E-INVOICING UNDER GST: A GAME CHANGER

[Anuj Bansal]

BACKGROUND OF ELECTRONIC INVOCING SYSTEM

In the 35th GST Council Meeting held on 21st June, 2019; ‘Introduction of Electronic Invoicing System’ was proposed and its need and advantages were discussed. Further, in the 37^th GST Council Meeting held on 20 September, 2019; GST council approved the standard of E-Invoice. In the recent past, a detailed note explaining what E-Invoice is and how will it work along with the e-invoice schema and template, as approved by the GST Council has been released.

Recently, on 13/12/2019, CBIC issued five Central tax Notifications; No. 68/2019 to 72/2019-Central Tax, to give effect to manner in which E-Invoice and QR Code shall be generated compulsory by certain class of registered persons. Such Notifications are as follows: -

S.N.	Notification No.	Details in Notification
1	68/2019-Central Tax	HOW E-INVOICE SHALL BE PREPARED
2	69/2019-Central Tax	WHICH ARE CGST ELECTRONIC PORTAL FOR E-INVOICE
3	70/2019-Central Tax	WHO WILL ISSUE E-INVOICE
4	71/2019-Central Tax	FROM WHEN INVOICE SHALL HAVE QR CODE
5	72/2019-Central Tax	WHO WILL ISSUE INVOICE HAVING QR CODE

WHAT IS E-INVOICE AND ITS NEED

E-Invoice is not only a tax reform but a business reform. At present, different accounting software are being used in industry for generation of invoice. Invoice data generated by one software can’t be read by another electronically, which hampers interoperability of data. The basic aim behind adoption of E-Invoice system by tax department is ability to pre-populate the return and to reduce the reconciliation process.

GST council issued a new E-Invoice standard which would be adopted by the industry, wherein they would re-align their data access and retrieval in standard form. The taxpayer shall continue to use its accounting system in the same manner as used today. The tax payer only needs to get its software updated according to new standard. 

ADVANTAGES OF E-INVOICE

1. One time reporting on B2B invoice data to generate GSTR-1 and E-way bill on real time basis.
2. Generation of ANX-1 and ANX-2 under new return system.
3. Reduction in Input Credit verification issue as the same data will get reported to tax department as well to buyer in his inward supply(purchase) register.
4. System level matching of B2B invoices.
5. Elimination of fake invoices.

WORK FLOW OF GENERATION OF E-INVOICE

1. The taxpayer will generate the E-Invoice in such format so that JSON file is created for every invoice. This can be done by the using schema issued by the Council.
2. Such file will be reported to Invoice Registration Portal (IRP).
3. Once the invoice is uploaded, the IRP computes hash (an alpha numeric number) based on the supplier’s GST number, Invoice number and Financial Year. The hash becomes the Invoice Reference Number (IRN). Hash is unique to each invoice for the entire financial year. Each hash will be saved in a central registry of GST system ensuring same invoice from the same supplier pertaining to same financial year is not being uploaded again.

The supplier can also generate the hash themselves for which a required feature should be incorporated into their accounting software. In this case, once the JSON invoice with hash is uploaded to the IRP, the hash uploaded by the tax payer will be validated by the hash that IRP generates.

4.  Subsequently, the IRP authenticates the E-Invoice by adding digital signature to the JSON. Only the E-Invoice authenticated by the IRP will be considered a valid invoice for GST purposes.
5. IRP also creates a QR code that contains vital details such as GSTIN of seller and buyer, invoice number, invoice date, number of line items, HSN of major items contained in the invoice as per value and hash.
6. IRP sends the E-Invoice data with digital signature and QR code to the seller and buyer on the e-mail Ids provided in the invoice. IRP also shares the uploaded invoice data with GST and e-way bill system.
7. The GST System, after validation, makes the E-Invoice data available in ANX-1 (Annexure of outward supplies) for the seller, and in ANX-2 (Annexure of inward supplies) for the buyer. Buyer has an option to accept or reject the transaction. GST system, further, will determine tax liability and input tax credit (ITC).
8. Meanwhile, e-way bill system creates Part-A of e-way bill using the received data. Only vehicle number have to be added in Part-B of the e-way bill.

MEANING OF CERTAIN TERMS

1. Invoice Registration Portal (IRP)

Vide Notification number 69/2019- Central Tax, dt 12/12/2019, Central Government has notified ten sites as CGST Electronic Portal which shall act as IRP. Ten sites serially numbered are from 1 to 10, starting from www.einvoice1.gst.gov.in to  www.einvoice10.gst.gov.in. Such site will be operative form 01.01.2020.

2. Invoice reference Number (IRN)

This code will be generated by CGST Electronic portal by filing the information contained therein by tax payer. Taxpayer can also generate IRN through its own system if its software supports for the same. IRN will be based on computation of hash of GSTIN, Year and Document number like Invoice number. The hash will always be the same irrespective of the registrar who process it or even if it is generated by the taxpayer. In case taxpayer generates it himself, the same will not make invoice valid unless it is uploaded / registered on the portal along with invoice details.

3. Quick reference code (QR CODE)

The IRP will also generate a QR code containing the unique IRN (hash) along with some important parameters of invoice and digital signature so that it can be verified on the central portals as well as by an Offline App. This will be helpful for tax officers checking the invoice on the check post / roadside where internet may not be available all the time. The web user will get a printable form with all details including QR Code. 

PERSONS WHO HAVE TO COMPULSORY FOLLOW E-INVOCING

As per Notification No. 70/2019-Central Tax, dt. 13.12.2019, Registered person, whose aggregate turnover in a financial year exceeds one hundred crore rupees, shall prepare invoice in term of Rule 48(4) in respect of supply of goods or services or both to a registered person w.e.f 01.04.2020.

As per Notification no. 71/2019 and 72/2019- Central Tax dt 13.12.2019, QR Code will be compulsory to be printed on invoice from 01.04.2020 and invoice issued by Registered taxpayers whose turnover exceeds 500 Crore in a financial year to unregistered person shall have QR code.

MISCELLANEOUS POINTS

1. It’s a myth that tax payer has to generate E-Invoice directly on Government’s portal.
2. Small tax payers can use one of the eight accounting / billing software currently listed by GSTIN.
3. Offline tool will also be provided to generate JSON file from invoice data which can be uploaded on the IRP.
4. All accounting and billing companies are being asked by the Government to adopt the E-Invoice standard so that their users can generate JSON from the software and upload the same on the IRP.
5. Bulk uploading facility of invoice on IRP will not be possible, it has to be done one at a time. Essentially bulk upload will be required by large taxpayers who generate large number of invoices. Their ERP or accounting system will have to be designed in such as way that it makes request one by one.
6. The E-Invoice mechanism enables invoices to be cancelled. This has to be reported to IRP within 24 hours.   
7. The E-Invoice schema also caters to the exports invoices as well.
8. For transportation of goods, the e-way bill will continue to be mandatory.

Discussions to this article

[Ganeshan Kalyani]

The taxability of the product is not a criteria for deciding whether to generate IRN or QR code or not. For every invoice irrespective of invoice value the aforesaid requirement has to be fulfilled.

It's a huge step of the Govt.to being everything in their surveillance. Now, Govt has become "Big Boss" and every tax payer has become its Contestants. Anybody breaking the rule will be out of the show. As simple as that. No manual interference. The invoice is generate through the system and it will end with the system based assessment. Everything virtual.