E-invoicing under GST – What is e-Invoicing & Its Applicability

E-invoicing under GST (Goods and Services Tax) in India is a system where businesses generate invoices for goods and services through a standardized electronic format directly on the GST portal. This electronic invoicing system facilitates the direct uploading and validation of invoices, making it part of the tax filing process and ensuring better compliance and monitoring.

Table of Contents

1. What is E-Invoice Under GST?
2. Latest Updates in E-Invoicing Under GST
3. Criteria for Who Must Generate E-Invoice and Applicability of E-Invoicing
4. How E-Invoicing Under GST Works
5. Benefits of E-Invoice to Help Businesses
6. What are the mandatory fields of an e-invoice
7. Frequently Asked Questions (FAQs)

1. What is E-Invoice Under GST?

An E-invoice, or electronic invoice, under the Goods and Services Tax (GST) system in India, is a standard invoice that is generated and stored electronically by a business for a transaction of goods or services. The concept of E-invoicing was introduced to replace the traditional paper-based invoicing process, making it more streamlined and efficient.

1.1 Features of E-Invoice Under GST

• Standardization: The format of the E-invoice is standardized for all businesses. This format includes all necessary details such as the GSTIN of the supplier, the GSTIN of the recipient, invoice number, date of invoice, HSN codes, tax rates, taxable values, and other critical information.
• Real-time Tracking: Since the invoices are generated on the GST portal, it allows for real-time tracking of invoices by both businesses and the GST authorities. This integration helps in better compliance and tracking of input tax credits.
• Automation: E-invoices facilitate automation of tax returns filing and input tax credit matching, reducing the chances of errors and manipulation in maintaining records.
• Interoperability: Being standardized, E-invoices can be easily shared or accessed by multiple stakeholders like businesses, tax authorities, and banks without the need for re-entry or reconciliation.

1.2 Importance of E-Invoice Under GST

• Enhanced Compliance: E-invoicing ensures that the invoices are compliant with GST regulations as the details are verified in real-time by the GST portal. This reduces the chances of fraudulent practices and enhances transparency.
• Reduction in Errors: Manual data entry is prone to errors. E-invoicing automates much of the data entry process, significantly reducing the chances of errors that can occur with manual processing.
• Faster Processing: E-invoicing speeds up the process of invoice generation, delivery, and payments, thus reducing the overall transaction time. It also helps in faster verification and reconciliation of transactions for tax purposes.
• Cost Savings: By moving away from paper-based systems, businesses save on costs related to printing, dispatch, and storage of invoices.
• Improved Business Efficiency: E-invoicing enables better management of working capital and helps in streamlining business operations. The quick access to financial data through electronic means allows for better decision-making and financial planning.
• Environmental Benefits: Reducing paper usage by adopting electronic means contributes to environmental sustainability, which is an added benefit of the E-invoicing system.

2. Latest Updates in e-Invoicing Under GST

1. New Threshold for E-Invoicing Mandate (Effective from April 1, 2024): The Goods and Services Tax Network (GSTN) has mandated that e-invoicing will now be required for businesses with turnovers exceeding ₹5 crores, starting from the next financial year commencing April 1, 2024​.
2. Implementation of E-Invoicing for B2C Transactions: The GST Council has recommended implementing e-invoicing for B2C (Business-to-Consumer) transactions in a phased manner, which marks a significant expansion of the e-invoicing system that was previously limited to B2B (Business-to-Business) transactions​.
3. Introduction of New Invoice Registration Portals (IRPs): To support the e-invoicing process, additional Invoice Registration Portals (IRPs) have been introduced. These portals are designated for different turnovers and types of businesses to facilitate the generation of e-invoices, ensuring compliance and streamlined operations​.

These updates signify the ongoing efforts to enhance tax compliance and the efficiency of the GST framework, making it imperative for businesses to stay updated and prepare their systems accordingly to comply with the new mandates.

3. Criteria for Who Must Generate E-Invoice and Applicability of E-Invoicing

The criteria for who must generate an e-invoice and the applicability of e-invoicing revolve primarily around the turnover of the business, which sets the e-invoice limit, and the types of transactions and documents involved.

3.1 Turnover Criteria or E-Invoice Limit

The e-invoice system mandates e-invoicing for businesses with varying turnover thresholds. Below is a table summarizing these thresholds and their applicability dates:

These changes reflect the phased implementation of the e-invoice system to incorporate more businesses under its ambit, ensuring comprehensive compliance across various business sizes.

3.2 Transactions and Documents Criteria

The e-invoice system covers specific types of transactions and documents, ensuring that various business activities are well-regulated under GST. Here’s a detailed list:

Documents Required for E-Invoicing:

• Tax Invoices
• Credit Notes
• Debit Notes

Types of Transactions Covered:

• Business-to-Business (B2B) Sales
• Business-to-Government (B2G) Sales
• Transactions involving exports
• Transactions deemed as exports
• Supplies to Special Economic Zones (SEZs) with or without payment of tax
• Transactions under reverse charge as specified

Exclusions:

• Business-to-Consumer (B2C) transactions (currently excluded from mandatory e-invoicing)

This structured approach in documenting and processing e-invoices ensures that there is clarity and ease of compliance for businesses under the GST framework. The e-invoice system is part of a broader effort to digitize tax compliance, reduce tax evasion, and make the process more efficient for businesses and the tax authorities alike.

4. How E-Invoicing Under GST Works

The process of e-invoicing under GST involves several key steps, primarily utilizing the e-invoice portal for generating and managing invoices. Here’s a step-by-step explanation of how the system operates:

Step 1: Prepare the Invoice

Businesses prepare an invoice using their accounting or billing software. This invoice must conform to the standardized format that has been specified for GST e-invoices. It should include all mandatory details such as GSTIN of supplier and recipient, invoice number, date of transaction, HSN/SAC codes, taxable value, and applicable GST rates.

Step 2: E-Invoice Login

The supplier needs to log in to the e-invoice portal using their credentials. This is a crucial step where the data of the invoice gets interfaced with the GST system.

Step 3: Upload Invoice Details

Once logged in, the supplier uploads the invoice details to the e-invoice portal. This can be done in various formats supported by the portal, such as JSON. Many GST software solutions provide direct integration that automates this upload process.

Step 4: E-Invoice Generation

The e-invoice portal processes the uploaded invoice details. If the details are in order, the portal generates an Invoice Reference Number (IRN), a unique QR code, and a digital signature. The IRN is calculated based on the GSTIN of the supplier, invoice number, fiscal year, and document type.

Step 5: Communication of E-Invoice

The portal then sends back the digitally signed e-invoice with the IRN and QR code to the supplier. This e-invoice is now considered valid for GST compliance and can be issued to the buyer.

Step 6: Integration with E-Way Bill

If required, the details from the e-invoice can be used to generate an e-way bill, provided the transaction involves the movement of goods exceeding the specified value. The e-invoice portal is integrated with the e-way bill portal to facilitate this process.

Step 7: Real-time Data Availability

Once the e-invoice is generated, its details are available in real-time to both the supplier and the recipient on their respective GST portals. This ensures that all data is synchronized and helps in accurate and timely input tax credit reconciliation.

Step 8: Archiving

All generated e-invoices are archived in the e-invoice portal for a period as specified by the GST law. This is crucial for audit and compliance purposes.

The implementation of this e-invoice system under GST aims to streamline the process of invoice management for businesses, reduce errors in tax calculations, and enhance compliance through real-time data integration with the GST portal.

5. Benefits of E-Invoice to Help Businesses

E-invoicing under GST brings several benefits that can significantly help businesses streamline their operations and comply with tax regulations more efficiently:

• Reduced Paperwork: E-invoicing minimizes the need for physical paper trails, reducing costs and effort associated with printing, storing, and retrieving invoices.
• Improved Accuracy: Automated data entry reduces human errors in invoice processing, leading to more accurate financial records and tax filings.
• Faster Invoice Processing: The electronic format allows for quicker issuance and receipt of invoices, speeding up the entire billing cycle and reducing delays in payments.
• Better Compliance: E-invoices are standardized and integrated directly with the GST portal, ensuring that the invoices are compliant with GST laws and regulations.
• Real-time Tracking: Businesses and tax authorities can track the invoice status in real-time, which aids in better management of tax liabilities and input tax credits.
• Enhanced Security: Digital invoices are more secure and less prone to theft, loss, or tampering compared to physical invoices.
• Easier Audit and Compliance Checks: With all invoices stored and accessible electronically, audits and compliance checks become more streamlined and less intrusive.
• Seamless Integration with Other Tax Processes: E-invoicing is integrated with the e-way bill system and GST returns, simplifying the reconciliation process and reducing discrepancies in tax credits.
• Environmental Benefits: By reducing the reliance on paper, e-invoicing promotes a more sustainable, environmentally friendly approach to business operations.

These advantages highlight how e-invoicing under GST not only simplifies tax compliance and enhances operational efficiencies but also supports a move towards digital and environmentally conscious business practices.

6. What are the mandatory fields of an e-invoice

The e-invoice under GST contains several mandatory fields that must be filled out to ensure compliance and facilitate accurate data processing. These fields are designed to standardize invoice formats across different businesses, which simplifies the reporting and tracking of transactions under GST.

Mandatory Fields of an E-Invoice

Here is a table listing the mandatory fields typically required in an e-invoice for GST:

7. Frequently Asked Questions (FAQs)