E-Invoicing Under GST: Everything You Need to Know

Electronic invoicing, also known as e-invoicing, has become an increasingly popular method for businesses to create and manage their invoices. In India, the government has introduced the GST e-invoice mandate under the GST regime to simplify the invoicing process for businesses. Read to know what e-invoicing is, how it works and what benefits it offers to businesses.

What is GST e-invoice?

GST e-invoice is an electronic document that is created and transmitted in a standardised format for invoicing under GST. The e-invoice system is a part of the government's digital India initiative and is designed to streamline and simplify the invoicing process for businesses.

How does the GST e-invoice system work?

The GST e-Invoice system consists of an invoice registration portal that generates a unique invoice reference number (IRN) and a QR code for each invoice. This reference number is used to track the invoice and ensure that it is unique and valid. Once the invoice is created, it is transmitted to the buyer who can then see the invoice details in real time.

The GST e-Invoice system integrates with the GST portal, ensuring that the invoice details are automatically uploaded to the GST portal, making it easier for businesses to file and reconcile their tax returns.

Businesses looking to take advantage of the benefits of e-Invoicing and comply with GST regulations must quickly adopt an e-Invoicing solution that provides robust automation and system integration. Thus, explore using the GST e-invoice portal to ease your business invoicing process.

Navigating the digital shift

The Goods and Services Tax (GST) regime, introduced to streamline and unify the taxation structure in India, brought about the need for a standardised and automated invoicing system. The GST electronic invoice system was created as a solution to simplify the cumbersome process of manual invoicing, reduce errors, and enhance overall compliance.

Under this system, businesses generate invoices electronically in a format that adheres to the prescribed standards. The GST network (GSTN) authenticates these e-invoices, ensuring accuracy and compliance with GST regulations.

Process of getting an e invoice system

The process of implementing an e-invoice system involves several key stages:

1. Ensure compliance with PEPPOL standards and incorporate e-invoicing schema into your ERP system.
2. Whitelist the IP address of your computer system on the e-invoice portal for direct API integration or use a GST Suvidha Provider (GSP) like ClearTax.
3. Utilize a bulk generation tool to upload invoices in bulk and generate JSON files for IRN generation.
4. Enter all necessary invoice details such as billing information, GSTN, transaction value, item rate, GST rate, and tax amount into your ERP or billing software.
5. Upload invoice details to the Invoice Registration Portal (IRP) using the generated JSON file, app, or direct API.
6. IRP will validate the invoice details, check for duplications, and generate an Invoice Reference Number (IRN) along with a digitally signed invoice and QR code.
7. Receive intimation of e-invoice generation via email and continue printing invoices with a logo as usual.
8. IRP forwards authenticated data to the GST portal for tax returns and, if applicable, to the e-way bill portal for generation of e-way bills.
9. GSTR-1 returns are auto-filled for the relevant tax period based on the data provided, determining tax liability accordingly.

Implementing an e-invoice system streamlines invoicing processes, enhances compliance, and facilitates seamless integration with tax and regulatory systems. With ClearTax's e-invoicing solution, ensure efficient and hassle-free compliance with e-invoicing requirements.

Benefits of e-invoicing to businesses

Here are some of the benefits of e-invoicing:

1. Reduced errors: With e-invoicing, the chances of errors in invoicing are minimised, resulting in greater accuracy, and fewer disputes with clients.
2. Cost savings: e-Invoicing reduces the cost of paper, printing, and postage, thus saving businesses money on logistics and bulk printing.
3. Faster payment processing: Electronic invoicing is faster and more efficient, allowing businesses to receive payment faster, improve cash flow and reduce late payments.
4. Reduced compliance risks: The e-invoicing system ensures that businesses comply with GST regulations by automatically updating invoices with the tax amount and providing real-time validation of invoice details.
5. Saves time: e-Invoicing saves time, eliminates manual processing, and automates many processes such as invoice generation, data entry, and payment processing, making it easier for businesses to manage their finances.

How can e-invoicing curb tax evasion?

E-invoicing plays a crucial role in curbing tax evasion through several mechanisms:

1. Real-time Transaction Monitoring: Tax authorities gain immediate access to transactions as they occur, promoting transparency and accountability.
2. Reduced Manipulation: With invoices generated prior to transactions, there's limited scope for manipulation, enhancing the integrity of tax records.
3. Prevention of Fake Invoices: Mandatory e-invoicing minimizes the prevalence of fraudulent GST invoices, ensuring only genuine input tax credits can be claimed.
4. Enhanced Tracking: Matching input credit with output tax details enables efficient identification and tracking of fake tax credit claims, bolstering tax compliance and enforcement measures.

What are the mandatory fields of an e-invoice?

Here's a table outlining the mandatory fields of an e-invoice:

Each of these fields is crucial for creating an accurate and compliant e-invoice.

What is the workflow of e-invoice?

The workflow of e-invoice involves several steps:

Step 1: Invoice Generation:
Generate invoices as usual, ensuring they adhere to e-invoice schema with mandatory fields like invoice type, number, date, supplier and buyer details, dispatch details, and tax information. Use accounting software or offline tools for JSON generation.

Step 2: IRN Generation:
Generate a hash based on specific parameters like GSTIN, invoice number, and financial year to create the Invoice Reference Number (IRN) using prescribed algorithms.

Step 3: JSON Upload:
Upload the JSON of the final invoice directly on the Invoice Registration Portal (IRP) or through GST Suvidha Provider (GSP) or third-party apps.

Step 4: Hash Validation:
If the hash is uploaded, validate it against the Central Registry of the GST System to ensure uniqueness. IRP generates a QR code and digitally signs the invoice, making it available to the supplier and buyer via email.

How to generate e-invoice in the GST portal?

To generate e-invoices on the GST portal, follow these steps:

1. Visit the e-invoice portal and click on the Registration button.
2. Choose e-Invoice Enablement and enter your company's GSTIN.
3. Complete OTP verification and provide annual turnover details for the relevant financial year.
4. Submit the information to register for e-invoicing.
5. Log in to the e-invoice portal and upload B2B invoices using your preferred mode to generate the Invoice Reference Number (IRN).

Who must generate e-invoice and its applicability?

E-invoicing is mandatory for businesses with a specified turnover limit set by the tax authorities. The applicability of e-invoicing varies by country, with thresholds and requirements subject to change. Typically, businesses meeting or exceeding the turnover threshold must generate e-invoices for transactions. Here's a simplified table illustrating e-invoicing applicability:

E-invoicing aims to enhance tax compliance, reduce errors, and improve efficiency in business transactions.

What are the modes of generating e-Invoice?

The modes of generating e-Invoices offer flexibility to taxpayers based on their preferences and requirements. Various options are available, including Web-Based, API Based, SMS Based, Mobile App, offline tool-based, and GSP based methods. Taxpayers can choose the most suitable mode for their business operations, ensuring seamless compliance with e-Invoicing regulations. Whether accessing through web platforms, utilizing APIs for integration, leveraging mobile apps for convenience, or utilizing offline tools, taxpayers have a range of options to streamline their e-Invoice generation process.

Systems before and after e-invoicing

Before the implementation of e-invoicing systems, businesses relied on manual or paper-based invoicing processes, which were often time-consuming, error-prone, and labor-intensive. This traditional approach involved printing, mailing, and manually processing invoices, leading to delays, inefficiencies, and increased risk of errors. With the introduction of e-invoicing systems, businesses transitioned to electronic invoicing methods, streamlining the invoicing process, reducing paperwork, and automating invoice generation, delivery, and payment. E-invoicing systems integrate with accounting software, enabling real-time tracking, faster payment processing, and improved accuracy, ultimately enhancing efficiency and reducing costs for businesses.

Time limit to generate e-invoice

The time limit to generate an e-invoice typically varies depending on the regulations set forth by tax authorities or governing bodies. In many jurisdictions, businesses are required to generate e-invoices at the time of supply or within a specified timeframe after the transaction occurs. This timeframe may range from immediate generation upon supply to within 24 hours or a few days after the transaction. Adhering to these time limits ensures timely reporting of transactions, enhances tax compliance, and facilitates seamless integration with accounting and tax systems for accurate record-keeping and reporting purposes.

How to register for an e-invoicing system?

Registering for an e-invoicing system typically involves several steps, depending on the requirements set by the tax authorities or governing bodies. Businesses may need to visit the designated e-invoicing portal and complete an online registration process by providing relevant details such as company information, taxpayer identification number, contact details, and any other required documentation. Once the registration is submitted, businesses may undergo verification processes to validate their identity and eligibility for e-invoicing. Upon successful registration, businesses receive access credentials or digital certificates to enable them to start generating and transmitting e-invoices electronically in compliance with regulatory requirements.