What Is E-Invoice In GST? Everything You Need to Know

Oct 21, 2021 in Documents

14 MIN READ

e-invoice-in-gst

The objective that our central government sought to accomplish by implementing the GST Act in 2017, was to promote uniformity and ease of doing business throughout the nation. With this in mind, the government has made numerous further attempts to improve the system by adopting and implementing new features such as the E-Way Bill System, E-Invoice in the GST Act, and so on.

Therefore, the fundamental motivation behind this was to reduce the burden on taxpayers and enhance system transparency. So, the Central Government is using E-invoicing as its best tool to achieve this goal.

Further, one might assume that all these requirements of e-invoices in GST are mostly for big companies having a turnover of Rs. 50 crore and above. But did you know that as of October 1, 2022, all registered taxpayers with an aggregate turnover of Rs. 10 crores or more must generate e-invoices for all business transactions?

With this blog, we aim to help you understand everything there is to know about e-invoices. So, let's begin!

What Is e-invoice in GST?

E-invoicing is a system in which all Business-to-Business (B2B) invoices and other documents are electronically uploaded and authenticated on the government's GST Invoice Registration Portal (IRP). And after the successful verification of the invoice, a unique Invoice Reference Number (IRN) is generated by the IRP portal.

Further, together with the IRN and QR code, a digitally signed invoice would be available for the supplier. This is issued to the product's recipient, and this invoice is known as the e-invoice or electronic invoice.

E-Invoicing does not require the creation of new invoices on any government portal that creates them electronically. However, it refers to these GST invoices issued by any software that businesses will upload to the IRP Portal.

Why Was e-invoicing Introduced?

In the 37th meeting of the GST Council, they introduced the concept of e-invoice for GST taxpayers. Initially, it was only applicable to taxpayers with a large annual turnover of Rs. 500 crores, but it is currently being implemented for small SME businesses with an annual turnover of Rs. 10 crores as well.

So, the key motivation behind the introduction of this new functionality was to first establish uniformity across all invoices generated by any business. It was done because there are numerous accounting and invoicing software in the market today that produce unique invoice formats. As a result, even though they contained similar information, they were difficult to manage on the GST portal.

The Council proposed the unique solution of electronic invoicing to overcome this obstacle. Furthermore, it will address the significant problem of tax evasion and fraud caused by the use of fake invoices. These invoices must first be validated by the GST portal before being issued to the supplier. In order to cancel an invoice, an intimation must be sent to the IRP site within 24 hours, after which it will be validated.

Benefits of e-invoicing

Now that we have understood what e-invoices and e-invoicing are, let's take a look at the benefits they offer:

  1. The first thing it solves is that it saves a lot of time for the taxpayer not to do repetitive tasks. With the electronic invoicing system in place, details can automatically get pre-populated in the GSTR-1 return and in part-A of e-way bills.
  2. It reduces data reconciliation problems. As the IRP system shares all the e-invoice data with the GST and e-way bill portals.
  3. E-invoicing allows for real-time tracking of invoices prepared by a supplier, which is very helpful for tax authorities as well.
  4. It allows for faster availability of Input Tax Credit (ITC) and removes substantial risk in its verification part. This is because the data input in the e-invoice prepared alone will be shared with both the recipient and GSTR-1 return. Further, it will get auto-populated in the GSTR-2A return as well.
  5. By enabling interoperability and lowering data entry errors, e-invoices generated by one piece of software can be read by another.
  6. Since, the information tax authorities need is readily available at the transaction level, they are less likely to carry out audits or surveys. It will also assist officials in combating fake invoicing methods.
  7. SMEs benefit with the availability of e-invoicing by removing some repetitive business procedures from their plate. SME entrepreneurs have a tendency to bounce from one activity to the next. And electronic invoicing allows them to quickly manage invoicing, payables and receivables. As a result, they may now focus on numerous other vital activities inside the firm.

How Can e-invoices Curb Tax Evasion?

The second goal of the GST Council while introducing the Electronic Invoice facility was to curb tax evasion and fake invoicing activities. Since, all the e-invoices need to be generated first on the IRP portal, it will provide a real-time update to the tax authorities even before the recipient has the invoice.

Further, it does not easily allow the facility to edit or cancel the invoice. This eliminates the possibility of fake invoicing and erroneous input tax credit as chances of invoice manipulation are removed. Further, all this information will be provided in the e-way bill too, forming a closed loop so that in transportation as well manipulation does not happen.

Therefore, through all these benefits, e-invoices remove the possibility of tax leakages in the end-to-end business transaction process.

What Are the Mandatory Fields of an e-invoice?

All e-invoices follow the requirements of the GST Act, 2017 related to invoicing activities. In the following table, all the 30 mandatory fields required in an e-invoice format are mentioned. These fields are essential to ensure effective e-invoice applicability.

Name of the fieldDescription
Document Type CodeThe document code specific to the type of document must be added here.
Supplier Legal NameName of the supplier as per the PAN card details.
Supplier GSTINSupplier’s GSTIN for e-invoice.
Supplier AddressFull address of the supplier including building no., flat number, etc.
Supplier PlaceDetails including, city, town, village of the supplier must be specified here.
Supplier State CodeThe state must be selected.
Supplier PincodeThe supplier’s address has a six-digit pin code.
Document NumberA unique invoice number relevant to the business, that is also sequential in order, for easy identification.
Preceding Invoice Reference and DateThe original invoice details which got amended and in lieu of this a further document is issued like a credit or debit note.
Document DateDocument Date is the date when the invoice was issued.
Recipient Legal NameThe buyer’s legal name is added, according to his PAN card.
Recipient’s GSTINThe buyer’s GSTIN needs to be specified.
Recipient’s AddressHere, the buyer’s address must be added, in detail.
Recipient’s State CodePlace of supply needs to be specified.
Place of Supply State CodeThe state of the recipient needs to get selected.
PincodeThe recipient’s location has to be selected.
Recipient PlaceDetails including, the city, town, and village of the recipient must be specified here.
Invoice Reference Number or IRNDuring registration, the supplier leaves the field empty. After which, GSTIN creates a unique number when the e-invoice is uploaded on the GSTN portal. As the e-invoice is accepted, acknowledgement is sent. It is mandatory for the IRN to be displayed, before the use of an e-invoice.
Shipping To GSTINThis relates to the GSTIN of the person, to whom the item is being delivered.
Shipping To State, Pincode and State CodeHere, shipping details for delivery of the goods and services must be added.
Dispatch From Name, Address, Place and PincodeDispatching entity name along with the town/city/village specifics.
Is ServiceIf the supply of service has to be specified.
Supply Type CodeThe type of supply and its responding code are specified. It can be supplied to SEZ, B2B, etc.
Item DescriptionThe item’s description.
HSN CodeThe particular code for the services or goods.
Item PriceThe GST exclusive unit price before the item price discount is deducted. It would result in a positive value.
Assessable ValueThe item’s price excludes GST after the item price discount has been subtracted.
GST RateThe rate of the particular item, for which the invoice has been generated.
CGST Value, IGST Value, and SGST Value, separatelyIt is mandatory for every item to include an IGST, SGST, and CGST.
Total Invoice ValueThe total value including GST.

Who Must Generate an e-invoice?

The e-invoice functionality was earlier applicable to all registered businesses which had an aggregate turnover of Rs. 500 crores, since October 1, 2020. But as the new notifications were issued, the turnover limit started decreasing in phases from Rs.100 crore to now Rs.10 crore.

So as per the new notification no. 17/2022 – Central Tax, all businesses from October 1, 2022, with an aggregate turnover of Rs.10 crores and more, will be required to generate and issue e-invoices to their customers. And in that, the e-invoice bracket will include documents like tax invoices, credit notes and debit notes.

If a taxpayer's e-invoice limit or turnover exceeds the stipulated limit in any fiscal year from 2017-18 to 2021-22, they must comply with e-invoicing in FY 2022-23 and onwards. Furthermore, the aggregate turnover will include the turnover of all GSTINs in India under a single PAN.

Who Is Exempted from e-invoicing?

Nevertheless, regardless of turnover, the following registered persons are not currently eligible for e-invoicing, as stated in CBIC Notification No.13/2020 - Central Tax, as amended:

Features-

BusinessesFor these documentsFor these transactions
An insurance, banking, or a financial institution, including an NBFCDocuments like the Bill of Supply, Bill of Entry, Commercial Credit Note or Debit note, Financial Notes Delivery Challan, and ISD invoices.Any Business-to-Consumer (B2C) sales, nil-rated or non-taxable or exempt Business-to-Business (B2B) sales, exempt Business-to-Government (B2G) sales, imports, high seas sales, bonded warehouse sales, Free Trade & Warehousing Zones (FTWZ), and supplies made under reverse charge covered by Section 9(4) of the CGST Act.
Goods Transport Agency (GTA)Documents like the Bill of Supply, Bill of Entry, Commercial Credit Note or Debit Note, Financial Notes Delivery Challan, and ISD invoices.Any Business-to-Consumer (B2C) sales, nil-rated or non-taxable or exempt Business-to-Business (B2B) sales, exempt Business-to-Government (B2G) sales, imports, high seas sales, bonded warehouse sales, Free Trade & Warehousing Zones (FTWZ), and supplies made under reverse charge covered by Section 9(4) of the CGST Act.
All the registered businesses or persons supplying passenger transportation servicesDocuments like the Bill of Supply, Bill of Entry, Commercial Credit Note or Debit Note, Financial Notes Delivery Challan, and ISD invoices.Any Business-to-Consumer (B2C) sales, nil-rated or non-taxable or exempt Business-to-Business (B2B) sales, exempt Business-to-Government (B2G) sales, imports, high seas sales, bonded warehouse sales, Free Trade & Warehousing Zones (FTWZ), and supplies made under reverse charge covered by Section 9(4) of the CGST Act.
All the registered businesses or persons supplying services by way of admission to the exhibition of cinematographic films in multiplex servicesDocuments like the Bill of Supply, Bill of Entry, Commercial Credit note or Debit note, Financial Notes Delivery Challan, and ISD invoices.Any Business-to-Consumer (B2C) sales, nil-rated or non-taxable or exempt Business-to-Business (B2B) sales, exempt Business-to-Government (B2G) sales, imports, high seas sales, bonded warehouse sales, Free Trade & Warehousing Zones (FTWZ), and supplies made under reverse charge covered by Section 9(4) of the CGST Act.
SEZ unit (excluded via CBIC Notification No. 61/2020 – Central Tax)Documents like the Bill of Supply, Bill of Entry, Commercial Credit Note or Debit note, Financial Notes Delivery Challan, and ISD invoices.Any Business-to-Consumer (B2C) sales, nil-rated or non-taxable or exempt Business-to-Business (B2B) sales, exempt Business-to-Government (B2G) sales, imports, high seas sales, bonded warehouse sales, Free Trade & Warehousing Zones (FTWZ), and supplies made under reverse charge covered by Section 9(4) of the CGST Act.
All registered persons as per terms of Rule 14 of CGST Rules (OIDAR)Documents like the Bill of Supply, Bill of Entry, Commercial Credit Note or Debit note, Financial Notes Delivery Challan, and ISD invoices.Any Business-to-Consumer (B2C) sales, nil-rated or non-taxable or exempt Business-to-Business (B2B) sales, exempt Business-to-Government (B2G) sales, imports, high seas sales, bonded warehouse sales, Free Trade & Warehousing Zones (FTWZ), and supplies made under reverse charge covered by Section 9(4) of the CGST Act.

How Was the System Before e-Invoicing?

Before e-invoicing was implemented in the year 2020, businesses used to generate invoices and any other transactional documents with manual accounting and invoicing tools.

During return filing, businesses either opted to enter all these details manually directly on the GST portal or choose the offline method of uploading a JSON file for the return. And a similar process was followed for e-way bills and all the returns verification like for GSTR-1 and GSTR-2A.

So to remove this difficulty of manually entering all details and conducting the data reconciliation process, the GST council introduced the electronic invoicing system.

How to Generate an e-invoice?

The steps required for generating an e-invoice are as follows:

1. Generating the invoice

With their usual invoicing or ERP software solutions, taxpayers will create invoices. While generating the invoice, they should take care of all the mandatory requirements as stated in the GST Act and E-Invoice.

2. Creating a unique Invoice Reference Number (IRN)

Based on the information provided by the seller, such as GSTIN, document type, document number, and fiscal year, the IRP portal will generate a hash parameter. After determining that no duplicate invoices exist in the Central Registry, the IRP portal will add its signature and a QR code to the invoice's JSON data.

Based on the information provided by the seller, such as GSTIN, document type, document number, and fiscal year, the IRP will generate a hash parameter. After determining that no duplicate invoices exist in the Central Registry, the IRP will add its signature and a QR code to the invoice's JSON data. The IRP portal's hash will be the concerned e-invoice related, Invoice Reference Number (IRN).

Introducing the GST e-invoice in the business transaction system

The taxpayer may continue to introduce and transmit this invoice to the recipient while printing it as it is currently done with a logo. Meanwhile, IRP will submit the authenticated payload to the GST portal in order to process GST returns. Details will also be sent to the e-way bill site, if applicable. For the concerned tax period, the seller's GSTR-1 is filled out automatically. This allows the determination of the tax liability.

Format of Sample e-invoice

This is one sample of an e-invoice format issued by the GST authorities:

GST e-invoice format

With TranZact, Accelerate Business Digitization and Fulfill E-Invoice Requirements Seamlessly

While reading this article, you may have realized that e-invoicing is significantly assisting businesses in taking their first step toward digitalization. It is highly recommended that you leverage e-invoicing and move forward with digitizing your entire organization. On your path towards digitization, TranZact is the tool that will certainly be useful.

TranZact is a platform and tool for seamless digital transformation, that helps SMEs digitize all aspects of their business processes, from customer inquiries to dispatch. It also assists businesses with all of their invoicing and e-invoicing requirements while adhering to all GST guidelines.

FAQs on e-invoice under GST

1. What is the penalty if an e-invoice is not generated?

The penalty for not issuing an e-invoice is 100% of the tax due or Rs. 10,000, whichever is higher. Further, if an incorrect invoicing is done the penalty for this error is Rs. 25,000.

2. How to cancel an e-invoice in the GST portal?

If you want to cancel an e-invoice, you must do it manually through the GST portal. This must be completed prior to filing returns. When you cancel, the invoice number cannot be reused; a new one must be generated or the IRP will reject it.

3. How to amend an e-invoice in the GST portal?

The e-invoice cannot be amended or corrected if there is a mistake, incorrect, or wrong entry. The only choice is to delete that invoice/IRN, upload a new invoice (with a new number, of course), and create a new IRN.


TraZact

TranZact is a team of IIT & IIM graduates who have developed a GST compliant, cloud-based, inventory management software for SME manufacturers. It digitizes your entire business operations, right from customer inquiry to dispatch. This also streamlines your Inventory, Purchase, Sales & Quotation management processes in a hassle-free user-friendly manner. The software is free to signup and gets implemented within a week.