Important Aspects Of E-Invoicing Decoded The government plans to eventually get all businesses under its purview, to streamline tax processes and curb tax evasion

By Archit Gupta

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E-invoicing will apply to businesses which have a turnover exceeding INR 500 crore, from October 1, 2020. The primary purpose of introducing e-invoicing in India was to enable the machine-readability of invoices, and interoperability amongst different software systems. The plan is to eventually get all businesses under its purview, to streamline tax processes and curb tax evasion. Here are some of the important aspects of e-invoicing.

How is the e-Invoicing model proposed to work?

Under the e-invoicing model, taxpayers will continue to generate invoices on their accounting/billing or ERP systems. These invoices will now need to be issued as per the latest schema that has been prescribed by the Goods and Services Tax Network (GSTN). Once the invoices have been issued, they need to be uploaded on the e-invoice portal using JSON format, or by directly keying-in the data. The latter has not yet been enabled.

Once the e-invoice system, known as the IRP (Invoice Registration Portal), validates the data, it will generate an IRN (Invoice Reference Number), which is also known as "hash'. The IRP will then return the e-invoice to the taxpayer, after affixing a QR code and digitally signing it. The IRP will further send the data to the GSTN for populating the relevant GST returns.

What is the e-invoice schema?

The e-invoice schema refers to the outline on which the e-invoice will be based. It consists of the names of the technical fields, the descriptions of those fields, the specifications on whether the fields are mandatory or optional to be filled in, and the explanatory notes.

The e-invoice is designed to cater to businesses from different sectors. The schema consists of five mandatory fields, which need to be filled in by all businesses. There will also be seven optional fields in which a business can choose to enter data, depending on their industry's requirements.

How is e-invoicing expected to improve compliance under GST?

E-invoicing will benefit businesses in several ways, but one of the key advantages for both businesses and the government is better tax compliance. It will enable tax authorities to have access to information in real-time, reduce the scope for a false input tax credit being claimed, avoid data-entry errors and the need for continuous reconciliations, facilitate the confluence of the e-way bill and invoice generation systems, prevent the manipulation of invoices, and minimize the need for initiating surveys and audits.

What are the modes of creating an e-invoice?

The following modes will be available for creating e-invoices: directly through the portal, using an offline tool, through API-based system integration, and through a mobile app. Generating e-invoices by directly entering data on the portal is a mode that has not yet been enabled by the e-invoice system. Likewise, the mobile app-based mode will be introduced at a later date, and not during phase one of e-invoicing.

Using API-based integration, the generation of e-invoices can be further done using four modes: through a GST Suvidha Provider (GSP), through direct system integration of the taxpayer, through system integration of a taxpayer's sister concern and through API-credentials enabled for generating e-way bills.

Will there be a facility to upload e-invoices in bulk?

Yes, there will be a facility to upload invoice data in bulk using an offline tool such as Excel, where taxpayers can generate multiple IRNs in one-go. This method is particularly useful for businesses having a large volume of invoices, for which IRNs need to be generated.

How will the e-way bill system be integrated with e-invoicing?

The e-invoice system provides the facility for generating e-way bills simultaneously. The invoice needs to have at least one HSN code belonging to goods, for which an e-way bill can be generated. There are a few more validations that the e-invoicing system will run before generating the e-way bill, such as the PIN-PIN distance gets validated; the vehicle number should match with the prescribed format, and should exist in the Vahan database; if only the transporter ID has been provided, then only Part-A will be generated; an IRN to which an e-way bill is linked cannot be cancelled unless the e-way bill is cancelled first; for a sales return, the e-way bill needs to be generated along with the delivery challan; and an e-way bill cannot be generated if the GSTIN (seller's or buyer's) has been blocked, due to GST returns not filed.

The plan is to discontinue the direct generation of e-way bills for B2B and export transactions for notified taxpayers, at a later date.

How will the e-invoicing system get integrated with the GST return-filing system?

Once an e-invoice has been generated and validated by the IRP, the data will be sent to the GSTN for pre-populating the relevant tables of the GST returns, i.e. the GSTR-1 and GSTR-2A. The GSTR-3B is a summary-based return, and the data will need to be manually entered by the taxpayer. The aim of the GSTN is to reduce reconciliation-related issues and increase tax compliance.

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Archit Gupta

Founder & CEO, Clear

Clear (née ClearTax) is India’s leading Fintech SaaS company with the mission of simplifying finance. We are trusted by over 6 million Indians, more than 50,000 tax professionals, 1 million small businesses and 3,000 large Enterprises. For small and large businesses, our product suite covers invoicing, GST, range of managed services and credit. For tax professionals, we offer comprehensive GST, Income Tax and TDS solutions. For individuals, we offer tax and wealth management solutions. With this Series C round, we have raised $140 million in equity capital since inception. Our investors include Y Combinator, Composite Capital, Elevation Capital, Founders Fund and Sequoia Capital.

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