What is E-invoicing?
E-invoicing is the new system through which business to business (B2B) transactions are authenticated electronically by GSTN, where e-invoices generated by one ERP can be read by another so that there is interoperability of data.
With the introduction of E-Invoice, accounting software and ERPs would have to adapt to the new e-Invoice standard wherein they would re-align their data access and retrieval in the standard format. However, users of the software would not find any difference in the look and feel of the physical or electronic (PDF/Excel) output of the invoices. When users file an invoice they have to make their ERP talk to GST-IRP and bring the JSON for QR code and print on their invoice. E-invoicing automates multiple documentation with a one-time submission of invoice details.
Under the E-Invoicing system, an identification number(ID) will be issued with every invoice by the Invoice Registration Portal (IRP) managed by the GST Network(GSTN). All invoice details from this portal will be transmitted in real-time to both the GST portal and the e-way bill server. It will also eliminate the need for manual data entry during the filing of ANX-1/GST returns as well as the generation of part-A of e-way bills since the information is passed directly to the GST portal via IRP.
How can we place the current issues in E-invoicing?
Businesses generate invoices from different software, and the details of those invoices are submitted manually in the GSTR-1 return. The invoice details are then expressed in GSTR-2A for presentation by the receivers. On the other side, by manually uploading the invoices again in excel or JSON, the consignor or transporters will produce e-way bills.
Under the new return system, mostly an expansion in the form of GST ANX-1 would take the place of the return of GSTR-1. The process of generating and uploading invoice details, however, will remain the same. It will be done by uploading data using the Excel method / JSON or through the online entry. For e-way bill generation, a seamless flow of data is anticipated. The key tool for allowing it will be e-invoicing.
Benefits of using E-Invoice
- E-invoice addresses and fills a significant gap in data reconciliation under GST to reduce misalignment errors.
- E-invoices generated on one software can be interpreted by another, thereby ensuring interoperability and helping to reduce errors in data entry.
- E-invoice allows for the real-time tracking of invoices issued by the supplier.
- Backward integration and automation of the tax return filing phase – the related invoice information would be auto-populated in the various returns, especially for the generation of e-way bills Part-A.
- Quicker availability of genuine input tax credit
- The tax authorities have less possibility of audits/surveys since the details they need are accessible at the transaction stage.
When does E-invoicing gets implemented?
Taxpayers with an annual aggregate turnover of over Rs 500 Crore can voluntarily generate e-invoice from 7th January 2020 through APIs. Whereas from 1st February 2020, the taxpayers with turnover over Rs 100 crore but less than Rs 500 Crore can join them. Electronic invoicing is compulsory from 1st April 2020 to federal taxpayers worth Rs 100 Crore. The combined turnover will include all GSTINs turnover under a single PAN, throughout India.
What are the Stages of generating an e-invoice?
- The taxpayer must ensure that the reconfigured ERP system use according to the PEPPOL standard. To incorporate the standard set for e-invoicing, i.e. e-invoice schema (standards), they must coordinate with the software service provider and must have the mandatory parameters, at least. With several invoices, it should be capable of generating the JSON file together. Some taxpayers who don’t have any software will be provided offline. In the future process when e-invoicing applies to small taxpayers, they can choose from 8 different accounting and billing software all tied up with the GSTN. It is available free of cost. It is available both online as well as offline.
- The user has to raise a standard invoice on that software afterward. He must provide all the necessary details such as the supplier’s billing name and address, GSTN, transaction value, item rate, applicable GST rate, tax amount, etc.
- Import invoice information onto the IRP using only the JSON file, particularly mandatory fields. It can do directly, or through GSPs or APIs. The IRP would serve as the main e-invoicing registrar and verification. There are several types of IRP interaction such as web-based, API-based, SMS-based, mobile app-based, offline tool-based, and GSP-based contact.
- IRP validates main B2B invoice data, searches for any duplications and produces a specific invoice reference number (hash). There are four parameters in YYYY-YYY: seller GSTIN, invoice size, and FY; and paper form (INV / DN / CN);
- IRP produces an invoice reference number (IRN), signs the invoice digitally, and establishes a QR code for the manufacturer in Input JSON. On the other side, the product provider will be intimate via email (if given in the invoice) about the production of e-invoices.
- IRP will forward an authorized file throughout GST returns to the GST site. Alternatively, the information will redirect, where appropriate, to the e-way bill site. For the relevant tax era, ANX-1 of the seller and ANX-2 of the buyer shall be auto-filled. In addition, the tax liability calculates by it.
How does E-invoicing Prevent tax avoidance?
- Tax authorities will have exposure to transactions when they occur in real-time since the e-invoice will have to be created compulsorily via the GST portal.
- There will be less scope for invoice fraud since the invoice is generated before a transaction is carried out.
- It will reduce the chances of fake GST invoices and can demand the only legitimate input tax credit, as all invoices must be created through the GST portal. Since the input credit can be compared to output tax data, monitoring bogus tax credit claims is simpler for GSTN.
Fields that are mandatory for E-invoice
E-invoice shall adhere primarily to the rules governing invoicing for GST. Besides this, the invoicing system or policies adopted by each business or sector in India should also be adapted. All information is made mandatory whereas the remainder is optional for businesses.
Also, many fields are made optional and only users can choose to fill up appropriate fields. It has also offered the interested users a description for each sector along with the sample inputs.
- 18 Sections consisting of a total of 133 fields
- Out of the 18 Sections – 8 are Mandatory and 10 are Optional
- Within 8 Mandatory sections, 34 fields are mandatory and 46 are optional.
- Within 10 Optional sections, 35 fields are optional and 17 are mandatory.
Advantages for E-Invoicing
- E-invoice takes place in different unnecessary steps while this process can save your time.
- It saves your work time instead of using other e-mails and helps you to concentrate on other tasks where you can build by adding important values. We all know it’s money to time.
- Manual input and increasing automation reduce mistakes and types by minimizing. So that there is no need to worry about losing your invoice in the mail.
- Your customers will get it more convenient to get an e-invoice to their desired platform. Receiving an e-invoice rather than a paper invoice saves up to 90% on processing costs.
- Get paid faster by invoice where it requires less effort and time to make an electronic invoice payable.
- Track your invoices by using invoice tools which helps you to know all the software that you have sent, viewed, and paid.
- If you are using online invoicing software, everything is saved on one platform which is accessible on any device from anywhere. It reports and analyzes your invoice overview.
- It is easy to customize and make professional-looking invoices without spending more time on editing spreadsheet modules.
- From a buyer’s perspective, e-invoices reduce the risk of fraudulent bills. The authenticity of e-invoices is automatically validated.
- E-invoicing is becoming standard, especially in the B2B world. Customers will be demanding on invoicing, so start your e-invoicing now and eventually, it gets upgraded.
Disadvantages of E-Invoice
- Sending invoices electronically comes with some risks that are not present in hard copy invoices. Clients need to upload their invoices on a secure server before they are printed.
An electronic invoice may be paid faster. In some cases, email service providers mark invoices as spam, by sending them a folder that users rarely look at. It can be difficult to know when your invoices are caught in spam filters and frustrating to communicate to clients how to alter their spam filters to allow invoices through.
- Electronic invoices can make bookkeeping tasks harder for your clients and customers. Some may need to download the invoice or print the invoice for their records.
- Especially in certain types of businesses, clients or customers may not have access to their email. This may especially be true of senior customers or customers in rural locations.
- There are several different e-invoice formats. When sending e-invoices, the sender and receiver must use compatible file formats where countries often have a domestically standardized format. However, especially cross-border invoicing processes can be complicated by compatibility issues.
- Another trouble for transactions across borders is by varying laws in different countries. But, as the countries are considering joint efforts to standardize, such as EU-wide standardization, this issue fades out to some extent.
- E-invoicing freezes a lot of time to do other productive things, it might not be as completely free as sending a PDF through email. If your invoicing volumes are a bit larger, software solutions often charge per invoice sent or have a monthly usage fee.
- Some customers still prefer regular invoices which are not possible to get all your stakeholders to use e-invoices. But eventually, all businesses would consider accepting both regular and e-invoices.
GSTN’s E-invoicing initiative
GSTN had released an e-invoice format in an excel and made it available for public feedback around 20 August 2019. The same authorize by the GST Council at its 37th meeting of the GST Council on 20 September 2019. ICAI-associated GSTN designed the software to conform with the GST and other Indian tax legislation. Besides these, the style adheres to the norms of the multinational and different industries. The e-invoice software appears comprehensive and allows for various industries and enterprises with a single format.
GSTN’s E-invoice will contain the following parts:
- E-invoice schema: It consists of the technical field name, description of each field, whether it is mandatory or not, and has a few sample values along with explanatory notes.
- Masters: Masters must determine the set of inputs that are predefined by GSTN itself for other fields. This includes these areas as UQC, State Code, a form of an invoice, category of delivery, etc.
- E-invoice template: The template is in accordance with GST rules, and allows the reader to correlate the terms used in other sheets. The require fields mark in green fields, and optional fields mark in yellow.
GST E-invoicing is must for businesses worth Rs 100cr turnover from April 1st-2020
From April 1st-2020, e-invoicing will be mandatory for businesses with a turnover of ₹100 crores. This will helps to control GST evasion and make compliance easier. The e-invoicing system will be rolled out in a phased manner from January 1st voluntarily, beginning with firms with a turnover of ₹500 crores, while businesses with a turnover of ₹100 crores or more will be required to do it from February 1st.
“The basic aim behind the adoption of the e-invoice system is to facilitate convenience to the taxpayers by further simplifying the GST return system. E-invoicing the tax department would help businesses and taxpayers by pre-populating the returns, resulting in reducing reconciliation problems”.
The e-invoicing system will allow small and medium enterprises to take instant loans from banks. “With the e-invoicing system, banks may not require physical documents including their validation. Rather, they could do MSMEs ratings for the loan on the basis of their e-invoicing.”
Fields involved in E-invoice:
|Sl. no.||Name of the field||List of Choices/ Specifications/Sample Inputs||Remarks|
|1||Invoice Type||Max length: 10Can be one of the following:
|Denotation for regular, SEZ supplies with payment, SEZ supplies without payment, deemed exports, sale from the bonded warehouse, export without payment of tax, export with payment of tax|
|2||InvoiceType Code||Max length: 50Will be auto-generated by GSTIN based on the invoice type specified by the user||A subcode may also be automatically added by the GSTN|
|3||Supplier_GSTIN||Max length: 15Must be alphanumeric||GSTIN of the supplier raising the e-invoice|
|4||Invoice Number||Max length: 16Sample input is“ Sa/1/2019”||For unique identification of the invoice, a sequential number is required within the business context, time-frame, operating systems and records of the supplier. No identification scheme is to be used|
|5||Preceeding_Invoice_Reference||Max length:16Sample input is
|Detail of original invoice which is being amended by a subsequent document such as a debit and credit note. It is required to keep future expansion of e-versions of credit notes, debit notes and other documents require under GST|
|6||Invoice Date||String (DD/MM/YYYY) as per the technical field specification||The date when the invoice was an issue. However, the format under explanatory notes refers to ‘YYYY-MM-DD’. Further clarity will be requires|
|7||Reverse Charge||‘Y’ or ‘N’ as a single character||Mention whether or not the particular supply is subject to reverse charge mechanism|
|8||GSTIN||Max length: 15||The GSTIN of the buyer to declare here|
|9||State Code||Max length: 2||The place of supply state code to declare here|
|10||Place||Max length: 50||The place (locality/district/state) of the buyer on whom the invoice is raise/ bill to must declare here if any|
|11||Pincode||Six digit code||The place (locality/district/state) of the buyer on whom the invoice is raise/ bill to must declare here if any|
|12||Unique Identification Number||Abbreviated as ‘UUID’Max length: 50
Sample input is ‘649b01ft’
|A unique number will generate by GSTN after uploading of the e-invoice on the GSTN portal. An acknowledgment will be sent back to the supplier after the successful acceptance of the e-invoice by the portal|
|13||ShippingTo_GSTIN||Max length:10||GSTIN of the buyer himself or the person to whom the particular item is delivering to|
|14||Shipping To_State||Max length:50||State pertaining to the place to which the goods and service invoice were or deliver|
|15||Supply Type||Max length: 2Sample values can be either of Supply/export/Job work||It can be either interstate or intrastate supply. Further, it can be outward or inward supply
Moreover, the supply can further be classified as import, export, job work, for own use, return, sales return, others, SKD/CKD/Lots, line sales, recipients not known, exhibition or fairs
|16||Transaction Mode||Max length: 2The schema specifies that the field can have either of regular/bill to/ship to||A combination of a ‘Bill To Ship To’ and ‘Bill From Dispatch From’ is allow|
|17||Item Description||Max length: 300The sample value is ‘Mobile’
The schema document refers to this as the ‘identification scheme identifier of the Item classification identifier’
|Simply put, the relevant description generally used for the item in the trade. However, more clarity is need on how it needs to describe for every two or more items belonging to the same HSN code|
|18||Quantity||Decimal (13,2)The sample value is ‘10’||The number of items (goods or services) that is a charge on the invoice as a line item.|
|19||Rate||Decimal (10,2)The sample value is ‘50’||The unit price, exclusive of GST, before subtracting item price discount, can not be negative|
|20||Assessable Value||Decimal (13,2)The sample value is ‘5000’||The price of an item, exclusive of GST, after subtracting item price discount. Hence, Gross price (-) Discount = Net price item, if any cash discount is provided at the time of sale|
|21||GST Rate||Decimal (3,2)The sample value is ‘5’||GST rate represents as a percentage that is applicable to the item being invoice|
|22||IGST Value, CGST Value and SGST Value Separately||Decimal (11,2)The sample value is ‘650.00’||For each individual item, IGST, CGST and SGST amounts have to be specified|
|23||Total Invoice Value||Decimal (11,2)||The total amount of the Invoice with GST. Must be round to a maximum of 2 decimals|