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E-Invoicing under GST: What, Why, Applicability, Benefits, and New limit from April 2022

Guide to E-invoicing under GST

Everything you need to know about E-Invoicing under GST

The CBIC has recently notified the fourth phase of implementing the E-Invoicing system under GST with effect from 1st April 2022 for GST taxpayers whose aggregate turnover is more than Rs. 20 crores.

How to identify whether e-invoice applies to your business? Is it applicable for all your POS Sale bills? Do you think E-Invoice means generating electronic invoices only from the Government GST portal in stipulated format? Worried that it will be a time-consuming expensive affair due to the latest rule?

Too many questions are running through your mind and you are searching for where you will get complete clarity for all your doubts. Here is a blog where all your question marks turn into full stops.

SECTION 1 – CONCEPT

What is E-invoicing?
E-Invoicing or Electronic Invoicing is a real-time authentication of B2B invoices by the GST portal (IRP) in order to seamlessly integrate the Input Tax credit, GST Filing, and E-way billing systems so that the end-to-end communication from the seller to buyer is hassle-free.

Why is E-invoicing required?
The purpose of E-Invoice is to avoid the data reconciliation between sellers and buyers under the GST Input Tax credit system by reducing the mismatch errors. E-invoices created on one software can be read by another, allowing interoperability and uniformity. Fake GST invoices are eliminated in this process. To summarize, the following are key take-aways of e-invoicing :

  • Faster and timely Input tax credit
  • Real-time Validation by GST portal
  • Traceability and Transparency
  • Uniform Invoice format and content
  • Curbing Tax Evasion

What is the process of e-invoicing?
E-invoicing is the process of how a normal invoice turns into an authenticated electronic invoice in the blink of an eye, though it involves the following integrated steps that work seamlessly for every invoice

  1. Creation – Preparation of invoice from your POS/ERP
  2. Conversion – Transforming invoice data into Govt stipulated JSON format files
  3. Transmission – Uploading the JSON into the IRP through authorized GSPs
  4. Validation – Verification of JSON for its correctness by the IRP portal
  5. Generation – IRP’s authentication of invoice by generating IRN, QR Code
  6. Integration – Downloading of digitally signed JSON into your POS/ERP
  7. Inclusion – Printing of E-invoices by POS/ERP by including the IRN and QR Code
  8. Communication – Exchange of information from IRP to GST portal
  9. Automation – Auto population of E-invoice data to E-way bill, GSTR-1and and GSTR-2B

What are the benefits of e-invoicing?
E-invoicing comes with a lot of benefits to the seller, the buyer, and the government. Some of the key benefits are listed below :

  • Faster Input Tax credit without waiting for month-end reconciliations
  • Real-time tracking of tax-compliant invoices between Seller, Buyer and Govt authorities using unique identifiers like IRN and QR Code
  • One time reporting -Auto-population to GSTR-1 and e-Way bill
  • Portal Validation ensures the reduction of manual mistakes
  • Continuing to provide required disclosures, you can have your own invoice format providing flexibility
  • Reduce frauds and manipulations (as immediate reporting to Govt) curbing Tax evasion
  • Part of Go Green / Digital India initiatives towards paperless offices

What are the transactions/supplies covered under e-invoicing?
E-invoicing applies to the following transactions of a registered seller

  • B2B transactions – Sales or services to registered buyers
  • SEZ transactions – Sales or services to SEZ units
  • Export transactions – Sales or services to customers outside India

What are the documents covered for e-invoicing?
By the term E-invoice, it doesn’t mean that it applies to only Invoices. It also naturally applies to Debit notes and Credit notes in respect of the above-mentioned B2B, SEZ and Export transactions

Is e-invoicing applicable to B2C?
As of now, B2C transactions viz sales or services to unregistered consumers, have been excluded from the purview of e-invoicing, since the whole system is designed to streamline the Input Tax credit (ITC) process, which will eventually be irrelevant in the case of B2C transactions

What are the methods/ways through which e-invoices can be generated?
E-invoices can be generated through any of the following methods :

  • GST provided Offline Tool
  • GSPs (GST Suvidha Provider)
  • ASPs (Application Service Providers) enabled with GSPs
  • Registered ERPs
  • E-commerce operators
  • Direct Integration (taxpayers above prescribed limit)
  • API of sister concern GSTIN
  • E-way Bill API credentials

SECTION 2 – APPLICABILITY

Who is eligible for E-invoice?
Every GST registered person whose aggregate turnover in a financial year exceeds the specified limit (from time to time) shall prepare an e-invoice in respect of the supply of goods or services or both to a registered person.

Who is exempted from E-invoice?
Persons listed under rules 54(2),(3),(4), and (4A) of the Central Goods and Services Tax Rules, 2017 are exempted from E-invoice regardless of their turnover. Examples of such exemptions are Insurance Companies, Banking Companies, Financial Institutions, NBFCs, Special Economic Zone (SEZ) units, Goods Transport Agencies (GTA), Passenger transportation service providers, etc.

What is the turnover limit for E-invoice applicability?
As per Notification No. 01/2022-CentralTaxes dated 24-02-2022, E-Invoicing is mandatory for GST taxpayers whose aggregate turnover is more than Rs. 20 crores with effect from 1st April 2022.

When did e-invoicing start and what are its phases of implementation?
E-invoicing was first implemented for Rs.500 crore businesses from 1st October 2020, then in the second phase it was reduced to Rs.100 crore from 1st January 2021, followed by in the third phase it was reduced to Rs.50 crore from 1st April 2021 and finally, in the fourth phase, it now stands at Rs.20 crore from 1st April 2022

PhaseWith effect dateTurnover criteria (INR)
11st October 2020500 crore
21st January 2021100 crore
31st April 202150 crore
41st April 202220 crore

How to calculate the aggregate turnover for E-invoice applicability?
GST taxpayers are subject to E-Invoice if their aggregate turnover is more than the prescribed limit. Aggregate turnover includes all types of outward supplies (sales or services) whether it is B2B or B2C, SEZ or Exports, Taxable or Exempted, everything put together needs to be accumulated to check the turnover limit for applicability

Does Aggregate turnover have to be calculated for which year to check E-invoice applicability?
Businesses whose turnover exceeds the prescribed limit in any financial year from FY 2017-18 till 2021-22, will be required to do e-invoicing from 1st April 2022. Say, for example, a taxpayer has the following aggregate turnover in the previous financial years – FY 2017-18 Rs.16 crores, 2018-19 – Rs.18 crores, 2019-20 – Rs.23 crores, 2020-21 – Rs.15 crores and 2021-22 – Rs.19 crores, then E-invoice will be applicable for invoices generated from 1st April 2022.

Will E-invoice be applicable for a newly started business, if its anticipated turnover for the current financial year exceeds the prescribed limit?
No, E-invoice is not applicable for new businesses. It is only based on the previous year’s aggregate turnover.

Will E-invoice be applicable if turnover during the current year exceeds the prescribed limit, even though the previous year’s turnover is within the limit?
Say for example, if a business turnover did not exceed 20 crores in any year up to 31st March 2022. However, if its turnover crossed 20 crores in Sep 2022, then will it be subject to e-invoice from Oct 2022? The Answer is No, for the entire FY 2022-23, turnover up to 31st March 2022 (previous financial years) is only to be considered. But there is a twist in this tale, If the Government reduces the e-invoice applicable limit to 10 crores with effect from 1st January 2023 (just, for example, not so stipulated by the Govt. yet), then e-invoice will be applicable to this business if its turnover crossed 10 crores in any financial year from FY 2017-18 till 2021-22.

SECTION 3 – SCENARIOS

How to make corrections or amendments to E-invoice after IRN generation?
Once an IRN is generated, the e-invoice cannot be edited or modified in the IRP portal, but it can be canceled only. Cancellation is also permitted only within 24 hours of IRN generation. Beyond that cancellation is also not possible, we need to raise a credit note/debit note against the invoice partially/fully. A separate IRN has to be generated for the credit note/debit note. There are also provisions to make amendments to the e-invoice using the GSTR-1 return of the GST portal.

What is the time limit for the cancellation of an E-invoice?
IRN can be canceled in the IRP or through cancellation API within 24 hours from the time of IRN generation.

Can we reuse a canceled e-invoice number?
The invoice number must be unique for a GST number across an entire financial year. IRP will not permit duplicate invoice numbers, even though the original e-invoice number is canceled.

How to validate the authenticity of a QR code in an e-invoice?
GST Dept. has provided a QR code verification app, wherein the QR code can be scanned using the “Verify QR code” option to display the GST e-invoice details stored in that QR code. The signed JSON can also be uploaded in the same app using the “Verify signed e-invoice” option to verify its authenticity and for integration purposes.

SECTION 4 – DEFINITIONS

What is the Invoice Registration Number (IRN) in GST e-invoice?
Invoice Registration Number (IRN) is a unique 64 digit alphanumeric reference number generated by IRP portal for every successful e-invoice generation. E-invoice presented by a seller to his buyer is not valid without the IRN number.

What is the Quick Response (QR) code in GST e-invoice?
QR code is a two-dimensional barcode generated by the IRP portal for every successful e-invoice generation. E-invoice presented by a seller to his buyer is not valid without the QR code. This QR code contains the digitally signed invoice details verifiable by a QR code verification app. It contains details like Seller GSTIN, Buyer GSTIN, Document number, Document type, Document date, Total Invoice value, Total number of line items, IRN number, and IRN date.

Who/What is a GST Suvidha Provider (GSP)?
GSPs are accredited institutions by the GST Dept. that provides API integration for communication by the user to the IRN portal for the purpose of e-invoice generation

Who/What is an Application Service Provider (ASP)?
ASPs are intermediaries who facilitate the communication between the user and GSP by providing platforms for API integration and thereby IRN generation.

What is an Invoice Registration Portal (IRP)?
IRP is a dedicated portal created by the GST portal for this e-invoice generation process. IRP receives the uploaded e-invoice JSON file from the user, validates it, and provides back the signed e-invoice with IRN and QR code as its response JSON.

ONE FINAL QUESTION?

Now that you have got complete clarity on e-invoicing concepts and scenarios, you will be left with one final question. What is the Best POS/ERP software for e-invoices? If you have multiple solutions for your business requirements, then you might be struck with many 2 way reconciliations and multi-fold times repeated invoice entries in different solutions.

Hence the need of the hour is a One-Stop solution like Gofrugal ERP which provides end-to-end solutions from POS Billing, E-invoicing, Inventory management, GST filing, and Accounting, all under one roof. What are you waiting for?

Gofrugal E-Invoicing