| e-Invoice implementation | Method of generation | Applicability | Process & GSP role |
The Government of India had intended to reshape the overall landscape of the indirect tax compliance & brought in Goods & Services Tax in the year 2017. The government in its vision of digital India, conceived of the GST landscape to be principally driven through the digital - electronic medium.
Accordingly, “Goods & Services Tax Network” was set up & it was to be complemented & supplemented by a group of GST Suvidha Providers (GSP) & Application Service Providers (ASP).
Return filing was permitted only through electronic mode in the first phase & the second phase saw e-Way Bill through online portals.
With the law fairly stabilized in the system, it was an opportune time to unveil the next big thing called e-Invoice (or) electronic invoice.
E-Invoice does not mean generation of electronic invoice on GST Portal but reporting of electronic invoice. In other words – Reporting of invoice data generated in a particular format which can be understood by government portal on real time basis.
Defining e-Invoice. Need for e-Invoice?
The word e-Invoice can evoke myriad images. Many tend to think that raising of invoice on the internet. For some, it conjures up fears of jettisoning the existing billing software. E-invoice entails neither.
Simply put, it ensures generation of invoices conforming to common standards. The necessary schema for this purpose has been developed. All billing/accounting software are required to meet to these standards. A system of authentication is inbuilt into the process.
The abiding objective is to ensure inter-operability across the GST landscape. Inter-operability implies that e-Invoices thrown by one software can be readily understood or rather read by another software/tool.
Adoption of standards will not impact physical (printed) or electronic (pdf version) invoice. Softwares would have to adopt the e-Invoice standard, re-aligning their data access & retrieval in the standardized format.
E-Invoice system being implemented consists of two important components -
- Generation of invoice in a standard format so that the invoice generated on one system can be read by another system.
- Reporting of the e-Invoice to central system.
Basic aim is the ability to pre-populate the return, enable smoother input tax credit (ITC) flows & to reduce the reconciliation problems.
E-Invoice does not mean generation of an electronic invoice but the reporting of an electronic invoice.
Reporting of the invoice data generated in a particular format which can be understood by the government portal on a real-time basis.
Requirement of e-Invoice is limited to business to business transactions (B2B). Registered Taxpayers with turnover of over Rs 100 crores & above are required to compulsorily issue E-Invoices from 1st April 2020 as per original issue in January 2020. Both suppliers of goods and services are covered.
For taxpayers above Rs 500 crores, obligations are two-fold. They have to not only generate e-invoice for B2B transactions but also the Quick Response (QR) Code for B2C transactions.
As per recent update from the 30th July 2020 notification release, the dates of implementation of e-Invoicing & QR Code system are proposed to be for 01 October 2020 for entities exceeding the turnover of 500 crores & above.
E-Invoices needs to be generated for:
- Business to business transactions (B2B)
- Business to government transactions (B2G)
- Transactions through e-commerce operators
- Reverse charge transactions
Detailed Process for e-Invoice
ØSupplier raises invoice in a billing/accounting software that is modified to comply with e-invoice parameters.
ØTaps software utility & takes out the invoice details in JSON format.
ØA IRN (Invoice Reference Number) is a combination of (1) Supplier GSTIN, (2) Invoice number & (3) document type & (4) financial year is generated.
ØInvoice details in JSON format are uploaded onto the Invoice Registration Portal (IRP). Uploading can be done through GSPs.
ØThe IRP generates hash & validates the hash uploaded JSON and ascertain any duplication. Once cleared, signature & QR code are added to the JSON.
ØData is transmitted to both GST & e-Way Bill system.
ØSupplier & purchaser are given with digitally-signed JSON with IRN along with QR code & also sent on e-mail ID’s as provided in the invoice.
Invoice is digitally signed & authenticated by the GST system.
ØThe data transmitted onto the GST portal goes and automatically updates the ANX-1 of the supplier & ANX-2 of the purchaser.
ØPart-A of the e-way bill system is automatically created with the e-invoice data. The e-way bill system will not be replaced. However, the volume of data entering is considerably reduced.
ØDefault currency in e-invoice is INR & the supplier can mention different currency as well.
ØE-invoice can bear about 100 line items & cancellation is permitted within 24 hours.
Ramifications of e-Invoice
The unfolding system of e-Invoice can cause temporary disruptions to the business but has long term beneficial impact.
A prudent taxpayer who makes use of third-party software/tool to generate e-Invoice can reap rich rewards.
GSP’s can play a huge role in terms of integration with existing ERP’s within taxpayer’s enterprise premises, facilitate bulk upload of invoices. The need to upload data repetitively will be dispensed with.
The overall process of e-Invoice generation can be automated to ease with the help of API’s & services inclined to e-Invoicing.
Volume of time devoted for reconciling input tax credit will be reduced & can be more productively deployed.
WeP Solutions Ltd.