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July 25, 2020

4 Steps to Generate GST e-invoicing for Business from October 1, 2020

by Mahesh Mara in GST, GST Circular Notification

4 Steps to Generate GST e-invoicing for Business from October 1, 2020

Currently, businesses generate invoices through various softwares, and the details of these invoices are manually uploaded in the GSTR-1 return. The invoice information is thereafter reflected in GSTR-2A for the recipients for viewing only. On the other hand, the consignor or transporters must generate e-way bill by again importing the invoices in excel or JSON manually.

The GST Council, in its 35th meeting, decided to implement a system of e-invoicing, which will be applicable to specified categories of persons. The concept of GST e-invoice generation system was taken into consideration for the reduction in GST evasion.

What is the GST e-invoicing system?

  • GST e-invoice is basically a digital invoice for goods and services provided by the business firm generated at the government GST portal.
  • ‘E-invoicing’ or ‘electronic invoicing’ is a system in which B2B invoices are authenticated electronically by GSTN for further use on the common GST portal.
  • Under the proposed e-invoicing system, an identification number will be issued against every invoice by the Invoice Registration Portal (IRP) to be managed by the GST Network(GSTN).
  • All invoice information will be transferred from this portal to both the GST portal and e-way bill portal in real-time.

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When will the system of e-invoicing come into effect?

The new GST e-invoicing system will be implemented from October 2020.

What is the benefit of implementing the system of e-invoicing?

For a nation like India where tax evasion is rife, this system can be a boon. Its most important benefit will be transparency and proof.

  • With e-invoicing, the moment an invoice is made, it will be uploaded to GSTN portal where pre-validation will be done and a unique number called IRN (Invoice Reference Number) will be issued. Once IRN is issued, the tax invoice will be shared with the recipient also. 
  • This real time tracking of invoices can be done by both, vendors and the government, and will result in a reduction of frauds and fake GST invoices
  • E-Invoice system boosts the automation of GST return filing process. E-invoicing can bring ease, speed and accuracy to the return filing process.
  • It will reduce the chances of fake GST invoices and the only genuine input tax credit can be claimed as all invoices need to be generated through the GST portal.
  • Since the input credit can be matched with output tax details, it becomes easier for GSTN to track fake tax credit claims.
  •  E-invoice resolves a major gap in data reconciliation under GST to reduce mismatch errors.
  • Lesser possibility of audits/surveys by the tax authorities since the information they require is available at a transaction level.

Recommendations of GST implementation Committee

Businesses with sales up to Rs 500 crore will be excluded from compulsory e-invoicing of Goods and Services Tax (GST). The recommendation was reportedly made on July 22, 2020 by the GST Implementation Committee of the GST Council. The compliance limit earlier was up to Rs 100 crore.

As per Yogendra Garg, CBIC Principal Commissioner (GST) the compliance would be brought in for businesses with Rs 100 crore sales when the process stabilizes. The return filing system would be improved further by incorporating the features proposed in the new e-invoicing system. 

The deadline for the implementation has not changed. The new GST e-invoicing system will be implemented from October 2020.

In November last year, the government had said that from April 1, 2020 electronic invoice (e-invoice) would be mandatory for businesses with turnover of Rs 100 crore. Later in March 2020, the GST Council extended the implementation date to October 1, 2020.

The Council has also exempted insurance, banking, financial instituions, NBFCs and passenger transport service from issuing e-invoice. 

The e-invoicing process was introduced to capture sales details, reduce errors, automate data entry and improve compliance and trust between tax officials and companies. It will also help auto-populate certain forms. Raising the compliance threshold gives smaller companies time to adopt the system.

Garg said the GST administration is working on a proposal to make a system available to businesses about how much input tax credit (ITC) is available with a taxpayer and the endeavour is to make life simpler for taxpayer. He also said that the focus of the authorities in the fourth year of GST, which was rolled out in July 2017, would be on easing the compliance burden.

What are the steps of generating an e-invoice under GST?

 STEP 1 – Generation of Invoice and JSON

  • Generation of the invoice by the seller in his own accounting or billing system. He must give all the necessary details like, billing name and address, GSTN of the supplier, transaction value, Item rate, GST rate applicable, tax amount, etc.
  • Seller should have a feature in its ERP that will output invoice data in JSON format.
  • Those taxpayers not having any software will be provided offline utility
  • The supplier’s software should be capable to generate a JSON of the final invoice that is ready to be uploaded to the IRP. The IRP will only take JSON.

STEP 2 – Uploading of JSON

  • Seller to upload the JSON of the e-invoice into the IRP.
  • It can be done directly on the IRP or through GSPs or through third party provided Apps
  • The IRP will act as the central registrar for e-invoicing and its authentication

STEP 3 – Validation of data by IRP

  • If IRN is not generated , then IRP will generate IRN, based on JSON uploaded.
  • If IRN is generated, then IRP will validate the IRN, (Based on JSON uploaded) from Central Registry of GST System to ensure that the same invoice from the same supplier pertaining to same Financial Year is not being uploaded again.
  • IRP generates the invoice reference number (IRN), digitally signs the invoice and creates a QR code in Output JSON for the supplier.

STEP 4 – Sharing of E-invoice

  • The seller of the supply will get intimated of the e-invoice generation through email (if provided in the invoice).
  • IRP will send the authenticated payload to GST portal for GST returns. Additionally, details will be forwarded to the e-way bill portal, if applicable. ANX-1 of seller and ANX-2 of the buyer gets auto-filled for the relevant tax period.
  • The IRP will sign the e-invoice and the e-invoice signed by the IRP will be a valid e-invoice and used by GST/E-Way bill system.

However, there are some challenges to the system. Many parts of India continue to suffer from lack of infrastructure. Large organizations, who have implemented auto generation of the e-waybill on creation of the tax invoices, will have to change their existing process. Taxpayers who have not up taken automation of e-waybill have to reach out their OEM’s for the configuration of the same. Similarly, the manual bill books and accounting software products used today may need to undergo an overhaul. This may prove to be a time-consuming task.

However, E-invoicing will most definitely provide a push towards a digital economy. Curbing tax evasion and increasing tax collections for the government may ensure that the government will not increase GST rates any further. 

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