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Article Dated 17th March, 2022

CONCEPT & PROCESS OF GENERATING E-INVOICE

E-Invoice: Concept

As per Rule 48(4) of CGST Rules, notified class of registered persons have to prepare invoice by uploading specified particulars of invoice (in FORM GST INV-01) on Invoice Registration Portal (IRP) and obtain an Invoice Reference Number (IRN).

Notified class of registered person

Taxpayers whose aggregate turnover (based on PAN) in a financial year > Prescribed Limit (w.e.f. 01-04-2022 the limit is 20 crores), refer Notification No. 01/2022 (central tax) dated 24.02.2022.

After following above ‘e-invoicing’ process, the invoice copy (with QR Code containing inter alia, IRN) issued by the notified supplier to buyer is commonly referred to as ‘e-invoice’.

  • Invoice issued by the notified person in any other manner shall not be treated as an invoice. (Rule 48(5))

  • Where e-invoicing is applicable, issuing of invoice in duplicate/triplicate is not required (Rule 48(6))

  • ‘e-invoice’ is not about invoice being in soft copy like PDF etc

  • ‘e-invoicing’ doesn’t mean generation of invoice by a Government portal.

  •  SEZ Units, Insurance, Banking [including NBFCs], Goods Transport Agency [transporting goods by road in goods carriage], Passenger Transport Services, Multiplex Cinema Admissions are exempt for generating e-invoice

Documents & supplies covered—

Document—Invoices, credit notes and debit notes

Supplies— B2B Supplies, Supplies to SEZs (with/without payment), Exports (with/without payment) & Deemed Exports. It is not required to generate e-invoice in case of B2C supplies as of now.

Process of E-invoice—

  • Taxpayers will continue to create their GST invoices on their own Accounting/Billing/ERP Systems

  • These invoices will now be reported to ‘Invoice Registration Portal (IRP)’

  • On reporting, IRP returns signed e-invoice with unique ‘Invoice Reference Number (IRN)’ and a QR Code.

  • Then, the invoice can be issued to receiver (with QR Code)

  • A GST invoice will be valid only with a valid IRN.

Electronic exchange of invoices between businesses

‘Schema’ is the standard format for electronic invoice (INV-01); it has all the typical elements of a commercial invoice.

‘Schema’ ensures e-invoice is ‘machine-readable’ and ‘inter-operable’ , i.e. the invoice can be exchanged seamlessly between different systems like Tally, SAP etc.

E-invoice— Flow

Supplier

Seller to have system or offline utility to prepare/ receive JSON

Seller uploads e-invoice JSON to IRP as per schema (INV-01)

Invoice Registration Portal (IRP)

IRP validates the data, generate IRN and send invoice payloads to GST system

GST System rules out existence of same IRN in GST system

GST system will save the invoice details in GST system and auto-populates invoice details in GSTR-1 of seller and GSTR-2A of buyer

IRP adds a QR code and signs the invoice JSON, IRP also pushes data to e-way bill system wherever required

Supplier receives signed JSON with IRN & e-way bill wherever required


Supplier issues e-invoice to the buyer with IRN/QR code

Suppliers’ GSTR-1 gets updated with invoice details

 

Schema / Format

  • E-invoice schema is notified as ‘INV-1’

  • ‘Schema’ simply means a structured template or format

  • ‘e-invoice’ schema is the standard format for electronic invoice

  • Invoice details in prescribed schema to be reported to IRP in JSON format (JavaScript Object Notation)

  • ‘JSON’ can be thought of as a common language for systems/machines to communicate between each other and exchange data

  • Businesses are already preparing/generating invoices in their ERPs/Accounting/Billing Software; the same to continue without any change

  • ‘Schema’ acts as uniform standard for ERP/ Billing/ Accounting software providers to build utility in their solution/package to prepare e-invoice, for reporting to IRP

  • Schema ensures e-invoice is ‘machine-readable’ and ‘inter-operable’, i.e. the invoice/format can be readily ‘picked up’, ‘read’, ‘understood’ and further processed by different systems like Tally, SAP etc.

  • Schema facilitates ‘machine-to-machine’ exchange of invoice data

Invoice Reference Number (IRN)

The Invoice Reference Number (IRN) is a unique number (also known as hash) generated by the e-invoice system using a hash generation algorithm. For every document such as an invoice or debit or credit note to be submitted on the e-invoice system, a unique 64 character invoice reference number shall be generated.

The unique IRN will be based on the computation of hash of GSTIN of generator of document (invoice or credit note etc.), Year and Document number like invoice number. The hash could also be generated by the taxpayers based on above algorithm.This shall be unique to each invoice and hence be the unique identity for each invoice for the entire financial year in the entire GST System for a taxpayer.

Reporting to IRP

Taxpayer needs a system/utility to report e-invoice details in JSON format to IRP and receive signed e-invoice in JSON format

Modes for reporting e-invoice: Multiple modes available so that taxpayer can use one based on his/her need:

  • API based (integration with Taxpayer’s System directly)

  • API based (integration with Taxpayer’s System through GSP/ASP)

  • Free Offline Excel Utility (Bulk Generation Tool, downloadable from IRP)

Invoice Registration Portal (IRP) is the website for uploading/reporting of invoices by the notified persons.

Vide notification no. 69/2019-Central Tax dated 13.12.2019, ten portals were notified for the purpose of preparation of the invoice in terms of Rule 48(4)

IRN Cancellation & Amendments

CANCELLATION:

IRN can be cancelled within 24 hours (from the time of generation of IRN).

However, if the connected e-way bill is active or verified by officer during transit, cancellation of IRN will not be permitted.

In case of cancellation of IRN, GSTR-1 also will be updated with such ‘cancelled’ status.

AMENDMENTS:

Amendments are not possible on IRP.

Any changes in the invoice details reported to IRP can be carried out on GST portal (while filing GSTR-1).

However, these changes will be flagged to proper officer for information

QR Code

E-invoice system will generate a unique 64 character length Invoice Reference Number (IRN) and digitally sign the e-invoice and the QR code (Quick response Code).The QR code will enable quick view, validation and access of the invoices from the GST system from hand held devices.

The QR code will consist of the following e-invoice parameters:

  1. GSTIN of supplier

  2.  GSTIN of Recipient

  3. Invoice number as given by Supplier

  4. Date of generation of invoice

  5. Invoice value (taxable value and gross tax)

  6. Number of line items.

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

  8. Invoice Reference Number (IRN)

  9. Date of generation of IRN

 

  • The QR code which comes as part of signed JSON from IRP, shall be extracted and placed on the invoice.

  • However, printing of QR code on separate paper not allowed.

  • While the printed QR code shall be clear enough to be readable by a QR Code reader, the size and its placing on invoice is upto the preference of the businesses.

  • “Acknowledgement No.” and “Date” given by IRP are only for reference. They need not be printed on e-invoice

  • Being a 15-digit number, the acknowledgement number will also come handy for printing e-invoice or for generating e-way bill (instead of keying in the 64- character long IRN).

B2C Dynamic QR Code

  • Notification No. 14/2020-Central Tax dated 21st March, 2020 mandates entities with aggregate turnover > Rs. 500 crores in a FY to include QR code on their B2C invoices.

  • It is also specified that a Dynamic Quick Response (QR) code made available to buyer through digital display (with payment cross-reference) shall be deemed to be having QR code.

  • The purpose of this Notification is to enable and encourage digital payments.

  • It has no relevance or applicability to the e-invoicing i.r.o B2B Supplies by notified class of taxpayers.

Miscellaneous

  • Supplier sends the e-invoice to the receiver, in the same way as he is doing now. However, a mechanism to enable system-to-system exchange of e-invoices will be provided in due course.

  • While transporting goods, wherever the e-way bill is needed, the requirement continues to be mandatory.

  • In case both Part-A and Part-B of e-way bill are provided in the e-invoice schema, the details will be used to generate e-way bill.

  • The IRP will push the relevant invoice data (payload) to GST System. The GST system will auto-populate them into GSTR-1 of the supplier.

Advantage of E-invoice—

  • Documents become tax compliant on real time basis

  • Single source of truth for fiscal purposes

  • Compliance becomes part of natural business process and supply chain system

  • Real time auto-population of invoice details into return

  • Simultaneous generation of e-way Bill, where required

  • E-invoicing can mitigate fraudulent practices in GST, especially the menace of fake invoices.

  • Gives fillip to initiatives like ‘invoice financing’ by enabling use of invoice as collateral, especially by small and medium businesses (e.g. TReDS).

  • Paves way for inter-operability among businesses, i.e. by allowing direct transmission of invoices in structured digital format from one finance system to another

  • Eliminates data entry errors

  • Reconciliation issues get reduced

  • Disputes among transacting parties get reduced

  • Faster payment cycles

  • Processing cost gets reduced

  • Better Internal Controls

  • Enhances overall efficiency of businesses

In case any registered person, is required to do e-invoicing but not enabled on the portal, he/she may request for enablement on portal: ‘Registration -> e-Invoice Enablement’.

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