GST Vidhi | GST Articles

     GST – E Invoice / What is e-Invoicing Under GST? Applicability, Limit, Process, Benefits

What is E-Invoicing?

E-invoicing, or electronic invoicing, is a system introduced under GST to make invoicing easier and more consistent across all businesses. Instead of manually creating and submitting invoices, businesses can generate invoices using their own software, which are then validated and authenticated by the GST Network (GSTN) through the Invoice Registration Portal (IRP). The portal assigns a unique Invoice Reference Number (IRN) and a QR code to each invoice, making it legally valid.

Why Was E-Invoicing Introduced?

E-invoicing was introduced to achieve several goals:

1.     Standardization: It creates a uniform invoicing format across all businesses.

2.     Automation: It helps in automatically reporting invoices to the GST and e-way bill portals.

3.     Reducing Tax Evasion: By tracking invoices in real-time, it reduces the chances of fraud.

4.     Better Compliance: It simplifies the process of tax reporting for businesses.

5.     Faster Input Tax Credit (ITC): E-invoicing allows quicker and more accurate processing of ITC for buyers.

How E-Invoicing Evolved in India

E-invoicing was gradually rolled out in India through various notifications. Initially, it was mandatory only for large businesses, but over time, the requirement was extended to smaller businesses as well. The rules and thresholds have been updated multiple times to expand the scope of e-invoicing.

How Does E-Invoicing Work?

The process of e-invoicing is integrated with the current invoicing systems used by businesses:

1.     Generating the Invoice: Businesses create the invoice using their own systems, following the e-invoice format (FORM GST INV-01).

2.     Sending to IRP: The invoice data is sent to the Invoice Registration Portal in a JSON format.

3.     Validation and Authentication: The IRP checks the invoice details, assigns a unique IRN, and generates a digitally signed invoice with a QR code.

4.     Returning the E-Invoice: The authenticated e-invoice is sent back to the seller, and the data is shared with the GST and e-way bill systems for automatic form filling.

5.     Issuing to Buyer: The seller then issues the authenticated e-invoice to the buyer.

Main Parts of an E-Invoice

An e-invoice includes several key components:

• Supplier and Recipient Details: GSTIN, name, and address of both parties.
• Invoice Details: Invoice number, date, value, tax amounts, item description, and more.
• Invoice Reference Number (IRN): A unique 64-character code.
• QR Code: Contains key information for quick verification.

Recent Clarification on E-Invoicing for Government Supplies

On September 14, 2023, the National Informatics Centre issued a clarification on e-invoicing for supplies made to government departments or agencies. According to this clarification, if a government department, establishment, agency, or local authority is required to deduct tax at source under Section 51 of the CGST Act, they must register under GST. Therefore, any business supplying goods or services to such entities must generate e-invoices if their turnover exceeds the prescribed threshold. The e-invoice must include the GSTIN of the government department or agency to whom the supply is made.

Benefits of E-Invoicing

E-invoicing offers many benefits:

• For Businesses: It reduces the effort needed for compliance, speeds up ITC processing, improves accuracy, cuts costs, and makes reconciliation easier.
• For Tax Authorities: It improves transparency, simplifies audits, and provides better data for policy-making.
• For the Economy: It helps formalize business transactions, simplifies doing business, and increases government revenue by reducing tax evasion.

Who Needs to Use E-Invoicing?

The requirement for e-invoicing depends on the business's annual turnover. As of August 1, 2023, all businesses with a turnover exceeding ₹5 crore need to use e-invoicing. However, some categories like insurance companies, banking companies, passenger transport services, and SEZ units are exempt. Additionally, businesses supplying to government departments or agencies that are registered under GST for tax deduction at source must also issue e-invoices.

Exemptions and Special Cases

Some businesses and transactions are exempt from e-invoicing:

• Government Departments and Local Authorities
• Insurance and Banking Companies
• Passenger Transport Services
• SEZ Units Also, the Commissioner can exempt certain persons or businesses from e-invoicing for a specified period.

Timeline for Implementing E-Invoicing

E-invoicing was introduced in phases, giving businesses time to adjust. Initially, it applied to large businesses, but now it includes even smaller ones. The latest update lowered the threshold to ₹5 crore from August 1, 2023.

Conclusion
E-invoicing under GST is a significant step towards digitalizing India's tax system. It brings many benefits, including standardization, transparency, and easier compliance. Businesses should stay informed about the latest rules and adapt their systems to fully benefit from e-invoicing. Proper implementation will ensure compliance and make business operations more efficient.

Disclaimer: All the Information is based on the notification, circular and order issued by the Govt. authority and judgement delivered by the court or the authority information is strictly for educational purposes and on the basis of our best understanding of laws & not binding on anyone.