Invoice is an Instrument containing details of supply issued by the supplier to the recipient of buyer of goods or services. It contains details pertaining to product description, quantity, rates, discounts, terms and conditions etc. Under GST regime, an “Invoice” or “Tax-Invoice” means the tax invoice referred in Section 31 of CGST Act, 2017. Issuing invoice under GST is important prominently for Claiming Input Tax Credit (ITC), Establishing Proof of Supply and Time of Supply. Invoice issued for Exempted good as well as by person under Composition scheme is referred as “Bill of Supply”.
What is E-Invoice?
Businesses use various types of ERP Software’s available for invoice generation as well as some use manual invoices, both of which are valid. Though the Invoice generated by System is an electronic invoice, but it is not the “E-Invoice” as referred under GST Act. E-Invoice is a system in which B2B invoices are authenticated electronically by the Notified Portal for further use on the common GST portal. E-Invoicing is just a registration of our regular invoice and it is not a generation of Invoice. The Invoice generated by our accounting software or a manual invoice is transmitted to the Notified Portal (Called as IRP- Invoice Registration Portal) in the prescriber format (INV-01), which provides in return a Digitally Signed unique Invoice Reference Number (IRN) along with a QR Code. To simply put,
E-invoice = Your regular invoice + IRN + QR Code + Digital Signature
Why E-Invoicing?
Today there are many accounting software available and every software has its format invoice, data is stored in its format. E-invoicing will help in following standard format to allow the exchange of data as well as readability by the system, which simply means enabling interoperability of data.
Benefits of E-Invoicing (Objectives)
- Real-time reporting& tracking of Invoices on the Government portal, which will reduce the chances of manipulation of invoices.
- Auto-populating data directly into the GSTR-1 of the supplier and then to the GSTR-2A/B of the recipient.
- Integrate auto-generation of E-way bill.
- Standard Invoicing will facilitate interoperability between multiple software’s.
- Minimized mismatch during reconciliation
- Easy and precise ITC Claim by Recipient
- Enabling the use of Invoices as collateral for initiatives like “Invoice financing”, which will especially help SMEs with easy finance.
- E-invoicing once applicable, will continue to apply even if turnover reduced below the threshold
Statutory Provisions for E-invoicing
Inserted vide Notification no. 68/2019 – Central Tax dated 13th December 2019
The following sub-rules are inserted under Rule 48:
(4) The invoice shall be prepared by such class of registered persons as may be notified by the Government, on the recommendations of the Council, by including such particulars contained in FORM GST INV 01after obtaining an Invoice Reference Number by uploading information contained therein on the Common Goods and Services Tax Electronic Portal in such manner and subject to such conditions and restrictions as may be specified in the notification.
(5) Every invoice issued by a person to whom sub-rule (4) applies in any manner other than the manner specified in the said sub-rule shall not be treated as an invoice.
(6) The provisions of sub-rules (1) and (2) shall not apply to an invoice prepared in the manner specified in sub-rule (4).
Inserted vide Notification No.72/2020 – Central Tax dated 30th September 2020
The following clause was inserted under Rule 46:
“(r) Quick Reference code, having embedded Invoice Reference Number (IRN) in it, in
case invoice has been issued in the manner prescribed under sub-rule (4) of rule 48.”.
Explanation of the above notification:
The “sub-rule (4) of Rule 48”&“clause (r) of Rule 46” read together, mandate e-invoicing for the notified class of persons, which specifies Invoice should be in a particular form GST INV 01, which should contain Invoice Reference Number (IRN) also IRN should be embedded in Quick Reference Code received after uploading data on Portal called as Invoice Registration Portal (IRP)
The sub-rule (5) invalidates an invoice prepared by the person liable for e-invoicing, for not preparing an invoice as per sub-rule (4).
Sub-rule (6) removes the applicability of sub-rule (1) & (2) which deal with the manner of preparation of invoices in triplicate for the supply of goods and duplicate for the supply of services to whom e-invoicing is applicable. Therefore, if an e-invoice is issued, then no issue of invoices in triplicate and duplicate.
Applicability of E-invoicing
The applicability of e-invoicing is being done in a phased manner starting from applying to a registered person whose aggregate annual turnover exceeds Rs. 500 crores to now reducing the limit down to Rs. 20 Crores. The applicability was implemented in a phased manner as provided below
Sr. No. | Notification No. | Annual Aggregate Turnover exceeding Rs. | Effective Date |
1. | 61/2020– Central Tax | 500 Crores | 01-10-2020 |
2. | 88/2020– Central Tax | 100 Crores | 01-01-2021 |
3. | 05/2021– Central Tax | 50 Crores | 01-04-2021 |
4. | 01/2022– Central Tax | 20 Crores | 01-04-2022 |
5. | 17/2022 – Central Tax | 10 Crores | 01-10-2022 |
Section 2(6) of the CGST Act: “aggregate turnover” means the aggregate value of all taxable supplies (excluding the value of inward supplies on which tax is payable by a person on a reverse charge basis), exempt supplies, exports of goods or services or both and inter-State supplies of persons having the same Permanent Account Number, to be computed on all India basis but excludes central tax, State tax, Union territory tax, integrated tax, and cess; “
Inserted vide Notification No.70/2020 – Central Tax dated 30th September 2020
(i) for the words “a financial year”, the words and figures “any preceding financial year from 2017-18 onwards” shall be substituted;
Hence, from 01-04-2022, E-invoicing applies to a registered person whose annual aggregate turnover exceeds Rs. 20 Crores in any previous financial year starting from 2017-18. Hence, once the Turnover Condition is satisfied, e-invoicing is applicable for a lifetime. Also, the aggregate turnover will include the turnover of all GSTNs under a single PAN across India.
Non-Applicability of E-invoicing- Entity
e-invoicing shall not apply to the following categories of registered persons, irrespective of the turnover
- SEZ Unit (But Applicable to SEZ Developer)
- Banking Companies, Including NBFC
- Insurance Company
- Goods Transport Agency (GTA)
- Passenger Transportation Services
- Admission to Multiplex Cinema
Note: The non-applicability is QUA-ENTITY & NOT QUA-SUPPLY i.e., the above entity is entirely exempt irrespective of the nature of the transaction. For example, a GTA whose main supply is the transportation charges, sometimes also charges other ancillary charges like loading, Jamali, etc. Here, GTA is exempt as a whole and not just GTA agency services.
Non-Applicability of E-invoicing- Transaction
e-invoicing shall not apply to the following transaction:
- B2C invoices issued by notified persons
- Bill of Entry
- Invoices issued by Input Service Distributors (ISD)
Exempt Supplies including NIL Rated (Except Export)
Transaction to be reported under E-invoicing
- Supplies to registered persons (i.e., B2B & B2G supplies),
- Supplies to SEZs (with/without payment of tax),
- Exports (with/without payment of tax), and
- Deemed exports,
- Reverse Charge Mechanism (Discussed in Detail)
Documents covered under E-invoicing
- Tax Invoices
- Credit Notes
- Debit Notes
- Export Invoice (Even if Exempt)
- Any other document as required by law to be reported by the creator of the document
Reverse Charge Mechanism under E-invoicing
* If the invoice issued by a notified person is in respect of supplies made by him but attracting reverse charge under Section 9(3), e-invoicing is applicable.
* On the other hand, where supplies are received by the notified person from (i) an unregistered person (attracting reverse charge under Section 9(4)) or (ii) through the import of services, e-invoicing doesn’t arise / is not applicable.
* Services through e-Commerce Operators-As E-Commerce Operators pay taxes as if they are the suppliers, they are required to generate IRN for their invoices. Meaning e-Commerce Operators are liable for e-Invoicing & generating IRNs.
Flow under E-invoicing
Components of E-Invoicing
- IRP- Invoice Registration Portal
The Invoice Registration Portals (IRPs) act as Registrars and operate through a website to assign Invoice Reference Numbers (IRNs) to each invoice/credit note/debit note. The invoice details can be uploaded onto the IRP using a prescribed mode to either generate or validate the IRN of the invoice uploaded. Only such invoices with an authorized IRN will be considered valid as per law. The purpose of the Invoice Registration Portal (IRP) is not to generate e-invoices online but only to register the details of the invoices generated by the entity on a day-to-day basis. At present, there is only one IRP – NIC. The e-invoice portal currently in use is https://einvoice1.gst.gov.in/. However, the government will add multiple Registrars (IRPs) in the future.IRP is WATCHMAN, meaning, it just acts as a mediator between Registered Person and GSTN.
- IRN- Invoice Reference Number
Each Invoice uploaded by the taxpayer will get a unique number called an Invoice Reference Number (IRN).IRN is 64 Characters in length. This IRN is a unique number in the GST system, irrespective of the taxpayer, financial year and document type.IRN is generated by the e-invoice system once the taxpayer uploads the invoice details.
IRN is generated using the computer algorithm (RSA256) based on the combination of the Supplier GSTIN, Document Type, Document Number and year of the Invoice (Financial Year).
- Digital Signature
All the validated invoices are digitally signed by the IRP using the private key of the IRP. This digitally signed JSON is then made available to the supplier. It Shouldn’t be confused with the Signature of the taxpayer
- QR Code
Quick Response Code is abbreviated as QR code. It is a two-dimensional barcode applied to items for presenting information in its machine-readable format. In the e-invoicing system, the QR Code will be used to provide information about a particular invoice quickly, without the need to retrieve such information from an external source, say, the internet. It would help indirect tax officers to determine whether a particular invoice is valid and contains all the relevant particulars with the use of handheld devices. This is especially useful when they are out on the field.
Once the Invoice Registration Portal (IRP) returns the e-invoice to the supplier after assigning the QR Code, the supplier only needs to use the QR Code to generate a PDF of the signed e-invoice.
Modes of registering Invoices with IRP:
There are various modes of generating IRN:
- Web-based: This is the direct way of generating IRN through the designated IRP.
- API based: API Stands for Application Programming Interface. This is through linking your ERP system with the designated IRP.
- SMS based: SMS via Registered mobile in a specific format.
- Mobile App based: Through Application provided by the IRP
- Offline tool based: Offline Excel utilities for the same are provided by the IRP.
- GSP based: GST Suvidha Providers through integration.
GePP-On– Stands for GST e-invoice Preparation and Printing Tool. It is a Browser based as well as Mobile downloadable online as well as the offline user-friendly system provided by the GSTN which uses E-way bill and e-invoice web credentials with2 Factor Authentication for safety (Login + OTP) and can be used in offline mode (for entering invoice details) which has Built-in validation features and contains all functionalities of e-invoice system.
E-Invoice & E-way Bill:
E-invoice & E-way bills are integrated. If part A & Part B Details are also fed along with E-invoice generation, an E-Way bill will be generated in the flow.
Methods of IRN & E-way Bill Generation
- Only IRN : Supply Details (Invoice) > IRN (e-invoice)
- IRN & E-way Bill : Supply Details (Invoice) + Transportation Details >IRN (e-invoice) + E-way Bill
- IRN first & E-way Bill later : Supply Details (Invoice) > IRN (e-invoice) AND Supply Details (Invoice) + Transportation Details > E-way Bill
Time Limit under E-Invoicing:
As of now, Documents with a date greater than 01.10.2020 only can be registered. It may be restricted in future to documents of the Current Financial year only. If required, IRNs can be cancelled but within 24 hours of the Generation of the IRN. Even though IRN is cancelled, the same document number cannot be used for registering again. If the E-way bill is associated with an e-invoice, the E-way bill has to be cancelled first and then the IRN. It is a two-step process.
If the E-way bill cannot be cancelled (already verified by the officer etc), then IRN Cannot be cancelled.
Disadvantages of E-Invoicing (Challenges)
- Registered person to whom E-Invoice is mandated, but doesn’t e-invoice, the Invoice shall not be treated as a valid invoice (Rule 48(5)). Hence, ITC isn’t available to the Buyer.
- Complications in Integrating ERP System with E-Invoicing.
- No Amendment or Partial Cancellation of E-Invoices
- Cancellation of E-invoice not possible after 24 Hours.
- Complication in Reconciliation between Books, E-invoice System, E-way Bill system, GSTR1.
- As the portal will delete data within 24 hours, need for alternative arrangements for the storage of data by businesses.
- E-invoicing System stability and non-availability issues.