Maximizing Efficiency with Sales Invoices and HSN Wise Summary/Annexure1

The sales invoice and HSN-wise summary are crucial components of compliance under the GST regime in India. Efficiency in the creation and reporting of sales invoices and a proper understanding of HSN codes are important for businesses to ensure the smooth conduct of their business within the purview of GST rules and regulations. Accurate documentation is vital for businesses to avoid penalties and legal issues.  With the use of technology and following the best practices, businesses can navigate the complexities of GST smoothly and focus their time and resources on the growth of their business. This article aims to guide businesses in maximizing efficiency in handling sales invoices and the significance of HSN codes, HSN-wise summary, and Annexure 1.

Sales Invoice under GST

Section 31 of the CGST Act of 2017 mandates the issuance of an invoice or bill of supply for every supply of goods, services, or both. The type of invoice issued depends on the category of the registered person making the supply or the nature of the business of the firm. For instance, a registered person making a supply issues a tax invoice, whereas a registered person dealing only in exempted supplies or being registered under the composition scheme issues a bill of exchange in lieu of an invoice. As per the act, an invoice must contain details like the name, address, and GSTIN of the supplier, serial number, date of issue, name, address, GSTIN of the recipient, HSN code, description, quantity, taxable value of goods, rate of tax, place of supply, whether tax is payable on a reverse charge basis, and the signature or digital signature of supplier or his authorized representative.

Maximizing Efficiency with Sales Invoices-Mandatory e-invoicing in GST

The government introduced mandatory e-invoicing for businesses with an annual turnover of 5 crore rupees for their B2B transactions, with the primary aim of streamlining the indirect tax system. This mandatory implementation is set to bring more efficiency and transparency to the tax system.

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Timely Invoice Generation and Verification: Crucial for E-waybill Compliance

Implementation of the E-way bill system

The GST council, in its 37^th meeting on September 20, 2019, recommended introducing the electronic invoice (e-invoice) system in GST in a phased manner to enhance the ease of compliance and smooth conduct of business. E-invoicing basically involves reporting details of specified GST documents, including GST invoices, debit, and credit notes, to a government-notified portal and obtaining a reference number. There are many advantages to e-invoicing, like accuracy and transparency, as details are auto-populated in the e-way bills and GST returns. It also reduces processing costs, improves payment cycles, and improves overall business efficiency. It standardizes the tax procedures and allows interoperability. The advancement in technology in recent times, along with increased penetration of the internet and the easy availability of computer systems, has made e-invoicing a popular choice globally. The taxpayers must create the GST invoices in their own billing or accounting software or ERP systems and report these invoices in the ‘invoice registration portal (IRP)’ that the department has provided on the common portal. The IRP then returns the signed invoice with a ‘unique invoice reference number (IRN)’ along with a QR code, which can then be issued to the receiver. The invoice is valid only when it has a valid IRN. The digitization of the invoicing system can bring the following benefits to businesses as well as the government:

• Automation for accuracy and transparency

The automation process will help businesses create standardized e-invoices directly from their accounting systems, reducing errors due to manual data entry. This will save time and money, speed up payment processes, and provide greater liquidity for businesses.

• Promotes transparency and prevents tax evasion

The real-time tracking of the e-invoices in the digitized system ensures that every transaction is accurately recorded and reported to the GSTN. This will help the tax authorities monitor the financial activities of businesses and detect discrepancies, tax evasion, or fraud.

• Simplify compliance and reduce costs

E-invoicing eliminates the need for manual record maintenance and reconciliations; the automated system ensures a seamless flow of data by directly integrating with the GSTN. Compliance costs will be reduced for the businesses, and they will save precious time, which they can utilize in growth strategies for their businesses.

• Avoidance of litigation

As compliance improves with digitization, the GST system gets streamlined. Litigation is reduced, and a lot of time and money spent due to legal processes are minimized.

• Advanced technology

Advancements in technology and access to the internet are helpful for businesses today. As more advanced and efficient software and platforms are available, invoice generation, tax reporting, and administration are more efficient and hassle-free.

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Integrating E-waybill with GST: Simplifying Tax Compliance for Businesses

Maximizing Efficiency with HSN-wise summary

HSN codes help to classify goods and services efficiently, apply the correct tax rates to the products, and calculate accurate GST. Applying the correct HSN codes provides more clarity and transparency to businesses, as it helps the government monitor transactions and check for tax evasion. Businesses can avoid penalties due to errors in classification and applying tax rates. It also helps them claim accurate input tax credits, thereby reducing tax liability.

HSN code requirements in Invoices

The Harmonized System of Nomenclature, or HSN, is an international standardized system of names and numbers classifying traded products. CBIC passed notification No. 78/2020-Central Tax dated October 15, 2020, stating that businesses with an annual aggregate turnover (AATO) exceeding 5 crore rupees must mention a minimum 6-digit HSN code for all their B2B and international transactions. Businesses with an AATO less than 5 crores are required to mention a 4-digit HSN code. These requirements are proposed to be integrated into the e-way bill system by February 15, 2024. For services, the service accounting codes, or SAC, need to be furnished. The primary purpose of the HSN and SAC codes is to classify goods for taxation and calculate GST. HSN codes and product classification are important in e-way bill documentation to determine the applicable GST rate and to provide a uniform classification system that is easy to understand by all concerned. Hence, it is important for taxpayers to understand HSN codes so that correct GST rates are applied and to calculate accurate tax liability. It also helps the government monitor financial transactions efficiently and eliminate tax evasion. GSTN has provided a utility on the portal to check the HSN codes of the products to help taxpayers. HSN codes help in global trade, fraud prevention, efficiency in operations, and staying compliant. CBIC has now made it mandatory to furnish the HSN and SAC codes in the e-way bill system. Failure to mention the codes can lead to penalties. All businesses with a turnover of more than 1.5 crores are required to mention the HSN and SAC codes in their GSTR-1, which contain the details of all outward supplies. GSTR-1 is a mandatory return that all registered taxpayers must file every month or every quarter, furnishing details of outward supplies, including export sales.

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How to Generate HSN-wise summary in GST

The HSN-wise summary can be generated while filing GSTR-1 in the following steps:

• Log-on to GST portal gst.gov.in and click on the returns dashboard
• Select financial year, quarter and period in the returns dashboard
• Click on prepare online button on GSTR-1 tile
• Select ‘table 12—HSN-wise summary of outward’ to add HSN details.
• Enter minimum two digits of the HSN code in the HSN box and the system will provide a drop-down list of related valid HSN codes
• Select the applicable HSN code from the drop-down and the description will be auto-populated in the description field
• If the desired HSN code does not exist in the drop-down menu, you can manually enter the applicable code as per the law. The system accepts manual entry of HSN codes at present.
• After entering the HSN code manually, it is mandatory to fill out the description of HSN in description field
• Fill all other mandatory fields like tax rate, taxable value, IGST, CGST, and SGST, and click on add button
• This will move the added records to ‘added/edited invoices to be saved’ section
• Continue to add the remaining records, if any, by following step 5 to 9
• After adding all the records, click save button under ‘added/edited invoices to be saved’ section to save all the added records
• This will move all added records to the ‘processed records’ section.
• Enter records in the other applicable tables of GSTR-1 and proceed with filing GSTR-1.

Maximizing Efficiency with Sales Invoices-Auto-population of e-invoice in GSTR-1

The electronic matching of invoices and auto-population of data from IRP in GSTR-1 have made compliance easier for taxpayers. It helps them claim accurate input tax credits and avoid complications like notices from the tax authorities. Autopopulation brings transparency and efficiency as it allows tax officials to monitor the information that taxpayers provide in their returns and ensure accurate tax calculations. It also helps the authorities confirm that the taxpayers claim eligible input tax credits accurately. For taxpayers generating e-invoices, the data gets auto-populated in the following tables of GSTR-1:

• 4A, 4B, 4C, 6B, 6C—B2B Invoices
• 6A: Export Invoices
• 9B: Credit/Debit notes (Registered): CDNR
• 9B: Credit/Debit notes (CDNUR)

The data gets auto-populated from the ‘invoice registration portal (IRP)’ of the taxpayer. This data can be edited before filing the GSTR-1. To edit an e-invoice detail, the taxpayer can access the invoice by going to Dashboard > Returns > Form GSTR-1/IFF: B2B and clicking on the edit button under the action column. Then save the changes. After the changes are saved, the ‘source IRN’ and ‘IRN date’ fields will become blank. The taxpayer can generate a summary by clicking on the ‘generate summary’ option in GSTR-1. They can download the e-invoice details that are auto-populated in an Excel file by clicking the ‘download details from e-invoices (Excel) button available at the bottom of Form GSTR-1 page.

The new GST return filing system

To simplify the GST return filing process, the government is planning to introduce a new filing system. Their main aim is to simplify tax procedures, eliminate tax evasion, and improve compliance. The new forms were made available to the public on a trial basis between July and September 2023. The offline tool is similar in design and appearance to the online portal that is currently in use for filing and paying taxes. The plan is to roll out the new system in a phased manner. Under this system, a single return form will replace multiple return forms. The single return consists of three components: a main return, form GST Anx-1, and form GST Anx-2. In the proposed new filing system, the new return form has four types to suit different taxpayers. The taxpayers have the option to choose from the four types depending on their turnover in the preceding year and expected supplies during the current year. They can choose the type that is most convenient for them. The different types are as below:

• Return type-RET-1-Periodicity-Monthly

Category of taxpayers whose turnover in the preceding financial year exceeded 5 crore rupees and who expect to make B2B, B2C, exports, and SEZ supplies.

• Return type-RET-1-Periodicity-Quarterly

Category of taxpayers whose turnover in the preceding financial year was less than 5 crore rupees and who expect to make B2B, B2C, exports, and SEZ supplies.

• Return type: RET-2 Periodicity-Quarterly (GST-Sahaj return)

Category of taxpayers whose turnover in the preceding financial year was less than 5 crore rupees and who expect to make only B2C supplies. This return is not available for e-commerce operators.

• Return type: RET-3-Periodicity-Quarterly (GST-Sugam return)

Category of taxpayers whose turnover in the preceding financial year was less than 5 crore rupees and who expect to make B2B and B2C supplies. This return is not available for e-commerce operators. In the above types, though the return filing is allowed on a quarterly basis, they must pay the tax on a monthly basis in Form No. GST-PMT-08.

Components of GST return in new return filing system

The returns for GST RET-1, RET-2, and RET-3 will consist of data auto-populated from two of its components, GST ANX-1 and GST-ANX-2. The main returns must be filed before the 20^th of the month, following the month and quarter to which the tax liability pertains. The forms GST ANX-1 and GST-ANX-2 are supplements to the main return forms GST RET-1, RET-2, and RET-3.

Annexure -1 or GST ANX-1

The return GST ANX-1 is to substitute the existing GSTR-1 in the new filing system. Registered taxpayers must report all their outward supplies, inward supplies under reverse charge, and imports made during a particular tax period in GST ANX 1. The details related to all the inward supplies from registered persons, supplies received from an SEZ unit or developer, and imports made by registered taxpayers must be reported in GST ANX 2. After the supplier uploads the documents related to supply in GST ANX 1, the recipient can view them in GST ANX 2. The recipient can either accept or reject them or keep them in a pending status so that he can act later. The recipients report the details of suppliers attracting a reverse charge. During this trial period, the taxpayers have been able to upload their invoices using the offline tool ANX-1 and view and download the summary of inward supplies in the common portal.

Conclusion

Businesses need to follow the best practices for efficient invoicing and return preparation by creating standardized and efficient invoicing processes with the help of technology. By using automated tools and a robust system for HSN code management, they can streamline the reconciliation process. Regular audits are important to ensure data accuracy. Staying updated regularly on GST amendments and regulations is vital for the business to avoid non-compliance. Taking the help of professional service providers can help businesses overcome the challenges and complexities of GST compliance.

Frequently asked questions

1. What is meant by a GST-compliant invoice?

Answer: An invoice that is created as specified under the rules and regulations of GST is called a GST-compliant invoice. The invoice must contain details including the name, address, and GSTIN of the supplier, serial number, date of issue, name, address, GSTIN of the recipient, HSN code, description, quantity, taxable value of goods, rate of tax, place of supply, whether tax is payable on a reverse charge basis, signature, or digital signature of the supplier or his authorized representative.

2. Can the recipient see the details uploaded by the supplier in GST-ANX-1?

Answer: Yes, the documents uploaded by the supplier in GST-ANX1 can be seen by the recipient on a real-time basis in his form GST-ANX-2.

3. Is interest or a late fee applicable for the delay in uploading the details in GST ANX-1?

Answer: Interest is applicable for late reporting of liabilities and delay beyond the due date in filing the return. There is no late fee for GST ANX-1.

4. Is mentioning the HSN code mandatory?

Answer: Yes, notification No. 78/2020-Central Tax, dated October 15, 2020, states that mentioning the HSN code in the invoices is mandatory.