Latest news 📢: On 10th May 2023, the Central Board of Indirect Taxes and Customs (CBIC) notified the 6th phase of e-invoicing implementation, which notified that all taxpayers with a turnover of ₹5 crore or more in any financial year from 2017-18 would be required to issue e-invoices from August 1, 2023.
As a first phase of implementing the e-invoice applicability, generating e invoices became mandatory for businesses with a turnover of 500 crores and above from 1st October 2020. But from 1st October 2022, as per CBIC notification, the fifth phase of e-invoice applicability made effective for GST taxpayers whose aggregate turnover is more than Rs. 10 crores. (Ref: Notification no. 17/2022 – Central tax).
How to identify the applicability of e invoicing for your business? Is it applicable to all your POS Sale bills? Do you think E-Invoice means generating electronic invoices only from the Government GST portal in a stipulated format? Worried that it will be a time-consuming expensive affair due to the latest rule?
Too many questions are running through your mind and you are searching for where you will get complete clarity for all your doubts. Here is a blog where all your question marks turn into full stops.
- SECTION 1 – CONCEPT
- What is E-invoicing?
- What is the need for e-invoicing?
- What is the process of e-invoicing under GST?
- What are the benefits of e-invoicing?
- What are the transactions/supplies covered under e-invoicing?
- What are the documents covered for e-invoicing?
- Is e-invoicing applicable to B2C?
- What are the methods/ways through which e-invoices can be generated?
- SECTION 2 – E-INVOICE APPLICABILITY
- Who is eligible for E-invoice?
- Who is exempted from E-invoice?
- What is the turnover limit for E-invoice applicability?
- When did the e-invoice applicability under GST was implemented and what are its phases of implementation?
- How to calculate the aggregate turnover for E-invoice applicability?
- Does Aggregate turnover have to be calculated for which year to check E-invoice applicability?
- Will E-invoice be applicable for a newly started business, if its anticipated turnover for the current financial year exceeds the prescribed limit?
- Will E-invoice be applicable if turnover during the current year exceeds the prescribed limit, even though the previous year’s turnover is within the limit?
- SECTION 3 – SCENARIOS
- SECTION 4 – DEFINITIONS
SECTION 1 – CONCEPT
What is E-invoicing?
E-Invoicing or Electronic Invoicing is a real-time authentication of B2B invoices by the GST portal (IRP) in order to seamlessly integrate the Input Tax credit, GST Filing, and E-way billing systems so that the end-to-end communication from the seller to buyer is hassle-free.
What is the need for e-invoicing?
The purpose of E-Invoice is to avoid the data reconciliation between sellers and buyers under the GST Input Tax credit system by reducing the mismatch errors. E-invoices created on one software can be read by another, allowing interoperability and uniformity. Fake GST invoices are eliminated in this process. To summarize, the following are key takeaways of e-invoicing :
- Faster and timely Input tax credit
- Real-time Validation by GST portal
- Traceability and Transparency
- Uniform Invoice format and content
- Curbing Tax Evasion
What is the process of e-invoicing under GST?
E-invoicing is the process of how a normal invoice turns into an authenticated electronic invoice in the blink of an eye, though it involves the following integrated steps that work seamlessly for every invoice
- Creation – Preparation of invoice from your POS/ERP
- Conversion – Transforming invoice data into Govt stipulated JSON format files
- Transmission – Uploading the JSON into the IRP through authorized GSPs
- Validation – Verification of JSON for its correctness by the IRP portal
- Generation – IRP’s authentication of invoice by generating IRN, QR Code
- Integration – Downloading of digitally signed JSON into your POS/ERP
- Inclusion – Printing of E-invoices by POS/ERP by including the IRN and QR Code
- Communication – Exchange of information from IRP to GST portal
- Automation – Auto population of E-invoice data to E-way bill, GSTR-1and and GSTR-2B
What are the benefits of e-invoicing?
E-invoicing comes with a lot of benefits to the seller, the buyer, and the government. Some of the key benefits are listed below :
- Faster Input Tax credit without waiting for month-end reconciliations
- Real-time tracking of tax-compliant invoices between Seller, Buyer, and Govt authorities using unique identifiers like IRN and QR Code
- One-time reporting -Auto-population to GSTR-1 and e-Way bill
- Portal Validation ensures the reduction of manual mistakes
- Continuing to provide required disclosures, you can have your own invoice format providing flexibility
- Reduce frauds and manipulations (as immediate reporting to Govt) curbing Tax evasion
- Part of Go Green / Digital India initiatives towards paperless offices
What are the transactions/supplies covered under e-invoicing?
E-invoicing applies to the following transactions of a registered seller
- B2B transactions – Sales or services to registered buyers
- SEZ transactions – Sales or services to SEZ units
- Export transactions – Sales or services to customers outside India
What are the documents covered for e-invoicing?
By the term E-invoice, it doesn’t mean that it applies to only Invoices. It also naturally applies to Debit notes and Credit notes in respect of the above-mentioned B2B, SEZ, and Export transactions
Is e-invoicing applicable to B2C?
As of now, B2C transactions viz sales or services to unregistered consumers, have been excluded from the purview of e-invoicing, since the whole system is designed to streamline the Input Tax credit (ITC) process, which will eventually be irrelevant in the case of B2C transactions
What are the methods/ways through which e-invoices can be generated?
E-invoices can be generated through any of the following methods :
- GST provided Offline Tool
- GSPs (GST Suvidha Provider)
- ASPs (Application Service Providers) enabled with GSPs
- Registered ERPs
- E-commerce operators
- Direct Integration (taxpayers above prescribed limit)
- API of sister concern GSTIN
- E-way Bill API credentials
SECTION 2 – E-INVOICE APPLICABILITY
Who is eligible for E-invoice?
Every GST-registered person whose aggregate turnover in a financial year exceeds the specified limit (from time to time) shall prepare an e-invoice in respect of the supply of goods or services or both to a registered person.
Who is exempted from E-invoice?
Persons listed under rules 54(2),(3),(4), and (4A) of the Central Goods and Services Tax Rules, 2017 are exempted from einvoice applicability regardless of their turnover. Examples of such exemptions are Insurance Companies, Banking Companies, Financial Institutions, NBFCs, Special Economic Zone (SEZ) units, Goods Transport Agencies (GTA), Passenger transportation service providers, etc.
What is the turnover limit for E-invoice applicability?
According to the recent CBIC notification, the 6th phase of e-invoicing implementation was announced. As per the announcement, all taxpayers whose aggregate turnover in any of the financial years from FY17-18 exceeds 5 crore must generate e-invoices for all their transactions starting August 1, 2023.
When did the e-invoice applicability under GST was implemented and what are its phases of implementation?
E-invoicing was first implemented for Rs.500 crore businesses from 1st October 2020, then in the second phase, it was reduced to Rs.100 crore from 1st January 2021, followed by in the third phase it was reduced to Rs.50 crore from 1st April 2021 and, in the fourth phase, it was further reduced to Rs.20 crore on 1st April 2022, and to Rs.10 crore in the fifth phase of implementation w.e.f from 1st October 2022. Finally, the e-invoicing applicability now stands at the sixth phase, for businesses whose turnover exceeds Rs.5 crore with effect from 1st August 2023.
| Phase | With effect date | Turnover criteria (INR) |
|---|---|---|
| 1 | 1st October 2020 | 500 crore |
| 2 | 1st January 2021 | 100 crore |
| 3 | 1st April 2021 | 50 crore |
| 4 | 1st April 2022 | 20 crore |
| 5 | 1st October 2022 | 10 crore |
| 6 | 1st August 2023 | 5 crore |
How to calculate the aggregate turnover for E-invoice applicability?
GST taxpayers are subject to E-Invoice if their aggregate turnover is more than the prescribed limit. Aggregate turnover includes all types of outward supplies (sales or services) whether it is B2B or B2C, SEZ or Exports, Taxable or Exempted, everything put together needs to be accumulated to check the turnover limit for e invoicing applicability
Does Aggregate turnover have to be calculated for which year to check E-invoice applicability?
Businesses whose turnover exceeds the prescribed limit in any financial year from FY 2017-18, will be required to do e-invoicing. Say, for example, a taxpayer has the following aggregate turnover in the previous financial years – FY 2017-18 – Rs.4 crore, 2018-19 – Rs.3 crore, 2019-20 – Rs.6 crore, 2020-21 – Rs.5 crore and 2021-22 – Rs.4 crore, then E-invoice will be applicable for them from 1st August 2023 as they have crossed the e invoice applicability limit of 5 crore in the financial year 2019-20.
Will E-invoice be applicable for a newly started business, if its anticipated turnover for the current financial year exceeds the prescribed limit?
No, E-invoice is not applicable to new businesses. It is only based on the previous year’s aggregate turnover.
Will E-invoice be applicable if turnover during the current year exceeds the prescribed limit, even though the previous year’s turnover is within the limit?
Say for example, if a business turnover did not exceed 10 crores in any year up to 31st March 2022. However, if its turnover crosses 10 crores in Sep 2022, then will it be subject to e-invoice from Oct 2022? The answer is No, for the entire FY 2022-23, turnover up to 31st March 2022 (previous financial years) is only to be considered. But there is a twist in this tale if the government reduces the applicability of e invoicing from 10 crores to 5 crores or less, then e invoice will be applicable to this business if its turnover is exceeding 5 crores in any of the financial years from FY 2017-18 till 2021-22.
SECTION 3 – SCENARIOS
How to make corrections or amendments to E-invoice after IRN generation?
Once an IRN is generated, the e-invoice cannot be edited or modified in the IRP portal, but it can be cancelled. Cancellation is also permitted only within 24 hours of IRN generation. Beyond that, cancellation is also not possible, we need to raise a credit note/debit note against the invoice partially/fully. A separate IRN has to be generated for the credit note/debit note. There are also provisions to make amendments to the e-invoice using the GSTR-1 return of the GST portal.
What is the time limit for the cancellation of an E-invoice?
IRN can be canceled in the IRP or through cancellation API within 24 hours from the time of IRN generation.
Can wereuse a canceled e-invoice number?
The invoice number must be unique for a GST number across an entire financial year. IRP will not permit duplicate invoice numbers, even though the original e-invoice number is canceled.
Howto validate the authenticity of a QR code in an e-invoice?
GST Dept. has provided a QR code verification app, wherein the QR code can be scanned using the “Verify QR code” option to display the GST e-invoice details stored in that QR code. The signed JSON can also be uploaded in the same app using the “Verify signed e-invoice” option to verify its authenticity and for integration purposes.
SECTION 4 – DEFINITIONS
What is the Invoice Registration Number (IRN) in the GST e-invoice?
Invoice Registration Number (IRN) is a unique 64-digit alphanumeric reference number generated by the IRP portal for every successful e-invoice generation. E-invoice presented by a seller to his buyer is not valid without the IRN number.
What is the Quick Response (QR) code in GST e-invoice?
QR code is a two-dimensional barcode generated by the IRP portal for every successful e-invoice generation. E-invoice presented by a seller to his buyer is not valid without the QR code. This QR code contains digitally signed invoice details verifiable by a QR code verification app. It contains details like Seller GSTIN, Buyer GSTIN, Document number, Document type, Document date, Total Invoice value, Total number of line items, IRN number, and IRN date.
Who/What is a GST Suvidha Provider (GSP)?
GSPs are accredited institutions by the GST Dept. that provides API integration for communication by the user to the IRN portal for the purpose of e-invoice generation
Who/What is an Application Service Provider (ASP)?
ASPs are intermediaries who facilitate the communication between the user and GSP by providing platforms for API integration and thereby IRN generation.
What is an Invoice Registration Portal (IRP)?
IRP is a dedicated portal created by the GST portal for this e-invoice generation process. IRP receives the uploaded e-invoice JSON file from the user, validates it, and provides back the signed e-invoice with IRN and QR code as its response JSON.
ONE FINAL QUESTION?
Now that you have got complete clarity on e-invoicing applicability, concepts, and scenarios, you will be left with one final question. What is the Best POS/ERP software for e-invoices? If you have multiple solutions for your business requirements, then you might be struck with many 2 way reconciliations and multi-fold times repeated invoice entries in different solutions.
Hence the need of the hour is a One-Stop solution like Gofrugal ERP which provides an end-to-end solution from POS Billing, E-invoicing, Inventory management, GST filing, and Accounting, all under one roof. What are you waiting for?
