E-invoicing under GST
Table of Contents
e-Invoice Background
The GST Council, in its 37th meeting held on 20th September, 2019, has 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) invoices, beginning from 1st January, 2020 on voluntary basis. Further, the GST Council, in its 39th meeting, held on 14th March, 2020, has further recommended certain classes of registered persons to be exempt from issuing e-invoices and the date for implementation of e-invoicing to be extended to 01.10.2020 for certain category of taxpayers
e-Invoice Advantages
e-invoice has many advantages for businesses such as standardisation, inter-operability, autoreporting of invoices into GST return, auto-generation of e-way bill (where required), reduction in processing costs, reduction in disputes, improving payment cycles and thereby improving overall business efficiency. Huge advancements in technology sophistication, increased penetration of internet along with availability of computer systems at reasonable cost has made ‘e-invoice’, a popular choice worldwide. Due to these benefits, which ensure ease of doing business, many countries have already adopted e-invoicing.
Benefits of e-invoice from GST perspective are enumerated below:
o 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
o Reduction of tax evasion
• Complete trail of B2B invoices.
• System-level matching of input credit and output tax
o Fraud mitigation
• Elimination of fake invoices
e-invoice – Schema (Standard format)
Presently, businesses are using various accounting/billing software, each generating and storing invoices in their own electronic formats. These different formats are neither understood by GST System nor among the systems of suppliers and receivers. For example, an invoice generated by SAP system cannot be read by a machine which is using ‘Tally’ system, unless a connector is used. With more than 300 accounting/billing software products, there is no way to have connectors for all.
In this scenario, ‘e-invoicing’ aims at machine-readability and uniform interpretation. To ensure this complete ‘inter-operability’ of e-invoices across the entire GST eco-system, an invoice standard is a must. By this, e-invoices generated by one software can be read by any other software, thereby eliminating the need of fresh/manual data entry.
e-invoice – Process:
The documents covered by ‘e-invoice’ system are:
- Invoices
- ii. Credit Note
- iii. Debit Note
‘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. 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.
Cancellation/Amendment of Reported Invoice:
Where needed, the seller can cancel IRN for an e-invoice already reported by reporting it on IRP within specified time. Amendment of e-invoice already uploaded on IRP will be done only on GST portal. 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/Excel) 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.
Multiple modes of reporting e-invoice will be made available so that taxpayer can choose one based on his/her need: API based, Mobile app based, Offline tool based and GSP based.
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):
The invoice data will be uploaded on the IRP (Invoice Registration Portal), which will also 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. The IRP will also push this signed e-invoice to the GST and the E-Way bill systems.
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)
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 will be provided for anyone to authenticate the QR code of the e-invoice and verify its basic details. The facility to view the e-invoice will be provided to buyers and tax officers, on the GST System / E-way bill system.
Note: The facility of e-invoice verification is planned to be made available only through the GST System and not the IRP. This is because the IRP will not have the mandate to store invoices. In order to achieve speed and efficiency, the IRP will be a lean and focused portal for providing invoice registration and verification service, generation of IRN and the QR codes. Hence, storing of the invoices will not be a feature of the IRP.
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 will be made available so that taxpayer can use the best mode based on his/her need. Below modes are envisaged at this stage:
a. API based,
b. Mobile app based,
c. Offline tool based and
d. GSP based.
Using API mode, the applicable taxpayers and their ERP/internal IT services/accounting software providers can interface their systems and get the signed e-invoice from IRP – after passing the relevant invoice information in JSON format. APIs will also handle multiple requests for invoices registration and to generate the IRN. This mode can also be used for multiple invoices as well. The e-way bill system provides the same methodology.
g. Printing of e-Invoice:
The supplier receives a 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.
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. 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 einvoice 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 for more details on the specifications and how to exchange and handle the payload and responses, respectively. The invoice number of cancelled invoice can’t be used again.
(i) Amendment of e-invoice already reported:
Amendment of e-invoice already uploaded on IRP will be done only on GST portal. Any amended e-invoice, if reported to IRP, will get rejected as its IRN (unique hash) will already be existing in the IRP system. Hence, amendment of invoices will not be possible through the IRP.
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