicing system in this article.
What is an e-invoice?
An electronic invoice, or e-invoice, is a type of invoice that is sent electronically, meeting specific standards. Both systems can exchange and identify data using the same standardized format.
One other benefit of electronic invoices is that the purchasing company’s accounts payable system can easily import them because of the structured data they contain.
What is the concept of e-invoicing?
E-Invoice, short for “Electronic invoicing,” is a system that allows for the electronic upload and authentication of all business-to-business invoices through a specified gateway.
After the complete authentication process, IRP assigns a distinct Invoice Reference Number (IRN) to every invoice. Every invoice also has a QR code and is digitally signed in addition to IRN. Electronic invoicing is the general term for this procedure under GST.
Reasons for introducing e-invoicing
While business users can easily interpret the bills produced by each application, the computer system cannot do so. Take “B” accounting software as an example; it simply cannot read invoices created by “A” software.
These days, you may find an extensive range of e-invoicing applicability options from multiple accounting and billing software packages, each with its preferred format for storing customer data.
The information on the invoice is the same, but the GST system cannot read and comprehend it because of this.
The same data is being transmitted in many invoicing forms these days, and no system can make sense of it.
As a result, there was a need to establish a standard for the format of e-invoicing applicability data sharing in order to guarantee data compatibility.
What is e-Invoicing, and is it mandatory for businesses above Rs.5 crore turnover?
Businesses with revenue over Rs 5 crore are required to use e-invoicing starting August 1, 2023, as per the new GST laws. As part of its continued attempts to improve GST collection and decrease tax fraud, the government has lowered the threshold from Rs 10 crore, a considerable decrease.
Errors in bill production are less likely to happen with electronic invoicing, and once created, there is no way to undo the process.
On top of that, the government is aware of all sales data in real-time so that no transaction can remain secret. Companies with a revenue of more than 10 crores are now eligible to receive invoices electronically.
Companies with a yearly turnover of more than Rs 500 crore were required to issue e-invoices from October 1, 2020, as part of the government’s staggered implementation of the system.
The subsequent reduction in the turnover e-invoice limit of 100 crores took effect on January 1, 2021. Businesses having a turnover of five crores or more would be required to submit e-invoices as of August 1, 2023, after a rise from 50 crores to 20 crores on April 1, 2022, 10 crores on October 1, 2022, and finally 50 crores on April 1, 2021.
How many types of e-invoice are there?
You should be familiar with the two main types of genuine eInvoicing. Online invoicing with or without compliance with regulations. Here, we will take a quick look at each one separately.
-
Non-compliant e-Invoicing.
Here is how to handle electronic invoicing that does not comply:
- Both the customer and the supplier have reached an agreement about the design and subject matter of the electronic invoice.
- Information will be properly structured using X12, Edifact, or XML tools or simple web forms for online billing.
- The vendor can use their Accounts Receivable (AR) system or a web-based form to generate and submit an electronic invoice.
- If the electronic invoice is prepared for processing by the Accounts Payable (AP) system, then the buyer will get it in that format.
Here, the eInvoice strictly conforms to the data formats specified by the business associates. This method of electronic invoicing does not comply with the legal requirements of the nations involved.
This can be due to a lack of e-invoicing laws in a particular country or the fact that businesses choose to take advantage of B2B efficiency while still
maintaining a paper procedure that complies with tax requirements.
-
Compliant eInvoicing.
The procedure for compliant electronic invoicing is quite similar to the one described above, with the following exceptions:
- All parties’ eInvoice data must conform to the rules and laws of the territories in which their respective businesses operate.
- When it comes to eInvoice content validation, security, non-repudiation, and archiving, the bills follow the rules set out by the government.
- Audit and VAT needs can be easily satisfied with the readily available invoices.
- The procedure does not involve any paper at all.
A business should take this approach as it will make maintaining their VAT requirements easier. However, eInvoicing is not bound to any generally accepted rules.
Instead, any business that operates on an international level would need to be aware of and adapt to the vastly different country-specific methods, which might range from complete bans to liberal regulations.
What are the advantages of e-invoicing applicability?
- Simplified reporting of B2B bills during creation, eliminating the need for several formats
- Using this information, you may create a sales and purchase register and prepare your GST returns for the new e-invoicing system.
- It is also possible to construct e-way bills using data from electronic invoices.
- Data reconciliation between books and GST returns submitted is optional.
- The prompt release of input tax credits and the real-time monitoring of supplier-prepared bills are within reach. Additionally, problems with verifying input tax credits will decrease.
- Processing tax returns automatically
- With real-time data availability for tax officials, the amount of fraud should decrease.
- Reducing the frequency of fake GST invoices
When is e-invoicing coming?
The Goods and Services Tax (GST) Council has authorized the gradual e-invoicing applicability to give businesses sufficient time to adjust to the new e-invoicing system.
According to the most recent change, all registered people whose aggregate turnover (based on PAN) in any preceding fiscal year from 2017–18 onwards surpasses 5 crores will be required to use e-invoicing starting August 1, 2023.
What is the rule for e-invoicing?
CGST Rule 48 specifies the regulations for the eligibility and creation of electronic invoices.
Who needs an e-invoice?
Based on their turnover and industrial sector, particular companies in India are required for e-invoicing applicability. The Goods and Services Tax (GST) Council oversees the e-invoicing system, while the National Informatics Centre (NIC) puts it into action. When it comes to India, these are the situations when electronic invoices are necessary:
Revenue: Electronic invoicing is mandatory for businesses with a yearly revenue above Rs. 10 crore.
Industry segment: Companies operating in the following industries are required to use electronic invoicing:
- Companies involved in producing items have an annual revenue of Rs. 10 crore or higher.
- Service providers have an annual turnover of Rs. 10 crore or higher.
- Parties that have chosen to participate in the GST composition scheme include exporters, importers, GTAs, and Special Economic Zone (SEZ) entities.
- These include insurance agencies, banks, financial organizations, and non-banking financial services providers.
Important Note: Only companies who have registered under GST are required to use e-invoicing. In addition, companies that are facing inspections under the Income Tax Act must use e-invoicing.
E-invoicing applicability is necessary for enterprises registered with the
Central Board of Indirect Taxes and Customs (CBIC) and organizations with a revenue over Rs. 10 crore. This category includes companies that have registered with the ICECP, the Indian Customs Electronic Commerce Portal.
Companies who want to be a part of the National E-Invoicing Pilot Project must use electronic invoicing. The National Informatics Centre (NIC) is spearheading this initiative to increase the prevalence of electronic invoices nationwide.
The last group that must employ electronic invoicing are businesses that have registered with the Central Excise Act.
Additionally, companies sending export invoices and those who have chosen the Composition Scheme are required to do so.
Will sending and receiving invoices be different from e-invoices?
No need for businesses to switch to the GST Portal or any other site to create invoices; they may keep using their current accounting software. But the truth is that an invoice can only be legitimate once the IRP has confirmed the QR code and the IRN.
In order to send out valid invoices, companies need to transfer the data from their accounting software to the IRP. As an additional piece of evidence for all the papers created for the transfer of goods from the seller’s location to the buyer’s, the portal will next produce an IRN (Invoice Reference Number) and a QR code.
In this case, the software you use for managing your company will be important in making sure you comply with the new requirements and in creating invoices that are GST-compliant.
The company management software you use must have an integrated feature that can automatically create e-invoice data in the required format and, more significantly, communicate with the IRP portal without any human interaction whatsoever to complete the e-invoice process.
Who is exempted from the e-invoice?
If you fall into one of the following categories, you are not required to create an electronic invoice under GST as per Rule 48(4).
- Financial organizations like as NBFCs, banks, and insurance companies have a hand in this.
- A company that provides transportation services for goods and passengers as well as services related to movie admission.
- Special Economic Zones (SEZ) Units. (Note: Developers of Economic Zones are eligible to use electronic invoicing)
How do you generate an e-invoice? Step-by-step instructions
E-Invoice requires that you utilize the portal’s offline tool or your ERP/business management software to produce invoice data in the specified format (JSON). After that, you may submit it to the IRP, and it will use the IRN and QR code to verify and confirm the invoice data.
1. Generating Invoices
To generate an e-invoice, one can use accounting or billing software that conforms to the standard format. A taxpayer is under no need to create an electronic invoice using the official government tax portal; this is to eliminate a common but incorrect belief.
Actually, taxpayers are free to keep using any accounting software they choose; the only requirement is that the application can produce invoices in the specified e-invoicing format.
Creating an invoice requires the following information:
- Document Type Code
- Supplier Legal Name
- GSTIN Number
- Supplier’s Address
- Supply Location
- Supplier State Code
- Supplier Pincode
- Document Number
- Last Original Invoice Number
- Buyer Legal Name
- Buyer GSTIN
- Buyer’s Address
- Buyer’s State Code
- The buyer’s state and pin code. Buyer’s Location Number,
- GSTIN for Shipping, Shipping Location Zip Code, and location details (name, address, place, and pin code) for goods dispatch.
- Item Description
- HSN Code
- Accessible Value
- GST Rate Total IGCT Value
- Total CGST and SGST values
- Overall Invoice Value
- Final invoice JSON
2. Generating Invoice Registration Numbers (IRNs)
Using a common hash-generation process, the supplier can create a one-of-a-kind Invoice Reference Number (IRN). Suppliers can generate IRNs, but it is optional. If there is no IRN, the government’s IRP system will create one.
3. Submit to the Income Tax Registration Portal (IRP)
All business-to-business invoices, whether created in-house or by a third party, are required to upload a JSON file to the Invoice Registration Portal (IRP) along with the IRN, if necessary.
4. Verifying Invoice Data with IRP
In order to prevent any duplication, the IRP will evaluate the JSON information, create an IRN, and check the file against the GST central register. Throughout the financial year, the IRN will serve as the E-invoice’s distinct identifier.
5. Making a QR Code and Digital Signature
We will include IRP’s digital signature to the invoice data and add a QR code to the JSON file if the verification is complete.
6. E-invoice data transfers to GST and E-invoice Portal
You may automate the process of filling out GST annexures by sharing the data you submit with the GST bill and e-invoicing system.
7. Connecting the Supplier’s ERP with the E-Invoice
The vendor will receive the digitally signed JSON, IRN, and QR code from the site. The purchaser’s registered email address will also get the invoice.
It is important to remember that choosing the correct invoicing solution will significantly impact your compliance journey, even if the E-invoicing system is being implemented to reduce tax evasion and make GST compliance easier for taxpayers.
How do you generate an invoice in the GST portal?
To begin, go to the e-invoice portal, then find the registration option. From there, choose “e-Invoice Enablement” if this is your first time using the e-invoicing system.
To complete the OTP verification, enter a specific GSTIN of a company. Please send your yearly turnover figures together with the relevant financial year. Electronic invoicing is something you can sign up for. From now on, whenever you need to produce an IRN, simply go to the e-invoice site, select the option you want to use, and submit your B2B invoices.
How 7-day E-Invoice Generation Limit will Impact Your GST Compliance?
What is the 7-day limit for an invoice?
A new guideline states that taxpayers whose AATO is Rs.100 crore or above cannot submit invoices more than seven days old as of the reporting date.
Keep in mind that this time restriction or e-invoice limit is exclusive to invoices and not debit or credit notes in general. With the goal of preventing the backdating of electronic invoices and ensuring timely compliance, a new seven-day time restriction was implemented on May 1, 2023.
Example
Consider an invoice dated May 7, 2023. You have till the e-invoice limit of May 14, 2023, to create the electronic invoice. You will no longer be able to use the IRP to submit or create electronic invoices after May 14, 2023. The user will not be able to report these invoices after the seven-day window has passed due to validations included in the IRP. Please be sure you report the e-invoice limit within the seven-day deadline.
What is IRN?
After you provide the necessary details, the GST Network e-invoicing system verifies your receipt (the “IRN” stands for “Invoice Reference Number”). And for that, a one-of-a-kind IRN (IRN) is given out. The identifier has 64 digits.
The electronic invoicing system uses a hash-creating method to produce this number. Because of this, it is also known as a hash. The following supplier details are required to form it: G S T I N, fin. Year, document type, document number, etc. Offline tools and an API-based system are the two current techniques for issuing IRNs.
What is the difference between IRN and E-invoice?
| Aspect | E-Invoice | IRN (Invoice Reference Number) |
| Definition | A digital tax invoice generated and authenticated electronically. | A unique reference number is assigned to each generated E-Invoice. |
| Purpose | Electronic format of an invoice replacing physical invoices. | Unique identification number for each invoice. |
| Generation | Generated by taxpayers or accounting software in a specific format. | Assigned by Invoice Registration Portal (IRP) after validation. |
| Data Validation | Undergoes validation checks for accuracy and adherence to tax regulations. | IRNs were generated after the successful validation of invoice details. |
| Significance | Facilitates automation and integration of invoice data with the tax system. | Serves as a reference for the authenticity of an invoice in the government’s tax portal. |
| Format | Follows a specific format defined by government tax authorities. | A unique alphanumeric code is assigned to each invoice. |
| Usage | Exchanged between businesses and shared with tax authorities for reporting purposes. | Physical or electronic bills for identification and authentication. |
| Storage | Electronic records are kept by enterprises and tax authorities. | Stored along with invoice details for future reference and verification. |
| Compliance | Part of the compliance framework is implemented by tax authorities. | Ensure the authenticity of invoices for verification during audits or tax inspections. |
| Legal Requirement | Mandated by government tax authorities in certain jurisdictions. | Legal requirements in jurisdictions were mandated by tax authorities. |
Can we cancel E Invoice?
Invoices will be processed sequentially by IRPs. However, the IRP will have a compact and targeted system to make sure this doesn’t slow down because of the servers.
One strategy for achieving this goal is to ensure that the IRP does not keep electronic invoices for more than 24 hours. Hence, the IRP only allows e-invoice cancellations within 24 hours.
Additionally, it is not possible to cancel just a portion of the invoice; cancellation of the entire invoice is required. The IRP does not support editing electronic invoices.
In three different scenarios, you can choose to cancel your electronic invoice.-
- Error,
- Duplicate entry
- Purchase cancellation on the side of the buyer
Ensure that you have the electronic invoice in hand when you cancel.
Reconciliation of Canceled E-invoices: Reporting and Documentation Requirements
How do you cancel an invoice in Tally Prime?
A visual representation of the invoice data that is easy for users to understand is usually missing from electronic invoices. It is possible, however, to transpose or temporarily transform them into visual representations while processing.
To cancel an e-invoice in Tally Prime, you must first delete the original record. Simply follow these instructions to cancel an electronic invoice:
Before you cancel an electronic invoice in Tally Prime, make sure you have the rights and permissions.
Follow these steps:
- Refer to the E-Invoice report.
- Select “IRN Generated from E-Invoice System” in the Status column.
- To cancel a voucher, choose it.
- Access the E-Invoice Cancellation Details screen by pressing F10.
- Fill out the “Reason for Cancellation” section with the reason for canceling the contract.
- Fill out the Remarks area with additional comments.
- To confirm the cancellation, hit the Enter key.
- Under “Pending,” you’ll see the coupon transferred to the “For IRN Cancellation” area. After that, you may cancel the voucher by sending it via e-invoicing after pressing the Exchange option.
- You can cancel your voucher by going to the IRN Cancel from the E-Invoice System area once the IRP portal processes your request.
Wrapping It Up
It is important to keep in mind that the specific actions and protocols may be subject to modification in accordance with the latest updates and announcements published by the Indian government. If you want the latest and greatest information about E-Invoice and IRN production under GST, it’s best to check the official GST e-invoice portal or contact a tax expert.
FAQs
-
Why is e-invoicing important for businesses?
E-invoicing is electronic billing that meets requirements. Businesses use it to simplify reporting, improve data quality, and comply with GST.
-
Does each business need e-invoicing?
E-invoicing simplifies tax procedures for businesses exceeding Rs. 5 crore. Alternatively, smaller companies may use it for efficiency.
-
What are users’ e-invoicing transition challenges?
Problems with data formatting, incompatibility of software, and integration of e-invoice creation with current systems are common challenges that users face. Proper training and tech assistance can solve these issues.
-
How is e-invoicing different from traditional invoicing?
E-invoicing automates invoice preparation, standardizes formats, and interacts with the GST system for real-time data access and fewer mistakes.
-
Can created e-invoices be canceled or edited?
E-invoices are usually not editable. Any mistakes, duplications, or buyer-initiated cancellations must be made within 24 hours. Full invoice cancellation is required.
-
What are the main e-invoicing steps?
Electronic invoices are created using accounting or ERP software, uploaded to the Invoice Registration Portal (IRP), verified, and issued an IRN.
-
Are there e-invoicing exemptions for particular businesses?
E-invoicing may be excluded for financial institutions, transportation providers, SEZ units, and certain registered enterprises.
-
How does e-invoicing help companies go beyond compliance?
E-invoicing improves business productivity by streamlining operations, improving data quality, speeding up tax returns, and reducing fraud.
-
How does the IRN (Invoice Reference Number) affect e-invoicing?
The IRN uniquely identifies each created e-invoice in the government’s tax system, helping with audits and verifications.
-
What businesses must use e-invoicing under GST?
GST requires e-invoicing for businesses with a turnover above Rs. 10 crore in certain industries and CBIC and ICECP registration.
