E-invoicing New GST Rule– How it helps GST Invoicing and Business?
Starting from 1st January 2020, GST council has approved the introduction and start using the e-Invoicing or electronic invoicing to submit the Invoices and avoid the e-Way Bills. This is mainly for Business-to-Business invoices (B2B) and is not a mandatory one to begin with.
The GST Council approved the standard of e-invoice in its 37th meeting held on 20th Sept 2019 and the same along with schema has been published on GST portal.
Why e-Invoice or Electronics Invoice?
It is an initiation from GSTN to simplify the GST return process and at the same time to help to avoid the following problems. So few major focus and importance of this step are,
- Build GSTN eco-system where the interoperability of the invoices are easy so that invoice generated by one software could be read by another software easily.
- Standardisation of Invoices and this would avoid re-enter of the data into GSTN portal
- Machine reading of the standard invoicing formats and would reduce the resource usage.
- Better Tax payers support and help them with
- One time reporting on B2B invoice data in the form it is generated to reduce reporting in multiple formats (one for GSTR-1 and the other for e-way bill).
- To generate Sales and purchase register (ANX-1 and ANX-2) from this data to keep the Return (RET-1 etc.) ready for filing under New Return. e-Way bill can also be generated using e-Invoice data
- It will become part of the business process of the taxpayer
- Substantial reduction in input credit verification issues as same data will get reported to tax department as well to buyer in his inward supply (purchase) register.
- On receipt of info thru GST System as buyer can do reconciliation with his Purchase Order and accept/reject in time under New Return
- Reduction of Tax Evasion
- Complete trail of B2B invoices
- System level matching of input credit and output tax
- Improve the efficiency of Tax Administration by Elimination of fake invoices.
What is e-invoice / e-invoicing?
Lets get an understanding of what is e-Invoice or Electronic Invoices.
E-invoice does not mean generation of invoices from a central portal of tax department, as any such centralization will bring unnecessary restriction on the way trade is conducted.
In fact, taxpayers have different requirements and expectation, which can’t be met from one software generating e-invoices from a portal for the whole country.
Invoice generated by ACTouch.com software may look more or less same, however, they can’t be understood by another computer system like Tally Software, even though business users understand them fully.
Hence a need was felt to standardize the format in which electronic data of an Invoice will be shared with others to ensure there is interoperability of the data.
A new Invoice format is envisioned and this format is used to upload the same into GSTN portal. In Simple terms
- You continue generate the Invoices in your software.
- But when you are uploading this data into GSTN, then it has to be in a format that’s understood by the portal and these data can be interoperable.
E-invoice Under GST India covers the following documents that will be reported:
- Invoice by Supplier
- Credit Note by Supplier
- Debit Note by Supplier
- Any other document as required by law to be reported by the creator of the document
What is the current system in place of e-invoicing?
Many people think that e-invoice will be generated from government’s tax portal. This is not true and invoices will be continued to generate using your existing Accounting or a billing software, keeping in view the varied need of item master, buyer master, UQC etc. along with sub-second response from IR Portal (IRP).
So the customer needs to keep their ERP / Accounting software to generate the invoice with additional data to capture and submit. GSTN portal will not generate the e-Invoices for you. It is just uploaded with JSON data formats.
The Benefits of E-Invoicing (Electronic Invoicing)
How e-Invoice would help Business?
Seems the real need here is for Tax Department than the Business as the Business may need to invest and improve their current system to be aligned with the GSTN needs. One important factor is, e-Invoicing is not a mandatory one. Due to this, it helps Business to decide when and how to deploy.
- E-invoicing would help business with no need to run around at the last day of the GSTN Returns and file all the records. Since these Invoices are already uploaded and the records are reconciled, we don’t need to duplicate the work.
- No need to generate the e-Way Bills as e-invoicing will get this done.
- Real time tracking of invoices as the Supplier generated invoice copy would be sent to customer by GSTN portal
How e-Invoice would help GSTN and Tax Departments?
The e-invoice system is implemented with two important areas namely,
- a) Generation of invoice in a standard format so that invoice generated on one system can be read by another system.
- b) Reporting of e-invoice to a central system.
GST Council has given the responsibility to design the standard of e-invoice and update the same from time to time to GSTN which is the custodian of Returns and invoices contained in the same. Adoption of e-invoice by GST System is not only part of Tax reform but also a Business reform as it make the e-invoices completely inter-operable eliminating transcription and other errors.
How to generate the GSTN e-Invoice?
The flow of the e-invoice generation, registration and receipt of confirmation can be logically divided into two major parts.
Part A to generate e-invoicing.
The first part being the interaction between the business (supplier in case of invoice) and the Invoice Registration Portal (IRP).
- Seller Generates invoice in his own accounting or billing system. The invoice must conform to the e-invoice schema (standards) that is published and have the mandatory parameters. The supplier’s (seller’s) software should be capable to generate a JSON of the final invoice that is ready to be uploaded to the IRP. The IRP will only take JSON of the e-invoice.
- Generate the unique Invoice Reference Number (IRN). This is an optional step. The seller can also generate this and upload along with invoice data. The 3 parameters which will be used to generate IRN (hash) are:
- Supplier GSTIN,
- Supplier’s invoice number and,
- Financial year (YYYY-YY). (The IRN or hash generation algorithm will be prescribed by GSTN in the e-invoice standard).
- Now upload the JSON of the e-invoice (along with the hash, if generated) into the IRP by the seller. The JSON may be uploaded directly on the IRP or through GSPs or through third party provided Apps.
- The IRP will also generate the hash and validate the hash of the uploaded JSON, if uploaded by the supplier.
- These data are validated and on receipt of confirmation from Central Registry, IRP will add its signature on the Invoice Data as well as a QR code to the JSON. The QR code will contain GSTIN of seller and buyer, Invoice number, invoice date, number of line items, HSN of major commodity contained in the invoice as per value, hash etc. The hash computed by IRP will become the IRN (Invoice Reference Number) of the e-invoice.
- Now share the uploaded data with GST and e-way bill system.
- The registered invoice will be sent to the Seller and Buyer on their mail ids as provided in the invoice
Part B to generate e-invoicing
The second part is the interaction between the IRP and the GST/E-Way Bill Systems and the Buyer.
- Share the signed e-invoice data along with IRN (same as that has been returned by the IRP to the seller) to the GST System as well as to E-Way Bill System.
- The GST System will update the ANX-1 of the seller and ANX-2 of the buyer, which in turn will determine liability and ITC.
- E-Way bill system will create Part-A of e-way bill using this data to which only vehicle number will have to be attached in Part-B of the e-way bill.