Cutting the GST Paper: A Short Intro to E-Invoicing

What is “E-Invoicing”

GST e-invoice’ or ‘electronic invoice’ is the new digital invoice for goods and services generated at the government GST portal. GST E-Invoicing is a major step towards reducing reconciliation errors and potential fraud in GST payments.

So how does it work?

Under the E-Invoicing system, an identification number – Invoice Registration Number(IRN) will be issued against every invoice by the Invoice Registration Portal (IRP) to be managed by the GST Network(GSTN).

The IRP will serve as a central hub, which will pass details of every invoice registered, directly to the GST portal and e-way bill portal. This transmission of information will happen in real time. Therefore, it will eliminate the need for manual data entry while filing GSTR-1 return as well as generation of part-A of the e-way bills

Since the implementation of GST in July 2017, 3.5 billion invoices per month and 42 billion invoices per year have been generated in India. Taking this huge volume into account, the GST Council has proposed the implementation of the e-invoicing system, which will address the problem of the widespread use of non-standardized formats for invoice generation.

E-Invoicing does not imply the generation of invoice on GST portal. That would be a myth. Instead, e-invoicing involves the submission of an already generated standard invoice on a common e-invoice portal. Thus it automates multi-purpose reporting with a one-time input of invoice details.

When does it come into effect?

The roll out of e-invoicing is set to come into effect from October 1, 2020 onwards. It will be mandatory for companies having an annual turnover greater than ₹500Cr, and voluntary for companies below that threshold. It will become mandatory for all companies in the near future.

E-Invoicing Process

The following are the stages involved in generating or raising an e-invoice:

Step 1: Update your ERP / billing software to meet the new E-Invoicing Standard.  

Taxpayers have to reconfigure their ERP or billing systems as per PEPPOL standard. PEPPOL is a global standard that specifies how documents should be structured in the purchase-to-pay cycle. PEPPOL simplifies the Purchase to pay cycle and makes it possible for different systems to read documents from each other. Using the PEPPOL standard, an invoice generated in SAP could then be read by the E-GST portal, and then read by your vendor using Tally.

Step 2: Generate IRNs for Invoices

Taxpayers have two primary options for IRN generation:

– Direct integration with the Invoice Registration Portal through APIs or a 3rd-Party GST Suvidha Provider (GSP)

– Manually upload invoices in bulk using the Bulk Generation Tool. This will upload Invoices in Bulk and generate IRNs for all invoices.

Step 3: Upload Invoices to the IRP:

Once either of the above options is chosen, raise the invoice on the respective ERP or billing software, and upload the details of invoice especially mandatory fields onto the IRP using the method chosen in step 2 above. The IRP will act as the central registrar for e-invoicing. There are several other modes of interacting with IRP such as SMS-based and mobile app-based.

Step 4: Validation and digital signing of the invoice by IRP

The IRP will validate the key details of the B2B invoice, check for any duplications and generates an invoice reference number for reference. IRP generates the invoice reference number (IRN), digitally signs the invoice and creates a QR code for the vendor. On the other hand, the vendor will get intimated of the e-invoice generation through email (if provided in the invoice).

Step 5: GST Details automatically sent to GST Portal.

The IRP will send the authenticated Invoice Data to the GST portal. Additionally, details will be forwarded to the e-way bill portal, if applicable. The GSTR-1 of the seller gets auto-filled for the relevant tax period. In turn, it determines the tax liability.

How does E-invoicing help your business

Businesses are expected to reap many benefits from the process of E-invoicing, which include:

  1. E-invoice enables immediate tracking of invoices
  2. It enables backward integration as well as automation while filing tax returns, where the details pertaining to the invoices are auto-populated in different returns
  3. E-invoices created on one software can be easily read by another, thus facilitating interoperability and minimizing errors in data entry
  4. E-invoicing resolves and bridges the gap in reconciliation of data under the GST system
  5. The chances for audits by tax authorities are minimized significantly as the data they seek is available readily available at a transactional level of detail.
  6. It offers instant accessibility of Input Tax Credit in genuine cases.

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