What is an e-invoice in GST? & ways to generate it?

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E-invoice portal– The GST Council has approved the introduction of ‘E-invoicing’ or ‘electronic invoicing’ in a phased manner for reporting of business to business (B2B) invoices to GST System, starting from 1st January 2020 on a voluntary basis.

What is e-invoicing?

An e-invoice is an invoice generated by any software on the computer or Point of Sales (PoS) machine.

E-invoice does not mean the generation of invoices from a central portal of the tax department, as any such centralization will bring unnecessary restrictions on the way trade is conducted. In fact, taxpayers have different requirements and expectations, which can’t be met from one software generating e-invoices from a portal for the whole country. Invoice generated by each software may look more or less the same, however, they can’t be understood by another computer system even though business users understand them fully. For example, an Invoice generated by the SAP system cannot be read by a machine that is using the ‘Tally’ system.

The e-invoice system being implemented by tax departments across the globe consists of two important parts namely,

  • Generation of invoice in a standard format so that invoices generated on one system can be read by another system. And after that
  • Reporting of e-invoice to a central system.

The basic aim behind the adoption of the e-invoice system by tax departments is the ability to pre-populate the return and to reduce the reconciliation problems. A huge increase in technology sophistication, increased penetration of the Internet along with the availability of computer systems at a reasonable cost has made this journey possible and hence more than 60 countries are in the process of adopting the e-invoice.

GST Council has given the responsibility to design the standard of e-invoice and update the same from time to time to GSTN which is the custodian of Returns and invoices contained in the same. Adoption of e-invoice by GST System is not only part of Tax reform but also a Business reform as it makes the e-invoices completely inter-operable eliminating transcription and other errors.

What are the benefits of the e-invoice system in GST?

E-invoicing system in GST will provide better taxpayer services, reduction in tax evasion and more such as-

  • One time reporting on B2B invoice data in the form it is generated to reduce reporting in multiple formats (one for GSTR-1 and the other for the e-way bill).
  • To generate sales and purchase register (ANX-1 and ANX-2) from this data to keep the Return (RET-1 etc.) ready for filing under New Return. e-Way bill can also be generated using e-Invoice data.
  • It will become part of the business process of the taxpayer.
  • Substantial reduction in input credit verification issues as the same data will get reported to the tax department as well to the buyer in his inward supply (purchase) register.
  • On receipt of info through GST System, A buyer can do reconciliation with his Purchase Order and accept/reject in time under New Return.
  • System-level matching of input credit and output tax.
  • Elimination of fake invoices.

Generation of e-invoice will be the responsibility of the taxpayer who will be required to report the same to Invoice Registration Portal (IRP) of GST, which in turn will generate a unique Invoice Reference Number (IRN) and digitally sign the e-invoice and also generate a QR code. The QR Code will contain vital parameters of the e-invoice and return the same to the taxpayer who generated the document in the first place. The IRP will also send the signed e-invoice to the recipient of the document on the email provided in the e-invoice.  

What are the steps involved in the e-invoicing process?

The flow of the e-invoice generation, registration, and receipt of confirmation can be logically divided into two major parts. 

1. The first part is the interaction between the business (supplier in case of invoice) and the Invoice Registration Portal (IRP).

2. The second part is the interaction between the IRP and the GST/E-Way Bill Systems and the Buyer. 

How many ways to make e-invoice?

There are multiple ways/modes will be made available so that the taxpayer can use the best mode based on his/her needs. The modes given below are envisaged at this stage under the proposed system for e-invoice, through the IRP (Invoice Registration Portal):

  1. Web-based,
  2. API based,
  3. SMS based,
  4. mobile app-based,
  5. offline tool based and
  6. GSP based.

E-invoice related more faqs you would like to know

Will businesses now be required to generate e-invoices on the GST portal or the e-invoice portal or the IRN portal?

No, Businesses will continue to generate e-invoices on their internal systems – whether ERP or their accounting/billing systems or any other application.

The e-invoicing mechanism only specifies the invoice schema and standard so as to be inter-operable amongst all accounting/billing software and all businesses.

Will there be separate invoice formats required for Traders, Medical Shops, Professionals, and Contractors?

No, the Same e-invoice schema will be used by all kinds of businesses. The schema has mandatory and non-mandatory fields. The mandatory field has to be filled by all taxpayers. The non-mandatory field is for the business to choose. It covers all most all business needs and specific sectors of business may choose to use those non-mandatory fields which are needed by them or their eco-system.

Please clarify whether there the current e-invoice schema is for the invoice to be issued by Govt or has to be maintained in the IT system by the taxpayer?

The invoice schema has to be maintained and invoices generated using this schema by the taxpayer himself. The GST portal or Invoice Registration Portal (IRP) will NOT provide the facility to generate invoices. IRP is only to report the invoice data.

The ERP or accounting billing software or any other software tool to generate the e-invoice of the seller shall only generate invoices.

How long will the e-invoice generated be available at the Government portal?

It is again clarified that the e-invoice will not be generated at the GST portal.

It will be generated only at the seller’s system – whether ERP or the accounting/billing system/other software tools of the seller.

It will be uploaded into the GST ANX-1 only once it has been validated and registered by the invoice registration system. After it has been validated and is available in the ANX-1, it will be visible to the counterparty in his ANX 2.

Thereafter it will be visible and available for the entire financial year and archived. As far as data on IRP is concerned, it will be kept there only for 24 hours.

While all businesses generate an invoice at the same time, how will the server react?

The businesses will generate the invoice at their system and hence that will not impact the servers of IRP.

The capacity of the system at IRP shall be built so as to handle the envisaged loads of simultaneous upload based on data reported in GSTR1 for the last two years.

Subsequently, multiple invoice registrars will be made available that will be able to distribute the load for invoice registration.

Will it be possible to add transporter details as well?

No. The transporter details must be entered in the E-Way bill system only.

Is it possible to auto-populate fields of the e-invoice based on credentials entered?  That way it can minimize data entry errors.

Since the invoice generation is to happen at the business end this can be built into the ERP or invoicing system of the seller. Most such software provides this facility in the name of item master, supplier master, buyer master, etc.

from the source e-invoice portal

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