Understanding E-Invoicing Under GST: Meaning, Benefits and Documents Required
E-invoicing under GST was made mandatory for companies with a turnover of Rs 5 crore and above. This e-invoice is a document with IRN associated with it and the digitally signed QR code is also printed on it.
The IRP generates a unique Invoice Reference Number (IRN) for each invoice once you have successfully completed the authentication process. IRN and each invoice must be digitally signed and added with a QR code. The collective process is known as e-invoicing under GST. Read on to know the benefits, types, modes of generating e-invoices, and other essential aspects.
What is E-invoicing Under GST?
An electronic invoice or e-invoice is digital proof of validating a monetary transaction between a buyer and supplier and approved by a government tax portal. E-invoicing is a system proposed in which invoices of B2B are prepared digitally in a format authenticated by the Goods and Services Tax Network (GSTN). The e-invoicing system ensures that all businesses follow a similar format before reporting their invoices to the GST authorities.
The government shared an e-invoice draft for public viewing in August 2019. The GST Council later modified the draft to make it compliant with its regulations. The standard format of e-invoices makes compliance easier. Furthermore, it increases transparency across the GST ecosystem since it covers multiple industries.
Why was E-invoicing Under GST Introduced?
Though invoices generated by most software look the same, more or less, they are still indecipherable by computer systems. For example, if software A generates an invoice, software B wouldn’t be able to read it. However, taxpayers and business owners can comprehend it.
Currently, various billing and accounting software are available, each using a different format for generating invoices. Therefore, the GST system can’t read and understand these invoices despite all information in invoices remaining the same.
Eventually, the need arose to establish a standard format in which electronic data of invoices are shared with others to ensure the interpretation of invoice data.
What are the Benefits of E-invoicing Under GST?
Some of the prominent benefits of the GST e invoice applicability are listed below:
- It eliminates redundancy in reporting the same details multiple times in different formats and forms. You must make a one-time upload, and all invoice details are pre-populated.
- Part-A of the e-way bill is captured automatically, and you only have to update the transporter details.
- Moreover, the B2B details are also automatically captured in the GSTR-1 return once you have uploaded all invoices.
- There’s a significant reduction in challenges related to input credit verification. It has become possible since you report the same data to the tax department and the buyer when you share an invoice of the inward supply (purchase) register (GSTR-2A).
- When you receive information from the GST e-invoice system, a buyer can reconcile details with the purchase invoice and accept or reject it within a stipulated time under the ‘New return’ option.
- It increases efficiency in the administration of taxes and eliminates the possibility of fake invoices.
- To reduce tax evasion, B2B invoices must be audited, and input credits and output taxes must be matched at the system level.
Also Read: How To File GSTR-9 And What Is The Penalty For Late Filing?
E-invoicing Under GST Applicability
The GST council has approved the GST e invoice applicability in a phased manner for ensuring that business owners and taxpayers have ample time to adapt to the new invoicing system via a digital approach.
- The e-invoice was already introduced on 1st October 2020 for business owners turning out a turnover of Rs 500 crores.
- The e-invoice applicability under GST for businesses generating a turnover of Rs 100 crores and more began on 1st January 2021.
- E-invoicing under GST for businesses generating a turnover of Rs 50 crores and more is applicable from 1st April 2021.
- Lastly, the most recent introduction is for businesses with a turnover of Rs 20 crores and more from 1st April 2022.
Type of Business Eligible for E-invoice
The e-invoice applicability under GST will apply to all businesses registered under GST and issue B2B invoices in a phased manner.
Who Should Upload E-invoice?
A seller should electronically upload all invoices to the IRP system and capture the QR code along with the invoice reference number (IRN) in the physical copy of the invoice that has been issued to the recipient according to the e-invoicing under GST.
Documents Required for E-invoicing Under GST
The taxpayer is required to upload the following documents to the IRP system:
- Invoice by supplier
- Debit note by a supplier
- Credit note by a supplier
- Any other document mandated by law to be uploaded to the IRP system by the taxpayer.
How is E-invoice Different from the Current Practices of Invoicing?
The GST e-invoice system requires taxpayers to electronically upload and authenticate all information with a unique invoice reference number (IRN) and an electronically signed QR code. However, the difference between e-invoicing and the current practice of invoicing is that the seller must print the IRN and QR code on the invoice before it can be issued to the buyer.
Businesses can use ERPs or business management software to connect seamlessly to the IRP system. It can help businesses automatically print the QR codes and IRN on their invoices. Furthermore, it gets easier for businesses to manage requirements and e-invoice rules under GST without hampering other business activities.
What are the Modes of Generating E-invoices Under GST?
Several modes are available for e-invoicing under GST to assist taxpayers in selecting the best one matching their needs. E-invoices can be generated in the following different modes:
- Web-based
- API based
- SMS based
- GSP based
Also Read: Goods And Services Tax (GST): Rates, Registration, Eligibility, Benefits And Returns
Final Word
The e-invoice applicability under GST not only helps streamline the GST processes but also helps tax authorities keep track of all B2B transactions since businesses are required to upload all information to the GST e-invoice portal. It shall go a long way in preventing tax crimes. Furthermore, businesses will have fewer opportunities to manipulate invoices as they are generated before the transactions occur. Lastly, authorities can identify fake invoices by matching the input tax credit to output tax on the GSTN portal.
FAQs on E-Invoicing Under GST
Ans: Partial cancellation of an e-invoice is not possible. E-invoices must be fully or wholly cancelled if they must be cancelled. The IRN must be notified within 24 hours of the cancellation when this occurs. After that period, you cannot cancel an e-invoice using the IRN. If you want to cancel, you must manually do it through the GST portal. Before filing the returns, this must be done. Invoice numbers cannot be reused when you cancel, and a new one must be generated; otherwise, the IRP will reject it.
Ans: E-way bills can be generated by taxpayers when they generate an e-invoice. However, they can generate an e-way bill at a later time as well. It is necessary to submit an e-invoice with the e-way bill in order to ensure the validity of the e-way bill. It is often believed that the e-way bill has been rendered obsolete since e-invoicing was introduced, but that is not the case. It is a very important document when transportation of goods takes place and e-way bills are required.
Ans: An unregistered person can generate an e-invoice if he or she is a consumer, as this is a business-to-consumer transaction. An ITC will not be claimed by the customer or an unregistered individual. Currently, there is no requirement for B2C transactions to be processed electronically. However, dynamic QR codes must be generated for B2C transactions. For taxpayers with a turnover exceeding Rs. 500 crores since December 1, 2020, this is a mandatory requirement.
Before you go…
- Looking for instant 🚀 personal loans 24*7 anywhere, anytime? Get personal loans up to ₹20 lakh starting at 9.9% p.a. Install the Navi app now!!
- Or, maybe you’re looking to buy that house you’ve been eyeing 🏠 and you need a loan of up to ₹5 crore. Install the Navi app now and get instant in-principle approval right away! Interest rates starting at 8.74% p.a.
- How about an affordable health insurance policy👨⚕️ starting at a monthly premium of just ₹235? Install the Navi app now and get your policy in under 2 minutes.
- Instead, want to put your savings into action and kick-start your investment journey 💸 But don’t have time to do research. Invest now with Navi Nifty 50 Index Fund, sit back, and earn from the top 50 companies.
Disclaimer: Mutual Fund investments are subject to market risks, read all scheme-related documents carefully.
This article has been prepared on the basis of internal data, publicly available information and other sources believed to be reliable. The information contained in this article is for general purposes only and not a complete disclosure of every material fact. It should not be construed as investment advice to any party. The article does not warrant the completeness or accuracy of the information, and disclaims all liabilities, losses and damages arising out of the use of this information. Readers shall be fully liable/responsible for any decision taken on the basis of this article.
Explore: Blogs on Income Tax Section
