E-Invoice An Overview

 

                     E-Invoicing An Overview

Today we will discussed about e-invoicing. As you all know E-invoice is mandatory for those taxpayer whose total turnover in last year was above 50Cr. There are so many issues which are faced by taxpayers but here we will discussed only basic about e-invoice method. In future we will discussed on this matter in Detailed.

Today we will try to understand the basic concept of e-invoicing.

 

E-invoice - Background:-

 

The GST Council, in its 37th meeting held on 20th September, 2019, approved introduction of electronic invoice (‘e-invoice’) in GST in a phased manner. Accordingly, steps have been initiated to introduce 'e-invoicing' for reporting of Business to Business (B2B) and export invoices. GST Council, in its 39th meeting, held on 14th March, 2020, further recommended certain classes of registered persons to be exempt from issuing e-invoices.

 

Following classes of registered persons have been exempted from issuing e-invoices:

a. Special Economic Zone Units

 

b. insurer or a banking company or a financial institution, including a non-banking financial company

 

c. goods transport agency supplying services in relation to transportation of goods by road in a goods carriage

 

d. Suppliers of passenger transportation service

 

e. Suppliers of services by way of admission to exhibition of cinematograph films in multiplex screens

 

E-invoice – Advantages:

 

e-invoice has many advantages for businesses such as Auto-reporting of invoices into GST return, auto-generation of e-way bill (where required).

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.

 

 

Benefits of e-invoice from GST perspective are enumerated below: e-invoice/IRN System

 

Area	Outcome
Automation of reporting documents for various compliances in GST	• One time reporting of B2B invoice data in the e-invoice form will reduce the reporting of the same in multiple forms (GSTR-1, e-way bill etc.). • e-way bill can also be generated using e-invoice data. GSTR-1 can also be auto-populated with the e-invoice data. • It will become part of the business process of the taxpayer. • Substantial reduction in transcription errors as same data will get reported to tax department as well as to buyer to prepare his inward supplies (purchase) register. • On receipt of information through GST System, buyer can do reconciliation with his Purchase Order
Reduction of tax evasion	• Complete trail of B2B invoices. • System-level matching of input credit and output tax
Fraud mitigation	• Elimination of fake invoices

 

E-invoice – Process:-

The documents covered by ‘e-invoice’ system are:

i. Invoices

ii. Credit Notes

iii. Debit Notes

 

issued by notified class of taxpayers to registered persons or for exports, are currently covered under e-invoice.

Though different documents are covered, for ease of reference and understanding, the system is referred as ‘e-invoicing’.

‘e-invoicing’ is not generation of invoice by a Government portal. Taxpayers will continue to create their GST invoices on their own Accounting/Billing/ERP Systems. These invoices will now be reported to ‘Invoice Registration Portal (IRP)’. On reporting, IRP will generate a unique ‘Invoice Reference Number (IRN)’, digitally sign it and return the e-invoice. A GST invoice will be valid only with a valid IRN.

IRP will also generate a QR code containing the unique IRN along with certain other key particulars. The QR code (which can be printed on invoice) enables offline verification of the fact whether the e-invoice has been reported on the IRP or not (using Mobile App etc.)

E-invoice schema only mandates what particulars shall be reported in electronic format to IRP so as to receive signed e-invoice from IRP. On successful reporting of invoice in JSON format to IRP, the supplier receives a signed JSON from the IRP which also includes data of a QR code. This payload can be converted to readable format and populated into a PDF file also. If the taxpayer desires, he can print it as paper invoice, as he is doing today, by also placing entity logo and other information, as needed. The PDF as well as the printed invoice will have to have the QR Code.

Cancellation/Amendment of Reported Invoice:

Where needed, the seller can cancel IRN for an e-invoice already reported within specified time.

Amendment of e-invoice already uploaded on IRP will be done only on GST portal, while filing GSTR-1. Amendment of invoices is not possible through the IRP.

To begin with, there will be only one IRP, but more IRPs will be added to provide sufficient availability, redundancy, speed and a diversified and distributed service to taxpayers with a choice.

 

E-invoice – Implications for Businesses: -

 

The e-invoicing system won’t entail much changes from the way businesses are issuing invoices presently. Businesses would not find much change since they would continue to see the physical or electronic (PDF etc.) output of the invoices in the same manner as it is today.

Necessary changes to enable such reporting of invoices to IRP and obtain IRN, will be made by ERP/Accounting and Billing Software providers in their respective software. The taxpayer can take services of GSPs as well, to report invoice data to IRP.

Multiple modes of reporting e-invoice will be made available so that taxpayer can choose one based on his/her need: API based and GSP based. Later, web-based and mobile app-based reporting will also be made available when coverage is increased by reducing the threshold of turnover.

 

E-invoice – Salient Features

a. Unique Invoice Reference Number (IRN):

The unique IRN will be based on the computation of hash of GSTIN of generator of document (invoice or credit note or debit note), Financial Year, Document Type and Document number like invoice number. This hash will be as published in the e-invoice standard and unique for this combination. This way hash will always be the same irrespective of the registrar who processes it.

To ensure de-duplication, the registrar will be required to send the hash to Central Registry of GST System to confirm whether the same has been reported already. In case, it has been reported by another registrar (as and when more registrars/IRPs are added) and the Central Registry already has the same IRN, then the registrar will reject the registration and inform the sender by sending appropriate error code. Only unique invoices from a taxpayer will be accepted and registered by the registrar.

b. Digital Signing of e-Invoice by Invoice Registration Portal (IRP):

After the invoice data will be uploaded on the IRP (Invoice Registration Portal), the IRP will generate the hash (as the IRN) and then digitally sign it with the private key of the IRP. The IRP will sign the complete e-invoice JSON payload (that includes the IRN/hash). Thereafter, this e-invoice signed by the IRP will be a valid e-invoice for the seller and can be used by the seller for his business transactions.

c. QR Code with key particulars:

The IRP will also generate a QR code containing the unique IRN (hash) along with some important parameters of invoice and digital signature so that it can be verified on the central portal as well as by a mobile App. This will be helpful for tax officers to verify the authenticity of invoice during road checks when Internet connectivity may not be available all the time.

The QR code will consist of the following key particulars of e-invoice:

a. GSTIN of Supplier

b. GSTIN of Recipient

c. Invoice number, as given by Supplier

d. Date of generation of invoice

e. Invoice value (taxable value and gross tax)

f. Number of line items

g. HSN Code of main item (line item having highest taxable value)

h. Unique IRN (Invoice Reference Number/hash)

i. Date of generation of IRN

 

Note: It is the signed QR code which will be easily verifiable by taxpayers as well as Tax Officers to validate whether the e-invoice has been reported to the IRP and accepted by it, as it will contain both the IRN as well as the Digital Signature of IRP as proof of having received and registered the e-invoice. If the signed JSON is tampered then e-invoice will become invalid and the digital signature will fail.

A Mobile App is provided for anyone to authenticate the QR code of the e-invoice and verify its basic details.

One can also verify the authenticity or correctness of e-invoice by uploading the signed JSON file or Signed QR Code (string) on e-invoice portal.

Note: IRP will not store invoices. In order to achieve speed and efficiency, the IRP is a lean and focused portal for providing invoice registration and verification service, generation of IRN and the QR codes.

d. Multiple Registrars/IRPs:

Multiple registrars (IRPs) will be put in place to ensure 24X7 operations without any break. To start with, NIC will be the first Registrar. More registrars (IRPs) will be added in due course.

e. Standardization of e-Invoice: A technical group constituted by the GST Council Secretariat has drafted standards for e-invoice after having industry consultation. The e-invoice schema/template is since notified as Form GST-INV-1.

f. Multiple Modes for reporting e-invoice:

Multiple modes are available so that taxpayer can use the best mode based on his/her need:

a. API based (integration with Taxpayer’s System directly)

b. API based (integration with Taxpayer’s System through GSP/ASP)

c. Free Offline Utility (‘Bulk Generation Tool’, downloadable from IRP)

 

Web-based / mobile app-based modes will also be provided in future.

g. Printing of e-Invoice:

The supplier receives signed JSON from the IRP. This payload can be received, converted to readable format and populated into a PDF file also. If the taxpayer desires, he can print it as paper invoice, as he is doing today, by also placing entity logo and other information, as needed. E-invoice schema only mandates what will be reported in electronic format to IRP and to receive the corresponding signed e-invoices from the IRP. While printing, QR code should also be printed, as it is one of the mandatory particulars under Rule 46 of CGST Rules.

h. Cancellation of e-invoice:

The seller can initiate cancellation of IRN of the e-invoice already reported, if that invoice is required to be cancelled by him/her. The cancellation of an invoice will be done as per procedure given under accounting standards and any other applicable rules/regulations. The cancellation will be allowed within specified time after generation of IRN.

The cancellation of e-invoice will be done by using the ‘Cancel IRN’ API (published on the e-invoice sandbox portal). The API will be a POST API and will require the IRN that is to be cancelled as the key parameter of the payload. Please refer the e-invoice sandbox portal for more details on the specifications and how to exchange and handle the payload and responses, respectively. The invoice number used for a cancelled invoice can’t be used again.

i. Amendment of e-invoice already reported: e-invoice/IRN System :-Amendment is possible through IRP. Amendment of e-invoices already uploaded on IRP will be done only on GST portal, while filing GSTR-1.

We will discussed this topic in detailed manner in future. Please tell us about the topic which you want to discussed.

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