December 26, 2022

E-Invoicing under GST

E-Invoicing means electronic invoicing which is a Tax invoice generally issued by each and every registered taxpayer and contains additional information in the form of a QR Code.  The tax invoices which are generated through accounting software like Busy, Tally etc are transmitted on the IRP ie. e-invoicing portal in json file or Invoice registration Portal .  

The government portal checks and verifies the information and returns back the json file with digital signature after generating IRN and adds a QR Code. Just like how a GST registered business uses an e way bill while transporting goods from one place to another, certain GST registered business must generate e invoices for B2B ( Business to business ) transactions.

Importance of checking e-Invoicing eligibility.

It is very important to follow the GST law for doing a business. E invoicing is one of the important compliances under GST, and the taxpayer has to check the status of e invoice eligibility to comply with it accordingly.  

Who needs E-invoicing

Taxpayers who have already complied with e-invoicing have to issue an e-invoice containing a valid Invoice Reference Number. If they have not issued the invoice then it will be considered as an invalid invoice and the recipient will not be in a position to claim the tax paid for that invoice as ITC ( Input Tax Credit). From ITC perspective .

It is necessary to check the supplier's e-invoicing eligibility even though e-invoicing does not apply to you. If there is an invalid invoice then the entire ITC chain will break. That's why it is important to know whether you are receiving a valid invoice or not.

Documents covered under e-Invoicing are:

1. Tax invoice.

2. Debit Note.

3. Credit Note.


Process of e-Invoicing

Creating invoices - Invoices are created using billing or accounting software as per the given format for E-Invoicing. It is not necessary for taxpayers to generate E- invoices through the government tax portal. Taxpayers can continue using any accounting software to generate invoices in E-invoicing format.

Invoice Registration Number (IRN) Generation: Suppliers generate a unique IRN (Invoice Reference Number) using a standard hash-generation algorithm. This is optional to the supplier and in absence of IRN, the IRP system of government will generate the same.

Upload on Invoice Registration Portal (IRP): Using accounting software or any third-party tool, JSON files are generated for each B2B invoice and along with the IRN, if generated is uploaded on the IRP (Invoice Registration Portal).

IRP Validation of Invoice Information: The IRP will validate the generated hash/IRN attached with JSON (if uploaded by the supplier)or generate an IRN and authenticate the file against the central registry of GST for any duplication. The IRN will be the unique identity of the E-invoice for the entire financial year.

Digital Signature and QR Code Generation: After the successful verification, the invoices get updated with IRP'S digital signature on the invoice data and a QR code will be added to the JSON file.

E-Invoice data transmission to E-Way Bill Portal and GST System: The data which is uploaded will be shared with the GST system and E-way bill, which will be used for auto-population of GST Annexures.

E-Invoice Receipt back to Supplier's ERP: The portal will send the digitally signed JSON along with IRN and QR code back to the seller. The invoice will also be sent to the buyer on their registered email id.

The QR code will consist of the following key particulars of E-Invoice:

1. GSTIN of Supplier

2. GSTIN of Recipient

3. Invoice number, as given by the Supplier

4. Date of generation of invoice

5.. Invoice value (taxable value and gross tax)

6. Number of line items

7. HSN Code of the main item (line item having highest taxable value)

8. Unique IRN (Invoice Reference Number/hash)  IRN Generation Date.

How will e-Invoicing curb tax evasion?

1. Manipulating of invoices will be less since the invoice gets generated before carrying out a transaction.

2. Chances of fake GST Invoices will be reduced and only real input tax credit can be claimed as all invoices need to be generated through the GST Portal.  Input credit is matched to output credit details, it becomes much easier for GSTN to track fake tax credit claims.

3. Tax authorities have access to transactions as they take place in real-time and e-invoices will have to be compulsorily generated through the GST portal.

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