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A Complete Comprehensive Guide About E-Invoice Under GST

When it comes to GST in 2020, the most major and extensively publicized change has been e-invoicing. Industry-specific invoicing procedures have existed. Despite the proprietary methods of preparing invoices, the overall taxpayers welcomed the unified approach to e-invoicing.

Understanding E-Invoice Under GST

When it comes to GST in 2020, the most major and extensively publicized change has been e-invoicing.

Under GST, E-invoicing is abbreviated and more often known as an E-invoice. E-invoice is essentially a mechanism that allows GSTN to electronically authenticate typically produced invoices.

E-invoice is commonly misunderstood to entail the creation of invoices through the GST site. However, the same term appropriately refers to the submission/uploading of ERP/accounting software-produced invoices into the Invoice Registration Portal (IRP) for electronic validation.

The current essay attempts to clarify the fundamentals of E-invoice; it covers several stages of implementation of E-invoices and briefly describes its relevance under GST.

How E-Invoice Started in India?

In May 2019, the first committee was formed to discuss the usability of E-Invoicing and to design an e-invoicing implementation strategy for India based on worldwide deployments. Since the committee’s recommendations, numerous iterations of E-Invoicing Specifications have been produced, culminating in the publication of the E-Invoice Schema in January 2020.

The requirement was expected to go into effect on April 1, 2020. However, the mandate was pushed to October 1, 2020, following the 39th GST Council meeting on March 14, 2020. The requirement ultimately went LIVE on October 1, 2020, in stages.

Basics Of E-Invoice Under GST

The fundamentals of e-invoicing are emphasized here.

  • E-invoice is a procedure through which GSTN authenticates a typically generated invoice. Following authentication, each invoice will be assigned an IRN (i.e., Invoice Reference Number). 
  • E-invoice is solely relevant to B2B transactions (i.e. provision of products or services, or both, to a registered person). E-invoicing attempts to reduce tax evasion, auto-populate multiple returns, and reduce the reconciliation problem that is now prevalent under GST.

Basics Of E-Invoice Under GSTHow To Generate E-Invoice?

An invoice is generated by the taxpayer’s system and transmitted to the Invoice Registration Portal (IRP) for approval. After authorization, the invoice data is updated with IRP’s digital signature, a QR Code, and the Invoice Registration Number (IRN). This is called an E-Invoice.

Data Points to Remember For Generating E-Invoice

The data points required to construct an E-invoice are determined by the e-invoice schema and template. The overall amount of data fields in an e-invoice using the GST standard format is around 140, of which approximately 50 are obligatory or necessary subject to specified criteria.

Details such as customer and supplier information, invoice value, tax rate, description and HSN of products or services, taxable value, and tax amounts are all required. Payment-related optional data fields include bank account number, manner of payment, pre-tax values, reference document number, and so on.

The number of line items permitted per e-invoice is limited to 1000. If no value is to be entered into any of the essential fields, a ‘Nil’ value should be entered for that field to ensure proper IRN formation.

Data Points to Remember For Generating E-Invoice

Who Needs To Generate E-Invoice?

E-Invoices under GST have been adopted in the country in stages based on the firms’ aggregate annual turnover. The turnover limit for mandatory issuance of e-invoice (electronic invoice) under the goods and services Tax (GST) has been reduced from INR 500 million (US$6.6 million) to INR 200 million (US$2.64 million) as of April 1, 2022, by India’s nodal body for administering indirect taxes, CBIC (Central Board of Indirect Taxes and Customs). Failure to present a proper invoice results in the receiver being denied the input tax credit (ITC), as well as fines. 

This annual turnover barrier has now been cut to INR 100 million, effective October 1, 2022, according to a recent announcement.

These developments indicate a significant rise in reporting obligations for commercial organizations. The government hopes to use this measure to help small firms adopt technology and plug leaks in tax compliance, particularly tax cheating, among small enterprises. These tiny firms, which often produce informal sale invoices or “kacha bills,” will be required to submit e-invoices. As a result, they will find it difficult to under report their sales since these businesses’ business-to-business interactions will be documented via the e-invoicing platform.

Who Needs Not to Generate E-Invoice?

According to GST notice the following individuals are free from creating e-invoicing:

  • NBFCs
  • Insurance company
  • GTA
  • Financial Institution
  • Banking company
  • Passenger transportation service provider
  • Provider of services involving admission to cinematograph film screenings in multiplex screens.
  • Units of Special Economic Zones (SEZs) (Notified by Notification Nos. 13/2020 and 61/2020-Central Tax): According to the notifications, the exclusion is for SEZ Units, not SEZ Developers.

Types of Transactions Need To Be Reported To Under E-Invoicing

E-invoicing is only applicable to B2B (Business to Business) transactions (including B2G (Business to Government). E-Invoicing covers B2B Supplies as well as Exports (including Deemed Exports), Supplies to SEZ B2B Reverse Charge Invoices, and Supplies through E-commerce Operators.

Applicability of E-invoicing and RCM transactions

  1. If a transaction through E-commerce falls under RCM, it is also subject to GST E-invoicing. In addition, an e-commerce operator can produce IRN for the same.
  2. As we can see, GTA is one of the RCM-notified services, although it is currently excluded from E-invoicing. SEZ units are free from E-invoicing, however, the SEZ developer must create IRN since they are subject to the E-invoicing regulation. E-invoicing is not required for B2C transactions (Business to Consumer). Invoices for taxpayers with an AATO of more than Rs 500 crore, on the other hand, must include a self-generated QR code. E-Invoicing does not cover import transactions.

Final Thoughts

Unlike the prevalent misconception that an E-invoice must be created on the common site, an E-invoice under GST can be prepared using any software/tool that supports the required E-Invoicing format. It is necessary to design the system so that invoice data may be transmitted and received.

It is vital to understand that taxpayers will continue to generate invoices. Taxpayers can generate IRN using technologies that can be integrated into their existing invoicing procedures or manually. However, there are numerous duties after IRN creation, such as getting the invoice printed with a QR code, validating its auto-population in GSTR 1, and so it is advisable to pick a solution that can meet all e-invoicing and GST compliance demands. Diligen is your go-to solution for accounting and finance related services.

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