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Jan 12, 2024

Understanding e-Invoicing Under GST: Applicability, Limits & Implementation Date

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Nishtha Arora

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The implementation of electronic invoicing is a significant advancement in the Goods and Services Tax (GST) system in India. The Goods and Services Tax Network (GSTN) uses this electronic invoicing system, also known as "e-Invoicing" or "electronic invoicing," to electronically authenticate business-to-business (B2B) transactions before they are used on the shared GST portal. The complexities of e-invoicing under GST will be thoroughly addressed in this article, along with its applicability, limitations, and implementation date.

Latest Update on E-Invoice:

  • 04 Dec '23: At Least 6 digit HSN will be mandatory in e-Invoices, for taxpayers whose AATO is 5Cr and above, from 15th of December 2023.
  • The second portal of e-Invoice System (https://einvoice2.gst.gov.in) will be operational from 1st April 2023.

Understanding E-Invoicing

E-invoicing is submitting a pre-generated standard invoice on a common e-invoice portal as opposed to creating invoices on the GST portal itself. This simplified method requires a single input of invoice details to automate multi-purpose reporting.

Each invoice under this system is assigned a unique identification number by the GSTN-managed Invoice Registration Portal (IRP).

This unique number makes it easier to transfer invoice data in real time to the e-way bill and GST portal.

Applicability And Limits

The applicability of e-Invoicing is determined by the aggregate turnover of a taxpayer. The criteria for different phases are as follows:

  • Phase I (From 1st October 2020): Turnover exceeding Rs 500 crore.
  • Phase II (From 1st January 2021): Turnover exceeding Rs 100 crore.
  • Phase III (From 1st April 2021): Turnover exceeding Rs 50 crore.
  • Phase IV (From 1st April 2022): Turnover exceeding Rs 20 crore.
  • Phase V (From 1st October 2022): Turnover exceeding Rs 10 crore.
  • Phase VI (From 1st August 2023): Turnover exceeding Rs 5 crore.

Taxpayers must comply with e-Invoicing in the financial year onwards if their turnover exceeds the specified limit in any year from 2017-18 to 2021-22. The aggregate turnover includes the turnover of all GSTINs under a single PAN across India.

If turnover increases beyond the threshold limit during the current year, e-Invoicing applies from the beginning of the next financial year.

Transactions And Documents Criteria

E-Invoicing is applicable to specific transactions and documents, including tax invoices, credit notes, and debit notes under Section 34 of the CGST Act.

It covers taxable B2B sales of goods or services, B2G sales, exports, deemed exports, supplies to SEZ, stock transfers, and services to distinct persons.

Exemptions From E-Invoicing

Certain registered persons are exempt from e-Invoicing, as per CBIC Notification No.13/2020 – Central Tax.

Exempt categories include: insurers, banking companies, financial institutions, Goods Transport Agencies (GTAs), registered persons supplying passenger transportation services, and more.

The exemptions cover various documents and transactions related to Business-to-Consumers (B2C) sales, nil-rated or non-taxable sales, imports, high sea sales, and more.

Systems Before & After E-Invoicing

Before the implementation of e-Invoicing, businesses manually uploaded invoice details in GSTR-1 returns and used ERP for generating e-way bills.

With e-Invoicing, the process remains the same, but the data seamlessly flows to GSTR-1 and e-way bill portals, eliminating the need for manual data entry.

Time Limit to Generate e-Invoice

Until April 30, 2023, no legal or systemic GST requirement existed for the creation of electronic invoices. With effect from May 1, 2023, companies having an Annual Aggregate Turnover (AATO) of INR 100 crore or more must produce electronic invoices (e-invoices) that include credit-debit notes and tax invoices within seven days of the invoice date. In the event that this deadline is missed, such invoices and CDNs will become non-compliant.

The current regulations do not place a time limit on the generation of e-invoices for other eligible taxpayers. Because the auto-population of e-invoice details into GSTR-1 takes up to three days, it is recommended that these taxpayers start creating e-invoices about a week prior to filing GSTR-1 returns.

But as of May 6, 2023, the department has extended by three months the deadline for reporting outdated electronic invoices on IRP portals. Additionally, the department has not yet disclosed the revised implementation date.

Process of Generating E-Invoice

The process involves configuring ERP systems as per PEPPOL standards, whitelisting the IP address on the e-Invoice portal for direct API integration, or using a bulk generation tool for uploading invoices.

The taxpayer raises a regular invoice on ERP or billing software, uploads invoice details onto IRP, and receives an Invoice Reference Number (IRN).

IRP validates details, generates IRN, digitally signs the invoice, and sends it to the GST portal.

The taxpayer continues printing the invoice with the IRN displayed.

Benefits of E-Invoicing:

Implementing e-Invoicing offers several advantages for businesses:

  • Resolving data reconciliation gaps to reduce mismatch errors.
  • Allowing interoperability, reducing data entry errors.
  • Enabling real-time tracking of supplier-prepared invoices.
  • Backward integration and automation of GST return filing.
  • Faster availability of genuine input tax credit.
  • Less possibility of tax authority audits.
  • Facilitating easy access to formal credit routes.

Curbing Tax Evasion with E-Invoicing

E-Invoicing plays an important role in curbing tax evasion by:

  • Providing real-time access to transactions for tax authorities.
  • Reducing the scope for manipulating invoices.
  • Minimizing the chances of fake GST invoices.
  • Ensuring genuine input tax credit claims.

Mandatory Fields of an E-Invoice:

An e-Invoice must adhere to GST invoicing rules, including mandatory and optional fields.

Key mandatory fields include Document Type Code, Supplier Legal Name, Supplier GSTIN, Supplier Address, Document Number, Document Date, Recipient Legal Name, Recipient's GSTIN, and more.

These fields ensure a standardized format and accurate reporting.

So in a Nutshell, e-Invoicing under GST is a transformative step towards digitizing and streamlining the invoicing process in India. With clear applicability criteria, defined limits, and a systematic process, businesses can leverage e-Invoicing to enhance efficiency, reduce errors, and comply seamlessly with GST regulations.

As the implementation progresses, the role of e-Invoicing in ensuring transparency and curbing tax evasion is set to become increasingly significant!

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