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Basics of e-invoicing: Everything you need to know about India’s latest reform

Mini

The Central Board of Indirect Taxes and Customs (CBIC) has notified that e-invoicing is to be mandatorily adopted by all companies with a turnover exceeding Rs 500 crore.

Basics of e-invoicing: Everything you need to know about India’s latest reform
Authored by Archit Gupta
The Central Board of Indirect Taxes and Customs (CBIC) has notified that e-invoicing is to be mandatorily adopted by all companies with a turnover exceeding Rs 500 crore. It was previously applicable to companies with a turnover exceeding Rs 100 crore, but the rule has been relaxed for the time being. This new reform is the gateway for the digitization of business processes in India.
Until now, businesses generated invoices on their accounting and billing systems and followed a non-standardized format that suited their needs. This format of an invoice did not provide universal machine-readability and interoperability across ERP and tax systems. E-invoicing was introduced to solve exactly this problem while ensuring better accountability and lower tax evasion.
What is e-invoicing?
E-invoicing is a system of generating B2B invoices according to a prescribed standard format, authenticating the invoice on a common portal, which further uses the data from that invoice across tax networks. In simple words, it is the system of generating invoices in an electronic format.
Under e-invoicing, invoices will be issued using the taxpayer’s own accounting or ERP system, as was done in the past. Now, it will be issued keeping in mind the e-invoice schema issued by the GSTN (Goods and Services Tax Network). Once the invoices are issued, the JSON file of the invoice has to be generated.
This JSON file will then need to be uploaded onto a common portal called the Invoice Registration Portal (IRP).
Once the invoices are uploaded, the IRP will generate an Invoice Reference Number (IRN) and a Quick Response (QR) Code. This e-invoice will then be returned to the taxpayer, after the IRP digitally-signs the e-invoice. From the IRP, the data from these e-invoices will get transferred to the GST portal and the e-way bill portal.
To whom is e-invoicing applicable?
E-invoicing is applicable to all businesses from 1st October 2020, if their turnover exceeds Rs. 500 crore. However, the CBIC has notified certain sectors and types of businesses, to whom e-invoicing will not apply:
  • Goods Transport Agency (GTA)
  • A registered person supplying passenger transportation services
  • An insurance company
  • A banking company
  • A financial institution, including an NBFC
  • A registered person who supplies services by way of admission to an exhibition of cinematographic films in multiplex services
  • An SEZ unit (excluded via N/no. 61/2020) 
  • What are the benefits of implementing e-invoicing?
    As its name suggests, e-invoicing provides the benefits of electronic authentication and shareability. In addition to this, the introduction of this system in India will also enable the real-time tracking of invoices, which in turn enables easy reconciliation of credit for the buyer, and minimizes tax evasion. Until now, GST returns had to be filed by manually uploading data. This new reform will reduce data entry and the resulting errors, and automate the return-filing process.
    The format of an e-invoice explained
    The GSTN, in collaboration with the ICAI, put together a comprehensive template for an e-invoice, in accordance with the certain specified schema. The latest e-invoice format was notified on 30th July 2020. It comprises 12 sections, five of which are mandatory and seven are optional sections. It will also have six annexures, two of which are mandatory.
    The mandatory sections of an e-invoice can have optional fields. These fields can be skipped while reporting. Optional sections, on the other hand, may have mandatory fields. If that section is chosen, those fields need to be filled in. The sections which are mandatory are basic details, supplier information, recipient information, invoice item details and document total. The mandatory annexures are item details and document total details.
    Once the e-invoice is uploaded on the IRP, the IRP will generate an IRN. This field is mandatory and is unique for each invoice. It consists of 64 characters based on alphanumerics. Here is the format of an e-invoice, as released by the GSTN.
    Various modes of generating an e-invoice
    The e-invoice system provides two basic modes to generate e-invoices. The first method is through a bulk upload of data using an offline tool. The second is through integrated APIs. Taxpayers can use either mode to generate e-invoices.
    Using an offline tool
    The e-invoice portal facilitates the generation of e-invoices in bulk. The taxpayer generates the invoices on his ERP as per the standard format and then uploads the data using an offline tool like Excel to the e-invoice portal.
    Using Integrated APIs
    Taxpayers can get either their systems integrated using API, or get system-integration carried out using a GSP (GST Suvidha Provider).
    a. Through GSPs integration
    Using a registered GSP, taxpayers can get system integration done through APIs. The GSP will have to be registered on the e-invoice portal. If the GSP being used is the same one used for the e-way bill portal, then the same login credentials can also be used. Only a new API user will need to be created.
    b. Through direct integration
    A taxpayers’ system can be directly integrated using APIs. The taxpayer will have to get registered on the e-invoice portal, though if he has registered on the e-way bill portal, the same login credentials can be used. An API user will need to be created. IP whitelisting will also need to be done before beginning the process of e-invoice generation.
    c.Through an enabled sister concern’s GSTIN
    If the sister company of the taxpayer having the same PAN has had API-based system integration done, a taxpayer can use the same login credentials. However, the IP which is used by the sister concern should be the same as the one used by the concerned taxpayer, while accessing the e-way bill and e-invoice production APIs. A new API user will need to be created in this case as well.
    d. E-way Bill API-enabled Taxpayers
    Taxpayers who had already gotten system integration using API done for the e-way bill portal can now use the same login credentials. There is no need for any further steps to be carried out.
    Archit Gupta is Founder and CEO - ClearTax
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