Everything You Need To Know About E-invoicing

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Everything you need to know about e-invoicing

The introduction of the e-invoicing system has been approved by the GST council, starting from April 1, 2020. The new invoicing system uses a standardized process of generation and reading of e-invoices. Currently, companies with an annual turnover of more than Rs. 500 crores need to mandatorily switch to the e-invoice system. Initially, this applied to the companies with an annual turnover of more than Rs. 100 crores.

Invoicing is an important part of every business and with the new reform it is highly recommended to understand the different facets of e-invoicing.

In this article, we have discussed all the main parts of e-invoicing. Read on!

What is e-invoicing?
E-invoicing is an electronic invoicing system for B2B businesses. In the e-invoicing system, the invoices will be issued using the ERP or accounting system of the taxpayer. However, as per the new reform, the invoice that will be generated will be in accordance with the e-invoice schema issued by the Goods and Services Tax Network (GSTN. The JSON file of the invoice ...
... needs to be generated once the invoice has been issued. This JSON file then needs to be uploaded to the Invoice Registration Portal or the IRP.

The IRP will generate the invoice Reference Number or the IRN along with a QR code. Once the IRP digitally signs the e-invoice, the e-invoice will be returned to the taxpayer. In the end, all the e-invoices get transferred to the GST and e-way bill portal.

Who all can use the e-invoicing services?
All businesses are eligible under e-invoicing starting from 1st October 2020. These businesses should have a turnover of more than Rs. 500 crores. Although there are a few sectors where the e-invoicing system is not applicable. These are:

A banking company
A registered person supplying passenger transportation services
A financial institution, including an NBFC
Goods Transport Agency (GTA)
An insurance company
An SEZ unit (excluded via N/no. 61/2020)
A registered person supplying services by way of admission to an exhibition of cinematographic films in multiplex screens

Who can generate an e-invoice?
Only the suppliers can generate an e-invoice. The transporters and recipients are not eligible to generate an e-invoice. Moreover, as the notification says, no supplier with a business turnover of less than Rs. 500 crores can generate an e-invoice.

What are the advantages of e-invoicing?
The new scheme of e-invoicing will help businesses to standardise their invoicing system. Other main benefits of e-invoicing are:

Invoice tracking in real-time
With e-invoicing, suppliers will get real-time tracking of their invoices. This will help suppliers to get Input Tax Credit (ITC) faster.

One-time reporting of invoices
A taxpayer has to report their invoices only once and this enables the one-time reporting. The taxpayer then has to get the invoice authenticated from the GST portal. Once the authentication is done, all the details will be auto-added to the GSTR-1. So, with e-invoicing, there is a reduction of manual reporting too that helps in low data entry errors.

Decrease in data entry errors
E-invoice facilitates automated data entry. The invoice is uploaded to a centralized portal, which enables multipurpose reporting. Once all the invoices are authenticated, it gets transferred to the GST portal on a real-time basis. This reduces manual data entry errors.

Assists the buyers
When the e-invoice gets uploaded to the GST portal, it will be shared with the buyers on his updated email address that is mentioned on the e-invoice. This system will assist the buyer in settling their purchase order by comparing the same with the e-invoice. Also, this will help the buyers to facilitate acceptance or rejection of the invoice in real-time.

Decrease in fraudulent activities
One of the major benefits of e-invoicing is the reduced number of frauds. With the centralized and automated system, e-invoicing records, and tracks data in real-time. This helps in reducing fraud at a considerable rate.

Generate invoice multiple times
In order to calculate the ITC amount, the taxpayer needs to have the GST invoice. The taxpayer may misplace or lose the GST invoice in transit. In such a scenario, the QR code is of great help. The taxpayer can generate the invoice any number of times with the help of the QR code.

Reduction in tax evasion
The real-time GST invoicing and automated generation of invoice reduce the chances of fake GST invoices. Under e-invoicing, the invoices are generated before the transaction is done. This reduces the cases of fake GST invoices. On a similar note, only a legitimate ITC amount can be claimed. The tax officials can easily track any fake input credits with the help of the information on input tax credits and output tax.

Easy e-way bill generation
E-invoicing also helps the taxpayer with the generation of an e-way bill. The taxpayer only needs to update all the details of their vehicle. The Part-A of the e-way bill is auto-filled from the authenticated e-invoice on the GST portal.

What are the different modes of generating an e-invoice?
There are 2 main modes of generating an e-invoice:

Offline tool
Through Integrated APIs

The taxpayers can use either of these modes to generate their e-invoice.

Offline tool: This lets the taxpayer upload data in bulk. The taxpayer generates the invoice on his ERP using the standard process. Then the bulk data is uploaded to the e-invoice portal using Excel.

Integrated APIs: The taxpayers can either optimize their system by integrating it with the API or use GSP (GST Suvidha Provider) to get the system-integration done.
There are various ways how the taxpayer can generate e-invoice using API integration and these are:

Through direct integration: This can be done by registering on the e-invoice portal. In case the taxpayer has registered for the e-way bill, they can use the same credentials to log in to the e-invoice portal too. The taxpayer needs to create an API user. Also, the user needs to whitelist their IP before the process of e-invoice generation begins.

Through GSP integration: The taxpayers can integrate API using the registered GSP. The user has to register the GSP on the e-invoice portal. The login credentials of the e-way bill can be used if the GSP used on the e-way bill is the same. However, a new API user needs to be created.

E-way bill API-enabled: If the taxpayers have already done the system integration using the API for their e-way bill, they can use the same login credentials. No new steps need to be carried out.

Through the GSTIN of a sister company: If the PAN of the sister company of the taxpayer has been integrated using the same API, then the same login credentials can be used. The IP used for accessing the e-way bill and generating e-invoice needs to be the same as the taxpayer as well as the sister company. However, a new API user needs to be created for this.