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e invoicing under GST

Electronic invoicing system or e-Invoicing under GST, which is commonly known as e-Invoicing system, is inserted by government to authenticate the invoices generated under B2B transactions.

On 20th September 2019, GST Council in its 37th Meeting approved the proposal to introduce E-invoice under GST.

Accordingly, from 1st January 2020, it became voluntary and from 1st October 2020 it became mandatory to generate e-Invoice for Specified Class of Business on their B2B transactions.

Therefore, for B2B transactions, it became mandatory to generate               e-Invoices on IRN portal if its aggregate turnover (based on PAN) in any of the preceding Financial year exceeds 500 crores

From 1st January 2021, it became mandatory for business registered with aggregate turnover (based on PAN) of more than 100 crores are required to issue e-invoices.

Watch video on e-Invoice generation from GSTHero Dashboard

What is e-Invoicing under GST ?

E-invoice doesn’t mean generation of invoice on GST portal. Taxpayer will generate invoice normally on their Accounting/ Billing/ ERP software.

This invoice will be registered on Invoice Registration portal (IRP). 

On such reporting, IRP will generate a unique Invoice Reference Number (IRN), digitally sign it and return the e-Invoice to the supplier.

As per Rule 48(4), E-invoice shall be prepared in Form GST INV-01 by notified class of persons on GST e-Invoice portal in prescribed manner subject to prescribed condition and restrictions.

Applicability of e-Invoicing under GST

applicability of e invoicing under gst

e-Invoice is mandatory for business having aggregate turnover of more than 100 crores in any preceding financial year from 2017-18 onwards for their B2B transactions and exports from 1st January 2021.

It is also mandatory for such transactions under reverse charge under section 9(3) in case of such business.  Such notified persons are not required to generate E-invoice for their B2C transactions.

On the contrary, if specified supplies are received by notified persons from unregistered person or import of services, e-invoice generation is not applicable.

e-Invoice is not applicable in case of import of Goods.

Exemption from e-invoicing in GST

exemption from e invoicing

e-Invoicing is exempt for following entities even if their turnover exceeds the prescribed limit

  1. 1
    Special Economic Zone (SEZ units) (not SEZ developers)
  2. 2
    Insurance, Banking Companies, Financial Institutions including NBFCs
  3. 3
    GTA giving goods transportation service.
  4. 4
    Supplier of passenger transportation service.
  5. 5
    Person supplying services by way of admission to exhibition of cinematograph films in multiplex screens.
Watch video for e-Invoicing process in Tally

How is e-Invoicing beneficial:

benefits of e invoicing under gst

One Time Reporting

Taxpayer’s work load will reduce drastically as one-time reporting will update the invoice on GST portal and consequently all the returns will get updated automatically. 

Uniform Format

Since, it is generated by GST portal, it is uniform all across the country. This will bring more clarity in understanding.

Interoperability

It means once the e-invoice is generated, it will be visible in various software and repetition of same work under various places will reduce.

E-way bill

E-way bill must be generated when there is a movement of goods of more than Rs 50,000 in value to or from a registered person.

By generating E-invoice, e-way bill can automatically be generated.

Auto-population to GSTR-1

Once e-Invoice is generated it will get auto-populated to GSTR-1.  It will get reflected in GSTR-1 while filing the return.

This will reduce the compliance burden to a great extent.

Reduction of Error

Many times, interest or penalty is levied because of error. It becomes very difficult to trace those errors.

Once all the correct details are being filled, accurate e-Invoice is generated and there will be no chance of any error in case of that particular transactions.

Benefit to tax department and buyers

e-Invoice is authenticated by GST portal and thus tax department can directly refer to that invoice.

Apart from this, buyers will also be able to refer the invoice online and will not have to depend upon the seller for invoice

Matching of Input Tax Credit

Since it updates the invoice on GST portal, Input Tax Credit becomes readily available with taxpayer as well as department.

Tax payer will be able to avail correct and accurate ITC and department will also be able to permit correct ITC and there will be no dispute

Elimination of fake invoices

These days, the biggest problem faced by GST department is raising fake invoices.

It becomes very difficult for the department to discover which invoice is real and which is fake.

 This system will reduce the number of fraud cases.

Facility to cancel/amend e-invoice

It’s not like once the invoice is uploaded, it cannot be amended. We can cancel or amend it within a specified time.

However, it can be altered only on GST portal. It is not possible on IRP (Invoice Registration Portal).

Bulk upload

It is also possible for suppliers to upload invoices in bulk. Which means when there are multiple invoices to be uploaded, taxpayer may simply upload all the invoices together in bulk and save its time

Real-Time system

It enables the tax payer and department to function on real time basis. Resultingly, the details of invoice as well as ITC will be available instantly for various purpose such as ITC, GST return filing, assessment etc.

No Duplication

As QR code is generated for every e-invoice, there is no chance of duplication. This will help the taxpayer to claim accurate ITC and pay correct tax to government.

Elimination of Reconciliation process

Earlier, before upload of any return or annual return, it was a very important part to reconcile data everywhere, like returns, annual return, Income Tax Return, Audit.

 But after introduction of E-invoicing, everything will be updated automatically, and the time to reconcile the data will be saved.

Accuracy in granting refunds

Granting refund is a very crucial task for government, as there was always a question on genuineness of it.

But after the automation of invoicing on GST portal, refund will be accurate and authentic. Thus the work of GST department and taxpayer will simply reduce and knowing the exact amount of refund will not be a tiresome job.

Effects of e-Invoicing under GST

e invoicing under gst

It is to be mentioned that approximately 20+ crore IRN has been generated within the period of 3.5 months up to January 2021.

This shows that the generation of E-invoice is not a very difficult or complex process. e-Invoicing under GST gave GST department a tool to know the exact tax amount which will make the work very easy and quick.

Similarly, the taxpayer will also be able to reduce his workload, as e-Invoice will help him to automatically add figures to various software as well as returns.

Cases such as Fraud, Tax evasion, mistakes etc. will also reduce as e-Invoices are based on QR code and IRN generated are unique for that particular e-Invoice.

Also, bulk filing of e-Invoices will also help the taxpayer to spend less time on compliances and focus more on his business.

Consequences of e-Invoicing system:

e invoicing system

e-Invoicing is one of the beneficial steps under GST as it assisted the matching concept which was the actual essence of GST Law, but so far couldn’t be implemented.

Apart from this, various problems faced by taxpayers and department like fake billing, undue litigations etc. came to an end permanently.

I hope this article was helpful for you to understand various aspects of e-invoicing.


CA Hema Pandey

About the author

Hema is a Chartered Accountant who is having about Eight years of experience in taxation and accounting. She is in practicing as a Chartered Accountant since 2020. She is a writer by passion and thus shares her experience and knowledge through her articles at various platform.Predominantly her area of interest is GST. Since GST is a very new concept for India, every practitioner is looking for clarity in this area. She likes to share her experience with everyone and therefore tries to put them in form of articles. Apart from this, she is also well-worsed in Financial market.

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