What is an e-Invoicing System in GST?
The e-Invoicing system has introduced a new system in the GST structure in which businesses can generate a digital invoice directly from the government GST portal for all the goods & services provided by them.
It would be incorrect to say that the e-Invoicing system simply involves generating an invoice from the GST portal.
Rather, e-Invoicing involves the submission of an already generated standard invoice on the e-Invoice portal of the government.
Tax frauds, tax leakage, tax evasions & malpractices in filing the returns are some prominent issues that will be kept in check with the e-Invoicing system.
e-Invoice is the new normal!
e-Invoicing has become a very crucial part of the GST regime in a very short period.
e-Invoicing or electronic invoicing is being implemented on all businesses having an annual aggregate turnover of INR 500 Cr. & above from October 2020 & has been nothing but a success ever since.
e-Invoice generation under GST is simpler but involves few more steps than the traditional invoicing system.
Under the e-Invoicing umbrella, taxpayers are required to generate the invoices in their billing systems & ERPs but in the SCHEMA as specified by the Government.
How can I get an e-Invoice?
Well, it’s not that difficult. To explain to you in a very crude way, I have listed down some broad steps to help you understand the actual process flow of generating an e-invoice.
- Taxpayers will continue to generate their invoices using their respective ERPs or Accounting systems.
- The main change that is introduced is that these invoices will now be reported to the Government portal which is specifically designed for handling the e-Invoices called ‘Invoice Registration Portal’ (IRP).
- When these invoices are reported at the IRP, it generates a signed e-Invoice with a unique ‘Invoice Reference Number’ (IRN). A QR Code is also generated with this IRN number.
- This signed e-Invoice with a unique Invoice Reference Number (IRN) and a QR code will then be issued to the receiver.
A GST invoice will be valid only with a valid IRN generated by the ‘Invoice Registration Portal’ (IRP).
We can break this process into two parts:
- Supplier to IRP
- GST System to Buyers
Let us understand the process in parts.
1. Supplier to IRP
Generating invoices by the seller in his existing accounting or billing system.
The IRP only accepts the JSON file format; hence the seller’s system should generate a JSON file format of the invoice.
Uploading of the e-invoice JSON to the IRP. The JSON may be uploaded directly on the IRP or also through e-Invoicing software GST Suvidha Providers (GSPs) or a third party.
IRP generates an Invoice Reference Number (IRN) based on the supplier’s GSTIN.
IRP will further check from the central registry of the GST System for verification of all the data furnished in the invoice, like GSTIN of the supplier, document number, etc.
On confirmation from the central registry, IRP adds its digital signature to the invoice data and also adds a QR code to the JSON file.
Return digitally signed JSON along with unique IRN & a QR code back to the seller.
Uploaded data of invoice will be shared with then GST System & e-way bill generation portal.
2. GST System to Buyers
Send the signed and authenticated e-invoice data along with IRN (same as that has been returned by the IRP to the seller) to the GST System as well as to the E-Way Bill generation System.
GST System will now auto-populate the GSTR-1 of the seller.
Also Read- GSTR 1 and GSTR 3B Return
e-Invoicing applies to which businesses?
W.e.f 1st October 2020, e-Invoicing will apply to all the businesses whose turnover is 500 Crores & above.
But, according to the recent update of January 2021, e-Invoicing has been made mandatory for all businesses whose turnover exceeds 100 Crores.
Recent Update regarding e-invoice Applicability:
Recently, the e-Invoice portal of the Government of India has enabled an option for sandbox testing for businesses whose turnover falls in the bracket of 50– 100 Crore bracket.
This may be an indication that the GST Council may soon start applying an e-Invoicing system to the businesses falling under the turnover bracket of 50-100Cr. The applicability date will probably be 1st April 2021 however, there has been no official notification released by the Government about it.
Therefore, all the businesses identified under this turnover bracket should start preparing for this change & get the necessary infrastructure up and running.
Recent Update on e-invoice & GSTR-1
Auto-population of GSTR-1:-
The government has now introduced a new automation facility in the GST portal which will auto-fetch the e-invoice generation data from the Invoice registration Portal (IRP).
Initially, there were some issues being faced in this auto-population exercise as some of the details of the invoices were not getting auto-populated in the GSTR-1 of the seller.
However, troubleshooting activities have been done and efforts to correct this inadvertent gap are still on.
Auto fetching of the complete data from the IRP will take some time.
Hence, taxpayers are advised not to wait for the complete auto-population of data, and instead proceed further with preparing and filing the GSTR-1.
There are improvements being made to the e-invoice portal and GePP Tool (GST e-Invoice Preparing and Printing Tool).
For further clarifications, click here.
e-invoice vs. GSTR-1 Reconciliation
One of the major benefits of e-invoice generation is that its details will get auto-populated while filing GSTR-1returns.
This feature will act as a basis for all the processes that fall further such as the release of taxes, reconciliation, or claiming maximum Input Tax Credit.
Due to various issues, the government had delayed the release of the auto-population feature. However, recently the government has rolled out a new feature that will now allow this auto-population saving the time of the taxpayers as well as the efforts.
Therefore, the taxpayers should know the details of this auto-population which in turn will have further implications on the tax processes.
Auto-population of the data in GSTR-1 will be done as shown in the table below:
|Sr. No||Column auto-populated in GSTR-1||Supply Type|
|1.||B2B 4A –Supplies other than those (i) attracting reverse charge and (ii) supplies made through e-commerce operator||Outward supplies made to registered persons other than RCM|
|2.||B2B 4B –Supplies attracting tax on reverse charge basis||Taxable outward supplies made to registered persons on which RCM is applicable|
|3.||EXP 6A – Exports||Export Supplies|
|4.||CDNR 9B – Credit or debit notes (Registered)||Credit/debit notes issued to registered persons|
|5.||CDNUR 9B – Credit or debit notes (Unregistered) – with UR type as exports with payment and without payment of tax||Credit /debit notes issued to unregistered persons|
Businesses have been benefiting from this automation technique since December 2020.
e-Invoicing is compliance is of high priority for the businesses and hence the data furnished while the generation of your e-invoice should be up-to-date and flawless.
Advantages of e-Invoicing
e-Invoicing has had an important contribution towards the GST structure for keeping in check some ill-practices that were going on in the existing tax structure.
The benefit of e-Invoicing has a positive impact on the various facets of the GST structure. Following are some of the advantages highlighted as shown below:
- Real-time reporting of transactions for authentication by the government portal.
- This transaction data will be available for Compliance and generation of e-way Bills.
- Easy ITC claim.
- Will prevent blocking of the cash flow due to mismatches.
- Solves a major problem of mismatching of data by faster data reconciliation.
- Improved business efficiency.
- Easy adaption to the GST Compliance.
In this article, we took a quick overview of the overall structure and faces of the e-Invoicing system. We also learned about the recent update related to the GSTR-1 Auto-population facility provided by the GST portal.
E-Invoicing benefits are going to help in the long run to curb tax evasions and tax leakage problems.
Though initially, the e-invoicing schema format may seem confusing, over time the taxpayers will get familiar with the system.
With multiple third-party GST Suvidha Providers (GSPs) in the market, e-Invoicing has become simpler than ever.
For more such informative content, stay tuned.
Until the next time….
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Disclaimer: The information contained in the above article are solely for informational purpose after exercising due care. However, it does not constitute professional advice or a formal recommendation. The author does not own any responsibility for any loss or damage caused to any person, directly or indirectly, for any action taken on the basis of the above article.
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