Government to Introduce E-Invoicing under GST

Shubham Chauhan

20 Mar, 2021

The GST Council has confirmed the introduction of E-invoicing for reporting the business to business (B2B) invoice to the GST System. E-invoicing is proposed to come in effect from 1^st January 2020 and shall be implemented in a phased manner by GST Network. The GST Council promulgated the standard of e-invoice in its 37^th meeting held on 20^th September 2019. The government has been actively working on this project and conducting workshops throughout the country to provide information about the framework. The primary aim of introducing e-invoicing is to simplify the process of GST filing for the taxpayers.

The responsibility of designing the standard of an e-invoice has been given to Goods and Service Tax Network, which will act as custodian of invoices.

Under the e-invoicing system, an identification number will be issued against every invoice by the Invoice Registration Portal (IRP) which further will be managed by the GST Network (GSTN)

Applicability of E-Invoicing system

• As per GST Council^[1], E-invoicing will be mandatory from 1^st April 2020 for the businesses having a turnover of Rs 100 crore or more.
• The voluntary trial period will begin from 1^st January 2020, for the businesses with a turnover of Rs 500 crore or more than that. The trial period for businesses with a turnover of Rs 100 crore or more will begin from February 1, 2020
• E-invoice system will remain voluntary and on trial basis even after 1^st April 2020, for businesses with a turnover of less than Rs 100 crore.
• The provision of e-invoice applies to domestic B2B sales, export sales and to the sales of Special Economic Zone units.

Process of Generating an E-Invoice

The following is the process of generating an e-invoice:

• To generate an e-invoice, the taxpayer needs to ensure the use of a reconfigured ERP system as per the standards of PEPPOL. Further, the taxpayer should coordinate with the software service provider to incorporate the standard set for e-invoicing. The software should be competent in generating the JSON file for multiple invoices together. For the taxpayers not having any software, the offline utility will be provided to them.
• The second step for the taxpayer is to raise the invoice on the software. The taxpayer should provide all necessary details like billing name and address, GSTN of the supplier, Item rate, etc.
• In the third steep, JSON file will be generated by the taxpayer to upload it on Invoice Registration Portal (IRP)
• The next step involves the generation of unique Invoice Reference Number (IRN) by the supplier. This unique is generated based on four parameters like taxpayers GSTIN, invoice number, financial year and the document type.
• Moving ahead, the taxpayer will upload the JSON file of the e-invoice combined with the Invoice Reference Number that was already generated on IRP.
• Further, the Invoice registration Portal will generate Invoice Reference Number and validate the IRN of JSON if it had already been uploaded. After that IRP will add its signature on the invoice data and a QR code to JSON.
• Finally, the taxpayer will download digitally signed JSON with Invoice Reference Number (IRN) along with a QR code. The registration portal will then share back the digitally signed e-invoice with the seller and the recipient through e-mail.

E-invoicing a step to Curb Tax-Evasion

• With the introduction of e-invoicing under GST, tax authorities will be able to keep a check on the transactions made by taxpayers. The e-invoice will have to be mandatorily generated through the GST portal, which will allow the tax authorities to keep a check on the transactions.
• E-invoice will be generated before the transaction takes place, which ultimately would reduce the scope of manipulation of the invoice.
• Taxpayers tend to create fake GST invoices to evade the payment of tax. The introduction of e-invoice will only allow genuine input tax credit as all invoices will be generated through the GST portal. Hence it will become easier for GSTN to track fake credit claims.

Important Points Associated with E-invoice under GST

• GST Council has notified around ten web portals managed by GST Network, which can be used to generate E-invoice.
• QR code will be obligatory from April 1^st,2020 for B2C invoices if the annual turnover of the business exceeds more than Rs 500 crore.

Conclusion

With the introduction of e-invoicing, the income tax department will be able to simplify the process of filing GST returns. The basic aim of the introduction of e-invoicing is to create ease of doing business. Moreover, this system will also help the tax authorities to curb tax evasion.