E invoicing: Applications, Advantages, Procedures & FAQs

E-Invoicing is the introduction of a digital invoice at the government GST portal, for goods and services provided by business firms. The GST council in India set up a committee in May 2019 to discuss e-invoicing considering global implementations. Since then, several drafts of e-invoicing were issued and this was finally released in January 2020. The mandate went live from October 1, 2020 in a phased manner.

Why E-Invoicing?

Tax fraud using fake invoices has been a bane that the government was fighting even before implementing GST. What E-Invoicing does in the Indian context is that it mandates authorization of each invoice from the government portal called IRP (invoice reference portal). Such real-time invoicing discourages fraudulent transactions. Other than plugging the holes in tax leakage, other benefits of e-invoicing under GST that benefits taxpayers include:

• Real-time tracking of invoices
• One-time reporting of all GST filings
• Minimized invoice mismatches
• Easy input tax claims
• Better management and automation of the tax filing process

What is the link between an e-invoice and e-way bills?

An e-way bill is generated when there is movement of goods in a vehicle whose value exceeds Rs. 50,000. A GST registered individual or business cannot transport goods that have value of more than Rs. 50,000 without an e-way bill. On generation of an e-way bill, a unique E-way Bill Number (EBN) is allocated that is available to the supplier, recipient, and the transporter.

E-way bills are directly integrated with the e-invoicing system. It is totally the taxpayer’s choice if they want to generate the E-way bill at the time of e-invoice generation or later by using the IRN as a reference. However, it should be noted that an e-waybill will be invalid without a valid e-invoice.

The government of India has also linked e-way bills to the GST return filing. E-way bill generation will be blocked for taxpayers who have two or more consecutive GST returns pending to be filed. This benefits businesses in the following ways:

• Easy compliance for the taxpayers
• Ensuring accuracy by automating the process
• Benefits the government by ensuring reduced tax evasion

To Whom Does E-Invoicing Apply?

E-invoicing became mandatory October 1, 2020, to all businesses that have an aggregate turnover of more than Rs. 500 crores. From January 1, 2021, e-invoicing became applicable to all businesses exceeding Rs. 100 crores in turnover, finally extending it to businesses with total turnover of more than Rs. 50 crores from April 1, 2021.

On the basis of entity, GST e-invoices can be generated only by suppliers, not by recipients or transporters. However, e-commerce platforms can generate e-invoices for the sellers selling products on their platform.

However, it should be noted that e-invoicing is not applicable to the following categories:

• Banking companies, financial institutions, NBFC, insurance companies
• Goods transporting agencies
• Registered individuals supplying passenger transportation services
• Registered individuals involved in the service of exhibition of cinematographic films in multiplex services
• Special economic zone (SEZ) units

Benefits of E-invoicing

E-invoicing offers a lot of benefits to all parties involves in B2B transactions. Some of the most important ones are:

• E-invoicing cuts out a number of steps in the invoicing process thereby saving time for the buyer and the seller
• With e-invoicing, the cost for paper or postal fees is saved
• E-invoicing encourages automation, thereby reducing errors and mistakes that are common with manual input
• Using e-invoicing software, it is easy to ascertain when an invoice has been sent, viewed and paid and keep track of the invoices
• Since the authenticity of GST e-invoices is automatically validated, it reduces the risk of fraudulent bills
• Easier for tax officials to trace fake input credit due to real-time access to data
• E-invoices are saved on one platform and can be accessed from anywhere, thereby providing a higher degree of control into the invoicing process
• E-invoicing allows real-time tracking of invoices, thus allowing faster availability of input tax credit
• Helps buyers reconcile their purchase order with the GST e-invoice and accept or reject the invoice in real-time

Registration Process for E-Invoicing

To generate e-invoices, businesses must register to the Invoice Registration Portal (IRP). They have to log in or signup to this portal. If they are already registered on the e-way bill portal, then they can use the same credentials to log in to the IRP.

• Once logged in as a registered tax payer, click on the “Registration” tab in the IRP home page
• Fill the registration form, enter the GSTIN and the captcha code
• Details such as name, address, trade name, and contact details will be auto-populated based on GSTIN
• Check and verify the details or click “Update from GST common portal” if it needs to be updated
• Click on “Send OTP”, OTP will be received on the registered mobile number
• Enter OTP to validate and provide a unique username
• Once username is validated, create password to access the IRP account

How Does E-Invoicing Work?

As per the regulations, e-invoices have to be issued to the IRP. The IRP then carries out the validation of the e-invoice to provide the supplier with a response message. If the IRP response is positive, the invoice gets a digital signature, and the IRP assigns it a unique number. A QR code is also generated for both the buyer and the seller to confirm its authenticity and to prove that it has been registered in the GST system, finally making the document available to both parties in the portal. However, if the response is negative, a message detailing the reason for rejection is sent.

The below fields get validated by the IRP system

• Document details: type, number, and date.
•  Item-related details like service/ goods, total amount, GST rate, HSN code, total item value.
• Supplier details like legal name, GSTN address including location, PIN code, and state code.
• Buyer details like legal name, GSTN number including, address, location, PIN code, and state code.
• Transaction details like tax scheme and supplier type
• Dispatch from address details
• Billing and Shipping details
• Invoice details include tax exclusive value, tax value and the total invoice value

How does e-invoicing impact businesses?

Businesses will have to make provisions for real-time upload of invoice data and printing of QR code. For this to happen, they will need to have the right technology that assists these provisions without having to change the invoicing process. Businesses using software that integrates with the IRP portal will find it smoother to manage the e-invoicing requirements. Furthermore, the entire behavior of businesses will change since the buyer will drive the supplier to upload invoices to the government-monitored IRP portal, as this will confirm his eligible input tax credit. This means that buyers will be more inclined to do business with those sellers who understand the necessity of quick and correct uploading of invoices.

How does Amazon Business ensure compliance for customers?

To support sellers comply with the Indian government’s e-invoicing system, Amazon Business has enabled a feature in Seller Central through which sellers can opt for generating e-invoices by storing fully encrypted IRP credentials in their account and authorize Amazon Business to generate GST e-Invoices on their behalf.

Amazon Business has also created a system where e-commerce operators can generate e-Invoices on behalf of the sellers for the marketplace transactions. For both marketplace and non-marketplace transactions, Amazon Business has enabled the generation of e-Invoices for sellers through the third-party GST Suvidha Provider (GSP).

Amazon Business has been educating sellers to perform the below checklist to ensure that the correct details are saved. This ensures the creation of accurate and compliant invoices from their Seller Central account. Sellers have to:

• Verify their business address in Seller Central to ensure that the name of the State complies with ISO standards. For instance, if the state of business address is Maharashtra, then the state name in the business address should be Maharashtra (case-sensitive). Abbreviations such as MH or MA should not be used.
•  Ensure that the PIN code is correct and corresponds to the GSTIN state in the business address under Account Info in Seller Central. More details on this can be found here.
• Ensure that the correct state GSTIN and correct PAN number is updated in Seller Central. In case of inconsistencies, contact Seller Support to have them corrected.
• Update the correct HSN, Product Tax Code and other mandatory ASIN information for each of the listings in Seller Central. To understand better about updating these details, visit the pages below.
•  HSN
• Product Tax Code

Amazon Business has also enabled the below reports to capture additional fields like PAN, IRN number, IRN date, IRN filing status and IRN Error code.

•    B2B Merchant Tax Report (MTR) for B2B orders
• Stock Transfer Report (STR) for liquidation/recommence, Fulfilment Centre transshipment, vendor returns, Network commingling, return consolidation etc.

On September 20, 2019, the 37th GST Council Meeting, chaired by Finance Minister Nirmala Sitharaman, was held in Goa. It was in this meeting that the standard of a new e-invoice scheme was discussed and approved. This mechanism and all the schemes related to it are published in the GST portal.

E-Invoicing FAQs

1) Where should businesses generate e-invoices?

Businesses can generate e-invoices through ERP or through their own accounting and billing systems.

2) Should there be separate e-invoice format required for each business?

All businesses have to use the same e invoice format. They have to fill the mandatory fields, other optional fields can be chosen by the business according to their requirements.

3) Is there any maximum length for the various fields?

Yes, the specification for each field has been mentioned with its length and characters that have to be entered.

4) What is the maximum number of line items supported by e-invoice?

The maximum number is 100.

5) Can I link multiple invoices in case of credit note or debit note?

Yes, it is allowed to link multiple invoices in such cases.

6) Can the generated invoices be fully or partially cancelled?

The generated invoices can be cancelled fully, not partially, but it should be reported to the IRP within 24 hours.

7) Do exports also require e-invoice compliance?

Yes, the e-invoice scheme has provision for export invoices as well.

Read More

1) Understanding GST Input Tax Credit and How to Claim It

2) GST Registration Process - A Complete Step by Step Guide

3) Advantages and Disadvantages of GST for Business, SMEs and Consumers