E- Invoicing – A step to eliminate jeopardy of fake bills

DEC 30, 2020
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Roadmap for E-Invoicing

The GST Council approved the standard of e-invoice in its 37th meeting held on 20th Sept 2019 and accordingly, on 13th Dec 2019, Government has issued Notification No 68/2019 CT to 72/2019 CT, laying down legal roadmap for E-Invoicing.

Legal Provision

As per newly inserted sub rule (4) in Rule 48 of CGST Rules, 2017 Notified class of registered persons have to prepare invoice by uploading specified particulars of invoice (in FORM GST INV-01) on Invoice Registration Portal (IRP) and obtain an Invoice Reference Number (IRN).

The invoice copy containing inter alia, the IRN with QR Code issued by the notified supplier to the buyer is commonly referred to as ‘e-invoice’ in GST

Notified persons

A registered person, whose aggregate turnover in any preceding financial year from 2017-18 onwards exceeds INR 500 crores [100 crores w.e.f. 01.01.2021] would be required to prepare invoice and other documents prescribed under sub-rule (4) of rule 48 in respect of the supply of goods or services or both to a registered person or for Exports.

Taxpayers whose aggregate turnover exceeds INR 500 crores had started e-invoicing from 1st October, 2020.

From 1-1-2021, Government has mandated e-invoicing for the taxpayers with aggregate turnover exceeding INR 100 Crores (in any preceding financial year from 2017-18 onwards).

Aggregate Turnover

Aggregate Turnover as defined under section 2(6) of CGST Act, 2017, includes Taxable supplies, Exempt supplies, Non-taxable supply, Export of goods, Export of services, Inter-State supplies of persons having same PAN, supplies without consideration [Schedule I].

Exclusions are Inward supplies on which tax is payable under RCM, CGST, SGST, IGST and cess.

It is to be computed on PAN India basis.

Financial Year

The aggregate turnover to be compared in any of the preceding financial years from 2017-18 onwards.

Where turnover exceeded Rs.500 crs in any of the previous FY from 17-18 then e-invoicing has become applicable from 01.10.2020.

In case turnover was exceeded Rs. 100 crs in any of the previous FY from 17-18 then e-invoicing will be applicable from 01.01.2021.

Where turnover of Rs. 100 crs was not exceeded in any previous FY but exceeding in current year, then e-invoicing will be applicable from 01.04.2021.

Once Applicable, no subsequent exemption

In case, aggregate turnover decreases below Rs. 500 or 100 crores in the subsequent year, the taxpayer has to continue to generate e-invoice irrespective of turnover. Once E-invoicing is applicable then it would be applicable for all FYs thereafter and there is no escape from this.

Applicability

  1. It is applicable on Supplies to registered persons (B2B), Supplies to SEZs (with/without payment), Exports (with/without payment), Deemed Exports, by the notified class of taxpayers
  2. It is applicable on Tax Invoice, Debit Notes, Credit Notes & Export Invoice.
  3. Government Departments / PSUs might have registered as regular GSTIN or TDS GSTIN. If the transaction is with TDS authority/ registration, then e-invoicing is necessary.
  4. E-invoicing is applicable for suppliers making supplies under Reverse Charge Mechanism.
    • In the case of B2B RCM invoices, if the supplier is notified to generate the IRN, he will do so with the RC flag in it, otherwise not required.
    • In the case of B2C RCM invoices or self-invoices, IRN need not have to be generated.
  5. E-invoicing is not applicable to B2C invoices, bill of supply, Import, Bills of Entry, invoices issued by Input Service Distributor (ISD).
  6. E invoice can be generated only by the suppliers. The buyer and transporters cannot generate E-Invoice.

Exemptions

The Entities which are exempted for e-invoices are-

  1. Special Economic Zone Units (not SEZ Developers) including Free Trade & Warehousing Zones (FTWZ)
  2. Insurer or a banking company or a financial institution, including a non-banking financial company
  3. goods transport agency supplying services in relation to transportation of goods by road in a goods carriage
  4. Suppliers of passenger transportation service
  5. Suppliers of services by way of admission to the exhibition of cinematograph films in multiplex screens.

Preparedness / Prerequisite

E-invoice in ‘e-invoicing’ doesn’t mean generation of invoice by a Government portal.

Registered persons will continue to create their GST invoices on their own Accounting/Billing/ERP Systems. It need to Integrate their existing ERP / Accounting and Billing software and incorporate necessary changes on account of e-invoicing, in order to enable reporting of invoices to IRP ( Invoice Reference Portal )and obtain IRN ( Invoice Reference Number ).

Schema

The business needs to incorporate a uniform standard called Schema for preparing an invoice.

Schema’ simply means a structured template or format. ‘e-invoice’ schema is the standard format for electronic invoice. It is notified as ‘Form GST INV-1’.

Invoice Registration Portal (IRP)

Invoice Registration Portal (IRP) is the website for uploading/reporting of invoices by the notified persons. E-Invoice Portal [Invoice Registration Portal – (IRP)] is going to perform the following-

  • Generate a unique Invoice Reference Number (IRN)
  • Digitally sign the e-invoice
  • Generate a QR code’
  • Send the signed e-invoice to the recipient of the document on the email provided in the e-invoice

The Invoice Reference Number (IRN)

The Invoice Reference Number (IRN) is a unique number (also known as hash) generated by the Invoice Registration Portal (IRP) using a hash generation algorithm, under the e-invoicing system

Invoice Reference Number (IRN) is different from Invoice number.

Invoice no. is assigned by the supplier and is internal to the business. Its format can differ from business to business and is also governed by relevant GST rules.

IRN, on other hand, is a unique reference number (hash) generated and returned by IRP, on successful registration of e-invoice.

Process Process of Generation of E-Invoice

1. Generation of Invoice and JSON -

  • Under E-Invoice, Invoice is prepared on ERP software and then JSON file from software will be created.

2. Uploading of JSON –

  • It is required to be uploaded on the IRP

3. Validation of data by IRP-

  • IRP will generate IRN, based on JSON uploaded.
  • It will validate the IRN, (Based on JSON uploaded) from Central Registry of GST System to ensure that the same invoice from the same supplier pertaining to same financial year is not being uploaded again.
  • On receipt of confirmation from Central Registry, IRP will add its signature on the Invoice Data as well as a QR code to the JSON.

4. Sharing of E-invoice-

  • Sharing the signed E-invoice data along with IRN to seller
  • Sharing the signed E-invoice data along with IRN to the GST System as well as to E-Way Bill System, will also update the ANX-1 of the seller and ANX-2 of the buyer.
  • The IRP will sign the e-invoice and the e-invoice signed by the IRP will be a valid e-invoice and used by GST/E-Way bill system.

5. Return the E-invoice-

  • Returning the digitally signed JSON with IRN back to the seller along with a QR
  • The registered invoice will also be sent to the seller and buyer on their mail ids as provided in the invoice.

Benefits From E-Invoice under GST

Government envisaged below benefits from E-Invoice

  1. Elimination of fake invoices
  2. Substantial reduction in input credit verification issues
  3. One time reporting on B2B invoice data, to reduce reporting in multiple formats (one for GSTR 1 or ANX 1 and the other for e-way bill)
  4. E-Way bill can also be generated using e-Invoice data

Benefits for businesses

  1. Auto-reporting of invoices into GST return,
  2. Auto-generation of e-way bill (where required).
  3. E-invoicing will also facilitate standardisation and inter-operability leading to reduction of disputes among transacting parties; improve payment cycles, reduction of processing costs and thereby greatly improving overall business efficiency.

Cancellation of E-Invoice

The e-invoice mechanism enables invoices to be cancelled. This will have to be reported within 24 hours. Any cancellation after 24hrs could not be possible; however one can manually cancel/amend the same on GST portal before filing the returns. Such situation would result into differences between GST portal and IRP and same would be flagged and reported to concerned jurisdictional officer thereafter justification on reasonable basis to be provided to department.

No partial cancellation of reported e-invoice allowed.

E Way Bill

E-Invoice will not replace E-way bill. For transportation of goods, the e-way bill will continue to be mandatory.

Precautions to be taken as a recipient

In case supplier is liable for e-invoice but issues normal invoice without IRN, ITC would not be eligible in hands on recipient. Such invoice without IRN would be invalid and treated as only piece of paper having no value under GST and not tax invoice.

Recipient is advised to take a declaration from supplier on applicability, if not applicable as on date then they need to inform in advance for its applicability.

The author of this article can be reached at +91-99716-62528 or anita.agrawal@aprafirm.com