The way forward with e-invoicing
Written By ————
e-Invoice is a system in which B2B (Business to Business) invoices are electronically authenticated by GSTN for use on the common GST portal. The Invoice Registration Portal (IRP), managed by the GST Network, will issue an identification number against each invoice under the electronic invoicing system (GSTN).
To combat tax evasion and fraud caused by the issuance of fraudulent invoices, the government has endeavoured to authenticate transactions between the supplier and its recipient using the technology-driven project known as ‘e-invoicing.
E-invoicing was implemented in stages beginning October 1, 2020, based on the aggregate turnover of the taxpayers. A summary of the turnover limit and the date of e-invoicing implementation is provided below:
|Aggregate turnover (Rs.) exceeding*||Effective Date||Notification No|
1 October 2020
61/2020 – Central Tax dated 30 July 2020
1 January 2021
88/2020 – Central Tax dated 10 November 2020
1 April 2021
05/2021 – Central Tax dated 08 March 2021
1 April 2022
01/2022 – Central Tax dated 24 February 2022
1 October 2022
17/2022 – Central Tax dated 1 August 2022
Note : The above threshold aggregate turnover limit is to be verified beginning with the previous fiscal year, in 2017-18. The aggregate turnover will include all GSTINs under a single PAN.
According to Rule 48(4) of the CGST Rules, 2017, the notified class of taxpayers must prepare an e-invoice by uploading specified invoice particulars (in FORM GST INV-01) on the Invoice Registration Portal (IRP) and obtaining a QR (Quick Response) Code with an embedded Invoice Reference Number (IRN). As a result, e-invoices for tax invoices, debit notes and credit notes (excluding commercial/ financial and their respective credit/ debit notes) for supplies made to registered taxpayers, exports (with/ without payment of taxes), SEZ units (with/ without payment of taxes), and deemed exports are to be generated.
Pros/Cons of E-invoicing
E-invoicing will help in the eradication of post-e-invoice manipulation/changes in external supply details/invoice. This will greatly decrease revenue leakages on outside supply.
If the supplier fails to comply with the e-invoicing provisions, the invoice will be considered invalid, and the recipient's input tax credit may be denied by the authorities. This places an additional burden on the recipient to check the supplier's e-invoicing status in addition to the conditions specified in Section 16 (2) of the CGST Act, 2017.
By reducing mismatch errors, E-Invoice may close a significant gap in data reconciliation.
An electronic invoice cannot be altered, modified, or rectified. Even small changes must be cancelled entirely. If no e-way bill is issued for the e-invoice, it may be cancelled on the IRP within 24 hours. After 24 hours, taxpayers cannot cancel an e-invoice on the IRP. After an e-invoice is cancelled, the IRN cannot be produced on the same invoice. The taxpayer must amend the invoice number, produce a new invoice on their system, and repeat the full process of producing an e-invoice on the IRP in addition to fixing the inaccuracies.
Data from the e-invoicing portal will be auto-populated into the e-way bill portal as well as in GSTR-1, eliminating the need to report outward supply details across multiple platforms/stages.
E-invoicing does not apply to B2C/B2CL transactions, where the possibility of fraud and tax evasion is unchecked
Information with Tax authorities at transaction level is readily available and chances of getting notices for reconciliations will be reduced.
The facility of generating e-invoices on a voluntary basis is not available, so taxpayers who want to use it (to avoid multiple activities of generating invoices, generating e-way bills, and filing GSTR-1) must wait until the threshold limit is revised or their aggregate turnover exceeds such threshold.
E-invoicing is designed to be machine-readable and uniformly interpreted, ensuring complete interoperability of e-invoices across the entire GST eco-system.
Integrating existing ERP/accounting software with an e-invoice portal will be a costly endeavour.
The QR Code scanning facility will aid in determining the authenticity of an invoice and will facilitate the flow of input tax credit
The system also checks whether or not repetitive e-invoices from the same supplier in the same fiscal year have been uploaded.
Even if the turnover exceeds the prescribed limits, e-invoicing is inapplicable:
Regardless of total turnover, e-invoicing is not applicable to the following registered taxpayers:
According to latest news, the government may soon mandate e-invoicing for taxpayers with aggregate turnover less than Rs. 10 crores, bringing more taxpayers into the e-invoicing fold.
The move to lower the turnover threshold and broaden the scope of e-invoicing is primarily intended to address mismatch errors and prevent tax evasion. Given the timelines, concerned businesses will need to upgrade their IT systems in order to comply with the e-invoicing standards. In addition, the gradual lowering of the electronic invoicing threshold suggests that eventually all GST taxpayer types will be required to use electronic invoicing.