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Starter’s Guide to e-Invoicing Under GST

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# What is e-invoicing under GST?

The GST is a value-added tax applied on most goods and services sold for domestic consumption. Consumers pay the GST, but businesses selling the products and services must remit it to the government. Electronic invoicing or e-Invoicing is a form of electronic billing, used by trading partners to present and keep a track of transactional documents and ensure that the terms and conditions of trading agreements are being met. 

E-invoice does not imply that invoices be generated/created from a central portal or tax department because this is not practicable and would impose excessive restrictions on trade and commerce. Various industries have different business requirements, which cannot be satisfied by software.

It’s a system in which the designated portal electronically uploads and authenticates all Business-to-business (B2B) invoices. Invoice Registration Portal (IRP), managed by the GST Network (GSTN) generates a unique Invoice Reference Number (IRN) for each invoice after successful authentication. In addition to IRN, each invoice is digitally signed and includes a QR code. This process is referred to as e-invoicing under GST. 

# When was it introduced?

It was made applicable from 1st October 2020 to all businesses with an aggregate turnover exceeding INR 500 crore; this was the first phase of e-invoicing. The second phase implied that every registered entity whose aggregate turnover in a year exceeds INR 100 crore will adhere to the e-invoicing mandate for all B2B sales and is in effect from 1st January 2021. The third phase was effective from 1st April 2021, according to which e-invoicing is mandatory for all registered B2B sales with an annual turnover of INR 50 crores.

# What was the purpose of introducing e-invoice?

Many people used fake invoices to avoid paying taxes and commit fraud, which was a serious problem for the government. A mechanism for e-Invoicing was proposed to put an end to these activities by mandating e-Invoices through the government portal.

# What are the steps to generate an e-invoice?

For invoice generation, any existing accounting or invoicing software/application provider (SAP/Tally/Busy) must adhere to the PEPPOL (Pan European Public Procurement Online) standard. GSTN referred to the PEPPOL standard which uses a version of electronic XML called Universal Business Language (UBL). E-invoice schema, masters, and E-invoice template are all parts of the GSTN’s e-invoice.

  1. Creation of the invoice on the taxpayer’s ERP (Enterprise Resource Planning), which is a business management software.
  2. Generation of the Invoice Registration Number (IRN). It is up to the supplier to generate the IRN. In the absence of IRN, the government’s IRP system will generate the same.
  3. On the Invoice Registration Portal, upload a JavaScript Object Notation (JSON) file for each B2B invoice, along with the IRN (if one was produced).
  4. IRP will evaluate the produced hash/IRN attached to JSON (or generate an IRN) and authenticate the file against the GST central registry to ensure there are no duplicates.
  5. The IRN will be the unique identity of the E-invoice for the entire fiscal year.
  6. The invoice will be updated with IRP’s digital signature on the invoice data and a QR code will be added to the JSON file after successful verification. The unique IRN (hash) of the digitally signed QR code can be validated on the central portal as well as by offline apps. 
  7. The digitally signed JSON will be sent by the portal along with IRN and QR code back to the seller. The invoice will be sent to the buyer’s registered email address as well.

# What are the advantages and disadvantages of using e-invoice?

Advantages-

  1. E-invoicing allows a supplier’s invoices to be tracked in real-time. This enables the input tax credit to be available faster (ITC). Frauds will be reduced when data is made available in real-time to tax officials. Enhance compliance and curb tax evasion.
  2. Under e-invoicing, the invoices are to be reported just once. This eliminates the time-consuming manual reporting process that existed earlier.
  3. E-invoicing makes it simple to generate an e-way bill because the taxpayer only needs to update vehicle information. The details in Part-A of the e-way bill will be auto-populated from the GST portal-authenticated e-invoice.
  4. Improve account reconciliation as once uploaded to the GST portal for authentication, the e-invoice will be shared to the buyer’s email address. It will also be possible to accept or reject invoices in real-time.
  5. Because e-invoices are generated in a standardized format, invoices created by one software can be read by another software. Interoperability is possible as a result of this.
  6. The GST invoices are required to calculate the ITC amount. An assessee may misplace or require more copies of an invoice that has already been issued. The QR code will prove useful in such cases. The assessee can create the invoice in PDF format any number of times by scanning this code.

 Disadvantages-

  1. Only B2B invoices are currently covered by the new invoicing system. Business-to-Consumer (B2C) invoices have yet to be brought under the e-Invoicing framework. When B2C invoices are involved, several frauds are reported. This is due to the absence of an ITC component.
  2. The archive option is not provided by IRP. The IRP does not store invoices for more than 24 hours. The prior invoice number cannot be used to create a new e-invoice. A taxpayer must revise the invoice number as well as correct any inaccuracies and create a new e-invoice on the IRP.
  3. A partial cancellation of an e-invoice is not possible. It must be completely cancelled, even if it is only for a small change. E-invoice cancellation is possible on the IRP within 24 hours. The cancellation cannot be done on the IRP after 24 hours; it must be done on the GST portal.

You may also like to read this:

1. Compulsory e-invoicing only for businesses having turnover > Rs.50 cr from Sept

2. 5 Easy Steps to Generate E-Way Bill on the GSTN Portal

3. How to Prepare GSTR-4 Annual Return for Composition Taxpayers using Offline Tool?

4. 6 Simple Steps to File GSTR-9 Online

5. How to Apply for GST Registration Online in India?

6. How to generate GSTR-3B using Vyapar?

7. How to generate GSTR-1 using Vyapar?


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