E-Invoicing In India: A Brief Guide
Electronic invoicing as defined by GST law is referred to as "e-invoicing." Similar to how an organization that is GST-registered uses an e-way bill when moving goods from one location to another, certain authorized GST-registered businesses are required to produce an electronic invoice for B2B transactions. By integrating E-invoicing solution into its tax system, India is prepared to follow the trend. As of 1 August 2023, enterprises having a combined annual turnover of 5 crores and higher need to abide by the most recent e-invoicing requirements.
What is E-invoicing?
An electronic invoice, also known as an e-invoice, is a digital document that is sent between two parties, mainly a supplier and a customer and is approved by the government's tax portal. Business-to-business (B2B) invoices are prepared digitally using E-Billing Software in an e-invoicing format and confirmed by the Goods and Services Tax Network (GSTN) in the proposed system. With the use of this system, any company that submits an invoice to the GST portal is required to do it in the manner specified. The Invoice Registration Portal (IRP) generates a specific Invoice Reference Number (IRN), digital authentication signatures, and a QR code for each invoice after successful authentication is complete. This combined procedure is referred to as e-invoicing.
Previous Invoicing Vs. E-invoicing System in India
The e-invoicing system was incorporated with a goal of improving taxpayer services, decreasing tax evasion, boosting GST administration efficiency, and achieving plenty of other benefits.
| Aspects of Comparison | Previous Invoicing System | Current E-invoicing System |
| 1. Physical Invoice | A physical invoice will still be created in accordance with the regulations outlined by the Act. There are no modifications in how a business generates physical invoices. | A physical invoice will still be created in accordance with the regulations outlined by the Act. There are no modifications in how a business generates physical invoices. |
| 2. Identifying Invoice | A sequential number is assigned to each invoice. | In order to facilitate comparison with the central registry, invoices are distinguished through an IRN. |
| 3. Invoice Reference Number (IRN) | In the past, there was no special code for invoices, just a regular invoice number. There weren't any fixed rules or limits, except that the numbers had to go in order. | In the e-invoicing system, a special number called the Invoice Reference Number (IRN) is created using a smart algorithm. This number helps to compare e-invoices easily. It's a unique IRN that gets checked on a Central Registry. |
| 4. Amending Invoices | You can find invoices that need to be changed on the GST portal. | E-invoices will be accessible in the IRP for just one day and can be fully canceled during this period. Any modifications after this will take place on the GST portal. |
| 5. Validating Invoices | The GST website doesn't allow you to check and save invoices | In e-invoicing, the invoices will have a digital signature, and a verified copy of the invoice data will be sent to the seller by the IRP (Invoice Registration Portal). |
| 6. Digital Signature | The only thing needed on the invoice was the supplier's digital signature. However, there was no option to digitally sign uploaded invoices on the GSTN/GST portal. | Invoices that have been checked and approved will receive a digital signature from the IRP. |
| 7. Chances of Errors | Since more individuals participate in the filing process, there is a greater chance of errors occurring. | When you upload and check the invoice details using JSON on the IRP, it updates the seller's GSTR-1. If needed, it also fills in e-Way bill info in Part A. This helps keep things accurate, and less room for errors. |
| 8. Viewing the Invoice | Information about the invoice that you enter can be seen on the GST portal. | You can use an app to easily see all the important invoice information by scanning a QR code. Also, e-invoices are sent to an email, so the supplier can keep a copy saved in the e-invoicing system. |
How Does E-invoicing Work?
1. The supplier creates the invoice data in a specific format. This can be done by the ERP software or an offline utility tool.
2. The supplier uploads the invoice data to the IRP (Invoice Register Portal). If the ERP is connected to the IRP through GSP, this upload can happen automatically.
3. The IRP checks the validity of the invoice data generated by the ERP software.
4. Once the validation is successful, the IRN (Invoice Reference Number) is generated. The invoice is digitally signed, and a QR code is added by the IRP.
5. The digitally signed invoice data, along with the QR code, is sent back to the supplier. The supplier prints these details on the invoice. In an integrated ERP-IRP environment via GSP, the software handles this step automatically.
6. The signed invoice data and IRN are sent to both the E-Way Bill System and the GST System.
7. The e-invoice integration system uses the data from IRP to fill in Part-A of the e-way bill. If all the details needed for the e-way bill are available during e-invoice generation, the e-way bill is automatically generated, and its number is added to the e-invoice data.
8. Similarly, the GST system populates details in GSTR-1 and GSTR-2A automatical
9. The buyer can see the supplier's invoice details in real-time on GSTR-2A for confirming the ITC (Input Tax Credit) eligibility.
How Will E-invoicing Aid In Preventing Tax Fraud?
Tax evasion and fraudulent activities using fake invoices have been ongoing problems even before the GST era. In India, the e-invoicing service is being introduced to tackle this issue. With e-invoicing, every invoice needs approval from the government's portal, stopping fake invoices in their tracks. This real-time reporting makes it harder to make dishonest changes later. E-invoicing is set to create a strong defense against tax fraud all across the country, reducing such illegal activities in the future.
For individuals and businesses, there's a handy mobile app called IRIS Peridot. It helps you check GST details and filing history for any GSTIN. You can also verify the QR code on an e-invoice or an e-way bill using this app. It's like having a reliable tool in your pocket to ensure everything is legit and transparent.
Benefits of E-invoicing
1. Instant Tracking: With e-invoicing, you can track invoices in real-time as suppliers create them. This makes it faster to get the credit you're owed.
2. Works with Different Software's: E-invoices are made in a way that different software can read them. This makes it easier for different systems to work together.
3. Easy E-Way Bills: E-invoicing makes it easy to create e-way bills. You only need to add some details about the vehicle. The system fills in other details automatically from your invoice.
4. Helpful for Buyers: When you upload an e-invoice for checking, the buyer also gets a copy of their email. This helps the buyer match their order with the invoice and quickly accept or reject it.
5. One-Time Reporting: Instead of reporting invoices multiple times, you just need to report them once to a portal that checks and gives them a special number. This number is used in your tax returns. This saves you from doing lots of manual reporting.
6. Less Fraudulence: The tax authorities can see data quickly, reducing swindling.
7. Fewer Mistakes: E-invoices go to a common place where everyone can see them. They then automatically go to the tax portal. This means less manual typing and fewer mistakes when filing taxes
Frequently Asked Questions (FAQs)
1. What is e-invoicing, and what are its guidelines?
E-invoicing, short for electronic invoicing, is a way to create invoices using a specific format that different e-invoice processing software can understand. This helps avoid mistakes and the need to enter data again. In simple terms, it's like making an invoice that computers can easily share with each other, making data sharing smooth. The rule for e-invoicing is outlined in CGST Rule 48, which defines when and how to use e-invoices.
2. Does the government tax portal create invoices directly?
No. People who pay taxes need to make invoices using special invoice management software for keeping track of money or for making bills. People who don't have big businesses can even pick one of eight free software from the government's website.
3. Has e-invoicing become mandatory? Who shall generate e-invoices?
Businesses with a yearly income over Rs. 5 Crore must generate e-invoices starting August 1, 2023. The rule is defined in Notification No. 10/2023–Central Tax dated May 10, 2023.
4. Can one upload a bulk of invoices together?
Invoices are meant to be uploaded individually. However, for big companies with lots of invoices, it might seem like a group upload. But these businesses use an invoice generation software that handles each request separately.
