E-invoicing pertains to the procedure of creating invoices electronically as authorized by the GST law. A few known GST-subscribed companies are needed to submit electronic invoices for business-to-business (B2B) dealings. This submission resembles the way businesses utilize e-way bills for product transit. This mechanism, which digitally endorses and substantiates all B2B invoices, was formulated by the Goods and Services Tax Network (GSTIN), which rationalizes the invoicing process.
This blog delves into the significance of e-invoicing, its operation and its benefits for businesses.
How E-invoicing Functions?
E-invoicing under GST in India is a convenient system in which businesses create invoices in a defined format and have them authorized by the Invoice Registration Portal (IRP).
Its working is as under.
- Invoice creation: Businesses generate invoices utilizing their billing or accounting software in a standard format recommended by the government.
- Upload to IRP: The created invoice is uploaded to the IRP.
- IRP Substantiation: The IRP examines the invoice, accredits a unique Invoice Reference Number (IRN), and creates a QR code for the invoice.
- Automatic Data Exchange: Once substantiated, the invoice particulars get automatically dispatched to the GST portal and the e-way bill mechanism.
This procedure ensures precision, lessens manual data entry mistakes, and eases GST return filing and e-way bill creation for Indian businesses.
India E-invoicing Mechanism
The Indian tax authority, the Goods and Services Tax Council (GSTC), accepted the phased adoption of B2B electronic invoicing under the Goods and Services Tax (GST) System in December 2019.
After the voluntary acceptance period, which started in January 2020, the adoption of the compulsory use of electronic invoices will commence in October 2020. Companies will need to accept the system slowly as per their annual turnover. The initial businesses required to take the GST system are those with a yearly turnover of Rs 500 crores or greater. Exceptions comprise Special Economic Zones (SEZ), banks, passenger transport companies, insurance companies, overland transport agencies, and cinemas.
Under the latest GST fiscal model, India has developed from possessing a convoluted tax regime with multiple tax types (state, local, and central) to a standardized system founded on information technology.
To execute this project, the government initiated the Goods and Services Tax Council (GSTC), which is accountable for making legislative decisions, and the Goods and Services Tax Network (GSTN), which offers IT services and infrastructure to the 36 Indian states and the central government. The GSTN builds the e-way bill platforms and electronic invoicing.
Three years after the adoption of the GST system, the government presently wishes to concentrate on fighting tax evasion, enhancing tax compliance, and raising collections.
By regularizing the invoicing procedure, the government expects to achieve interoperability of the complete GST System, decrease fraud, and promote tax compliance by all Indian businesses.
The documents contained in the GST e-invoice system comprise B2B invoices, credit notes, export invoices, and debit notes.
Features of the Indian GST Invoice
In India, electronic invoices are termed GST Invoices. It would help if you created the GST Invoices in JSON format, adopting the GST INV-1 schema. The schema follows the PEPPOL/Universal Business Language and adapts to the Indian market.
The identical format applies to all invoices by all firms and sectors across the country.
Authorized GST invoices will carry an IRN code employed by the IRP.
Invoice Reference Number (IRN)
The IRN (or hash) is a 64-digit numeric code formulated by the IRP for every electronic invoice. Only invoices carrying the IRN are valid. The Indian invoicing system is also known as the IRN System, as it endorses electronic documents by assessing and entrusting the IRN.
You should keep the IRN code consistent with the invoice number. The issuer designates the invoice number, which constitutes an internal data point.
Quick Response (QR) Code
When the IRP authenticates the invoice, it uses a QR code in string format, which the issuer’s e-invoicing system must change into an image. The QR code permits the authorization of and entry of invoices in the GST system through a mobile device. The electronic invoice’s print format must contain the QR code.
Time Limit to Submit Documents to IRP
There had been no time restriction specified by the GST systems or the GST law to create e-invoices until 30th April 2023. Nevertheless, from 1st May 2023 onwards, tax depositors with Annual Aggregate Turnover (AATO) of INR 100 crore or over must create e-invoices for credit-debit notes and tax invoices within seven days of CDN/invoice date. Otherwise, such CDNs and invoices will become non-compliant.
There is no specified time duration within which e-invoices must arise for the remainder of the eligible taxpayers. So, such taxpayers are suggested to generate e-invoices on or following the CDN/invoice date, ideally a week prior to the filing of GSTR-1 return, as it requires T+3 days for particulars of e-invoices to become auto-populated into GSTR-1.
Nevertheless, the department has postponed the 7-day deadline to list the earlier e-invoices on the IRP portals by 3 months. And it has not officially declared the newest implementation date either.
Pros of E-invoicing System
Some of the businesses benefit from the e-invoicing mechanism. This helps reduce tax evasion due to real-time data verification, helps file GST returns, and maintains accuracy by minimizing manual errors. Moreover, by automating the exchange of invoice data to the GST and e-way bill websites, the e-invoice website simplifies the process and elevates corporate efficiency and compliance.
Businesses get the following advantages by utilizing e-invoice instituted by GSTN:
- E-invoice sorts out and plugs a significant gap in data reconciliation within GST to lower mismatch mistakes.
- E-invoices generated on one application can be read by another, enabling interoperability and aiding in lowering data entry errors.
- Backward incorporation and automation of the tax return filing procedure – the proper details of the invoices would be auto-populated in the different returns, specifically for creating part A of e-way bills.
- Real-time monitoring of invoices made by the supplier is allowed by e-invoice.
- Reduced the possibility of tax authorities conducting surveys/audits as the information they need is present at a transaction level.
- Authentic input tax credits become available quickly.
To know more about e-invoice, you can visit the portal:
Final Thoughts
E-invoicing resembles a significant upgrade for businesses concerned with GST. Controlled by the Goods and Services Tax Network (GSTN), it’s a fresh way of managing Business-to-Businesses (B2B) invoices by inspecting them digitally.
For those seeking to gain the most from e-invoicing, kanakkupillai provides a robust solution for businesses to ease payments and improve customer service.
Thus, e-invoicing is a step toward an improved, more compelling future for businesses within the GST system. Acclimatizing to digital transformation places businesses forward in modern financial practices, guaranteeing they remain flexible and challenging in the current fast-paced business environment.
