Electronic Invoice (E-Invoice)

Emerge of Electronic Invoice:

• Fake Invoice under GST

• If a business has not been registered under GST but uses fake GSTIN on the invoice and charges GST, it shall not be a valid invoice as the tax paid will not get deposited with the government.
• If a business has not supplied anything to another business but issuing a GST invoice with the intention to defraud input tax credit.

The GST Department has so far arrested more than 300 persons across India on fake invoice since November 2020. The GST intelligence and authorities have booked more than 3,200 cases against 9,600 fake GSTIN entities as of now. 

Purpose of E-Invoice:

The new process of Invoicing brings with it a large amount of real-time data for analytics by the government to curb the threat of fake invoice, resulting in genuine input tax credit (ITC) claims by taxpayers. 

The concept of using a standard file which contains the relevant particulars of an invoice and authentication by the government would also enable the buyer to verify the genuineness of its supplier through automated systems. The buyer’s insistence will compel suppliers to mandatorily issue e-invoice and ensure that the tax for the same is deposited with the government.

What is E-Invoice?

E-Invoice is a system in which B2B invoices are authenticated electronically by GSTN for further use on the common portal. Under the E-Invoicing system, an identification number will be issued against every invoice by the invoice registration portal.  All the information will be transferred from this portal to both the GST Portal and E-Way bill portal in real time. Therefore, It will eliminate the need for manual data entry while filing GSTR1 return as well as generation of the e-way bills.

To whom is E-Invoicing applicable?

Aggregate turnover in any PY from 2017-18 to 2019-20	Date from which E-Invoice applicable
>500 Crores	01-10-2020
>100 Crores	01-01-2021
>50 Crores	01-04-2021

E-Invoicing has been made applicable as on the date mentioned in the below table with respect to the aggregate turnover specified.

However, irrespective of the turnover, E-Invoicing shall not be applicable to the following categories of registered persons:

1. An Insurer or banking company or financial institution including NBFC
2. A Goods Transport Agency
3. A Registered Person supplying Passenger Transportation Services
4. An SEZ Unit
5. A Registered Person supplying services by way of admission to the exhibition of cinematographic films in multiplex services.

How to Generate an E-Invoice?

An e-invoice is a B2B invoice reported by a GST registered business with the e-invoice portal (GSTN), which must adhere to the standard format notified by the CBIC.

The following are the step by step process to generate an e-invoice and IRN.

• Step 1 – Creation of the invoice on the taxpayer’s ERP:

The taxpayer will continue to generate invoices in the normal course of business. However, the reporting of these invoices electronically has criteria. It needs to be done as per the e-invoice schema along with the mandatory parameters.

• Step 2 – Generation of the Unique IRN:

The IRN (also known as hash) is a unique number which is generated by the e-invoice system using a hash generation algorithm. For every document submitted, a unique 64 character IRN will be generated.

At present, the e-invoice system provides the two modes to generate the IRN (Invoice Reference Number)

• Offline
• API

Notified taxpayers, who need to generate e-invoice, can generate them using these options.

1. Using Offline Tool:

The process of obtaining IRN and e-invoice though offline tool is presented below:

2. Using API:

API (Application Programming Interface) is a software intermediary which allows two applications to interact with each other. With regard to the e-invoicing system, APIs facilitate the communication and exchange of data between taxpayers or GSPs (GST Suvidha Providers), and the e-invoice system.

• Step 3 – Generation of the QR Code

The e-invoice system will generate the IRN, and then digitally sign the e-invoice and the QR code (quick response code). The QR code will enable a quick view, and validation and access of the invoices from handheld devices. The QR code will consist of the following parameters:

1. The GSTIN of supplier
2. The GSTIN of recipient
3. The invoice number as given by supplier
4. The date of generation of the invoice
5. The invoice value (taxable value and gross tax amount)
6. The number of line items
7. The HSN code of the main items (the line item having the highest taxable values)
8. The unique IRN (hash)

The digitally signed QR code will have the unique IRN (hash) which can be verified on the central portal, as well as by offline apps. This will be helpful for tax officers who need to check invoices in places where internet connection may not be available, such as on highways.

1. What documents are presently covered under e -invoicing?

Answer: (i) Invoices, (ii) Credit Notes & (iii) Debit Notes

2. What supplies are presently covered under e-invoice?

Answer: Supplies to registered persons (B2B), Supplies to SEZs (with/without payment), Exports (with/without payment), Deemed Exports, by notified class of taxpayers are currently covered under e-invoicing.

3. B2C (Business to Consumer) supplies can also be reported by notified persons?

Answer: No. Reporting B2C invoices by notified persons is not applicable or allowed currently. However, they will be brought under e-invoice in the next phase.

4. Is E-Invoicing applicable for NIL rated or wholly exempt supplies?

Answer: No. In those cases, a bill of supply is issued and not a tax invoice.

5. Whether E-Invoicing is applicable for invoices between two different GSTINs under the same PAN?

Answer: Yes. E-Invoicing by a notified person is mandated for supply of goods or services or both to a registered person.

As per Section 25(4) of CGST/SGST Act, “A person who has obtained or is required to obtain more than one registration, whether in one State or Union territory or more than one State or Union territory shall, in respect of each such registration, be treated as distinct persons for the purposes of this Act.”

6. Which entities/sectors are exempt from the e-invoicing mandate?

Answer: 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

7. Whether E-Invoicing is applicable for supplies involving Reverse Charge?

Answer: If the invoice issued by the notified person is in respect of supplies made by him but attracting reverse charge under Section 9(3), e-invoice is applicable.

For example, a taxpayer (say, a Firm of Advocates having aggregate turnover in a FY is more than Rs.500Cr.) is supplying services to a company (who will be discharging tax liability as recipient under RCM), such invoices have to be reported by the notified person to IRP.

On the other hand, where supplies are received by a notified person from (i) an unregistered person (attracting reverse charge under Section 9(4)) or (ii) through import of services, invoices don’t arise/are not applicable.

8. Whether invoice raised as B2C, later customer provides GSTIN could be amended to be B2B?

Answer: There is no option to make amendments in e-invoicing, one needs to issue GST credit note [within next Sept of FY for which invoice pertains] then raise new B2B e-invoice

9. Which year aggregate turnover to be compared with 500crs and 100Crs?

Answer: The aggregate turnover to be compared in any preceding financial year from 2017-18 onwards. Where turnover exceeded 500Crs in previous FY from 17-18 then e-invoicing would be applicable from 01.10.2020.

In case of 10Crs was exceeded in any previous FY from 17-18 then e-invoicing from 01.01.2021.

Where turnover of 100Crs was not exceeded in any previous FY and exceeding in current year (2020-21) then e-invoicing is applicable from 01.04.2021.

10. Whether e-invoice is applicable in case of exports?

Answer: Yes, e-invoicing is applicable when an invoice is issued to the recipient.

11. Do one need to check turnover every year when e-invoicing is applicable?

Answer: Once E-invoicing is applicable then it would be applicable for all FYs thereafter and there is no escape from this, therefore once e-invoicing is applicable there is no need to check turnover for all succession years.

12. Whether invoice issued by ISD is covered under e-invoicing applicability?

Answer: e-invoicing is not applicable to invoices issued by Input Service Distributor (ISD).

13. Whether amendments could be made in e-invoices once raised for which IRN has already been generated?

Answer: Amendments are not allowed on IRP once raised it cannot be changed/amended.

However one could cancel the same within 24 hours Where 24 hours are lapsed then the taxpayer do not have any other option and need to proceed with the same Further when filing GSTR-1 taxpayer could amend the same in GST portal Such above 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.

14. Can one partially cancel a reported e-invoice?

Answer: No. It has to be cancelled in total. No partial cancellation of reported e-invoice allowed.

Cancellation of invoices is governed by Accounting Standards and any other applicable rules/regulations.

15. Can an IRN/invoice reported to IRP be cancelled?

Answer: Yes. The cancellation request can be triggered through ‘Cancel API’ within 24 hours from the time of reporting invoice to IRP.

However, if the connected e-way bill is active or verified by an officer during transit, cancellation of IRN will not be permitted.

In case of cancellation of IRN, GSTR-1 also will be updated with such ‘cancelled’ status.

16. What if I have generated an Invoice by mistake and it is not cancelled within 24 hours?

Answer: One may cancel in its Books of Accounts. Do not report the Invoice in your GST Returns i.e., manually delete in GSTR-1.

Such a situation would result in differences between GST portal and IRP and the same would be flagged and reported to concerned jurisdictional officers thereafter justification on reasonable basis to be provided to the department.

17. How to disclose any other amount collected in invoices which do not have any GST Impact?

Answer: One could enter such details in the field “other charges (Invoice Level)”. It could be noted that e-invoicing requires details w.r.t disclosed in GST Tax invoice other details could be added when issuing final to recipient.

18. What is the maximum number of line items supported by an e-Invoice?

Answer: The maximum number of line items allowed per e-Invoice is 100.

19. Procurement from vendor who is liable for e-invoice but issues normal invoice without IRN [i.e., e-invoice generated]

Answer: ITC would not be eligible in hands on recipient – as such an invoice without IRN would be invalid and treated as only a piece of paper having no value under GST and not tax invoice.

It is suggested to take a declaration from the vendor on applicability. If not applicable as on date then they need to inform in advance for its applicability.

20. How to check whether a particular supplier is supposed to issue an e -invoice?

Answer: The taxpayer needs to ensure applicability of E-invoicing r/w rule 48(4).

One can search the status of enablement of a GSTIN on e-invoice Portal.

The status of enablement of GSTIN is based on GSTR-3B reported turnover.

However, it has to be noted that enablement status on an e-invoice portal doesn’t mean that the taxpayer is supposed to do e-invoicing. Taxpayers need to check applicability on actual turnover.

As there could be instances that turnover was excess reported in returns etc.in such case actual needs to be seen rather than GSTR-3B reported data.

This listing of GSTINs is solely based on the turnover of GSTR-3B as reported to the GST System. It may contain exempt entities or those for whom e-invoicing is not applicable for some other reason. So, it may be noted that enablement status on an e-invoice portal doesn’t mean that the taxpayer is supposed to do e-invoicing. If e-invoicing is not applicable to a taxpayer, they need not be concerned about the enablement status and may ignore it.

This information will be eventually made available through “Search Taxpayer”/“Know Your Supplier” Sections on the GST portal also.