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e Invoicing under GST

Introduction:

e-Invoicing under GST The Government mandated e-Invoices for a specified category of large enterprises from October 1st, 2020.

e-Invoicing shall apply to all B2B transactions & documents like Credit Notes, Debit Notes, RCM Invoices, Export & SEZ Invoices, B2B Invoices & B2G Invoices will be liable to e-Invoicing under GST.

In this article, we have simplified the impact of e-Invoicing on refunds & how e-Invoicing shall work with the Special Economic Zone.

Towards the end we have discussed the best e-Invoicing solution for your business & for your clients, so read till the end.

Watch process of e-Invoicing generation

Understanding the working of e-Invoicing under GST:

e-Invoicing under GST is not a new term anymore as it was implemented a month ago & was the most discussed topic in GST for over a year.

But to simply the working of e-Invoicing in brief, it is the process of organizing the management & generation of B2B Invoices that has been made mandatory for all businesses having an annua aggregated turnover of INR 500 Crores & more.

Under e-Invoicing businesses are required to generate invoices in a special format e-Invoicing SCHEMA that has been given by the Government & upload these invoices to the IRP for validation purposes.

The IRP will then check for errors & duplications in the e-Invoice & upon successful validation will generate unique IRNs & QR Codes for the e-Invoice.

The invoices are reported to the official portal in real time & is validated there itself.

This makes the invoices more accurate. E-Invoicing will apply to the following documents-

In the same fashion as Export & SEZ Invoices are liable to e-Invoicing the processes related such as Refund will also be effected by e-Invoicing.
  • B2B Invoices
  • B2G Invoices
  • RCM Invoices
  • Export Invoices
  • Credit Notes 
  • Debit Notes

e-Invoicing will tend to impact these documents, their transactions & other processes that are related to the liable documents & businesses.

Introduction to SEZ- Special Economic Zone

gst e invoicing software

SEZ or Special Economic Zone, is the geographical regions of the country that are marked by the government as special economic or trade zones with a very simple tax & legal compliance structure.

These regions may be weak in the sense of taxation or may possess special trade value which gives them the privilege to shield themselves from the compliance load & strict rules etc.

SEZ in a way can be deemed as Trade Capacity Development tools of the country that will help enhance the trade & economy of the country through the means of receiving some liberty & privileges.

The SEZ are deemed as foreign territory for trading & international taxation purposes. Which is why goods & supplies to SEZ Units & Developers are treated the same as exports & attract 0% tax rate or are zero rated supplies.

However, the supplies received from an SEZ Unit/Developer are deemed as normal supply & will attract the tax as the normal tax rates specified by the Government.

Guide: e-Invoicing under GST & SEZ Units/Developers

e-Invoicing is applicable on the following documents-

  • B2B Invoices
  • Export Invoices
  • RCM Invoices
  • Credit Notes
  • Debit Notes
  • B2G Invoices
Now as supplies to SEZ are considered as exports, e-Invoicing generation will apply to all supplies MADE TO SEZ. However, Supplies from SEZ are not liable to e-Invoicing, & here is how it works-
e Invoicing solution

Supplies MADE TO SEZ unit/developer

f you are a business having an annual aggregated turnover of INR 500 Crores & more, and if you supply to an SEZ unit/developer then such invoices shall be created as per the specified SHCEMA & uploaded to the IRP for validation & IRN Generation.

This is mandatory for all businesses liable & supplying to SEZ, & will thus help in avoiding friction in trade, transactions & refund.

GST e-Invoicing Covers- Supplies to SEZ (with or without GST payment), Exports (with or without GST payment), Deemed Exports (with or without GST payment).

The liable businesses are required to generate IRN & QR Codes & report the e-Invoices to the IRP mandatorily.  

Supplies RECEIVED FROM SEZ unit/developers

As per the GST Notification (Central Tax), 61/2020 dated 30-7-2020, all SEZ units/developers are exempted from generating e-Invoices for their supplies.

Meaning if you are an SEZ unit/developer even with an annual aggregated turnover limit that falls under e-Invoicing, you will not be required to generate IRNs for any of your invoices.

Any supplies received from the SEZ will not attract e-Invoices, IRNs & QR Codes for that matter.

  • However, as per a recent notification, e-Invoicing will apply to SEZ in special cases, it is applicable if they have specified turnover and fulfill other conditions for e-invoicing mandate.
  • e-Invoicing eligibility for this special case may be a little complicated, but here is an example to simplify the same for you-
  • If an SEZ unit, an SEZ developer, and a regular DTA (Domestic Tariff Area) are registered under the same legal entity i.e. having the same PAN, and the aggregate total turnover of the legal entity i.e. PAN is more than INR 500 Crores (considering all three GSTINs).
  • In this case, the SEZ unit is exempt from e-invoicing, but e-invoicing will be applicable to DTA Unit as well as the SEZ developer because the aggregate turnover of the legal entity, here, is more than Rs. 500 Crores. Thus, the eligibility is calculated on total annual turnover in case of a common PAN.
Note: The recipients need to identify Normal Supplies, SEZ Units & SEZ developers as separate entities, considering that they display unique traits, IRN requirement & play different roles in the e-Invoicing context

Impact of e-Invoicing under GST on Refunds

e-Invoicing will impact the Exports, Trades, Deemed Exports & SEZ transactions as mentioned above.

Now with these transactions comes in the picture another crucial provision that is REFUNDS.

Exports & SEZ transactions do attract refunds & with e-Invoicing impacting these transactions the same will also affect the refunds.

The businesses which are liable to e-Invoice generation of Export & SEZ Invoices must report their Invoices to the IRP & generate IRN for their invoices, credit notes & debit notes. 

This, they must do in order to clear off the friction from the next step that is refund.

The Government will not allow refunds to invoices without an IRN, i.e. where IRN is applicable but missing.

Additionally IRNs will in fact be helpful for businesses while claiming the Refunds as the e-Invoices are accurate, validated & authentic documents.

So the chances are that the Government will process the refund request sooner & in real-time as the invoices are also created in accurate & real-time. 

Additionally the e-Invoice data will also auto-populate in the GSTR-1 of the supplier, which will ease the reporting of refunds in the returns, and this also means that e-Invoicing may automate the refund process as well (in the future).

Conclusion

We hope that e-Invoicing on SEZ & Refunds is well understood to you by now, so as promised here is what we think of the best e-Invoicing Software Solution.

Now, e-Invoicing has more perks to it than cons, but it is an addition in the GST Compliance list for businesses.

However, e-Invoicing compliance is of high priority for all businesses that are liable to it irrespective of its impact, as it is mandatory.

It can sometimes be a little bit difficult than it seems considering the complex SCHEMA Format, Real-time Validation, Bulk operations & more.

The Government also recommends the use of external solutions such as GSPs to comply better with e-Invoicing, one such GSP is GSTHero which is also the best e-Invoicing Solution in the market currently.

best e Invoicing software

GSTHero makes e-Invoicing simple to understand & operate with its user-friendly features & prominent support.

So why GSTHero?

  1. Simple integration
  2. Data Security
  3. Direct integration with the IRP
  4. Scalable for high data volume
  5. Highly Automated- requires minimal human input
  6. Reduced Errors with automation
  7. Enhanced productivity of your accounts team
  8. Compliance in real-time
  9. Bulk Operations- Generate, cancel, print, validate & edit e-Invoice in bulk within the ERP
  10. Achieve 100% Compliance with e-Invoicing
  11. Cost-effective

Watch e-Invoice Generation process from GSTHero


Prachi Wankhede

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