e-Invoicing extended for businesses with more than INR 20 crore annual turnover. In February 2022, the Goods and Services Tax (GST) council announced that the electronic invoicing (e-invoices) system will be extended to businesses with an annual turnover of more than INR 20 crore to INR 50 crore, with effect from 1st April 2022.
e-invoicing is mandatory for all the businesses whose aggregate annual turnover in any preceding financial year starting from 2017-18 exceeds INR 20 crores. The aggregate turnover includes the turnovers of all the GSTINs under a single PAN across India.
e-invoicing applies only to the business-2-business (B2B) segment involved in the supply of goods or services or both to registered buyers, SEZ units, or exports and deemed exports.
The e-invoicing system does not make any changes to the existing invoicing system. However, an additional step has been added to automate tax-related processes that replace manual reporting of forms, separate GST declarations, separate tax accounting etc.
Let’s discuss e-invoicing in detail to understand the important aspects of it and how businesses need to prepare themselves for all the challenges it might pose.
What is e-invoicing
In the first place, e-invoice or e-invoicing does not mean generating invoices electronically or generating them through a government portal.
E-invoicing is a process to make the invoices more authentic and ease the tax filing process.
Even in e-invoicing, notified businesses generate GST invoices on their own using their billing, accounting and ERP systems. They then upload those invoices in the ‘Invoice Registration Portal (IRP)’, which generates an invoice with a unique ‘Invoice Reference Number (IRN)’ along with a QR code. This invoice is nothing but the e-invoice in GST, and the seller or the supplier should issue the same to the buyer.
A GST invoice without a valid IRN is not considered valid.
The e-Invoicing Process
The step-by-step process of how e-invoice is generated is listed below.
- The seller generates an invoice in his own accounting and billing software or an excel or other existing systems. The seller should ensure that the generated invoice data is in JSON format, without which the IRP will not accept it.
- Once the invoice in JSON format is ready, the same needs to be uploaded directly on Invoice Registration Portal (IRP).
- The IRP verifies the supplier’s GSTIN, document type & number, financial year and also checks the Central Registry of GST System for any duplicates.
Once verified, it adds a signature on the invoice along with a QR code containing GSTINs of seller and buyer, invoice number, invoice date, number of line items, HSN of a major commodity, etc.
- The IRP then generates the Invoice Reference Number (IRN), which is a unique 64-character hash. The IRN provides a unique identity for each invoice for the entire financial year. An IRN number looks like 35054cc24d97033afc24f49ec4456dbab81f542c534f9d30359dc75794e08bbe
In case the IRP finds a similar document in the registry, it will reject it with an error code.
- Once everything is clear, the IRP returns the digitally signed invoice with the IRN and the QR code to the seller.
In another half of the e-invoicing, where the seller or the buyer are not involved, the IRP portal shares the document’s data and the IRN to GST system and e-way bill system. The GST system then updates the GSTR-1 of the seller and GSTR-2A of the buyer.
If the invoice also contains transportation details like transportation ID, vehicle number, etc., the e-way bill system captures the same and creates the e-way bill without requiring further data entry.
Which Businesses Should Issue e-Invoices?
The GST Council in 2019 approved the introduction of e-invoicing in GST for reporting B2B invoices in a phased manner. Accordingly, the system has become active starting from 1st January 2020.
|Notified Businesses with turnovers||E-invoicing effective from||E-invoicing applicable on|
|For businesses with a turnover above INR 20 crore to INR 50 crore||1st April 2022||Invoices, credit notes and debit notes|
|For businesses with a turnover above INR 50 crore to INR 100 crore||1st April 2021|
|For businesses with a turnover above INR 100 crore to INR 500 crore||1st January 2021|
|For businesses with a turnover above INR 500 crore||1st October 2020|
E-invoicing is Mandatory for
All the registered B2B businesses whose aggregate turnover in any preceding financial year from 2017-18 onwards is more than the set limit. Currently, it is for businesses with a turnover of above INR 20 crore.
All the businesses supplying to registered persons (B2B), supplying SEZs, conducting exports, deemed exports are currently covered under e-invoicing.
E-invoicing is Not Mandatory for
Certain businesses are, however, exempt from the e-invoicing mandate, including
- Special economic zones (SEZ)
- Financial and non-financial institutions, including insurance companies, banks
- Transportation agencies supplying goods by road
- Suppliers of passenger transportation service
- Suppliers of services by way of admission to movies in multiplex theatres
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