Like we are accustomed to the filing of “e-way bills” for the transportation of goods from one place to another, the GST Council has decided to initiate a process of e-invoicing, applicable to a specific section of taxpayers in its 35th meeting. The CBIC (Central Board Of Indirect Taxes and Customs) has formally announced the process of e-invoicing under the GST Notification No. 68/2019-Central Tax, which makes way for the inclusion of sub-sections (4), (5), (6) under the GST rules for execution of e-invoicing. Scroll down to know the rules associated with e-invoicing under GST in detail.
Understanding E-invoicing Under GST
If you think that e-invoicing would mean generating the invoice from the common GST portal, you are on the wrong track. The process of e-invoicing is a little more complicated. Generating an e-invoice or electronic invoice under GST refers to the process where B2B invoices are validated electronically by the GSTN for additional use in the common GST portal.
According to this system, a distinct identification code will be provided for every invoice by the IRP (Invoice Registration Portal), which is later governed by the GSTN. The details associated with the invoice will be carried from this portal to both the e-way bill portal and GST portal on a real-time basis. With the implementation of this process, the requirement of manual data entry in the GSTR-1 and part-A of the e-way bills can be done away with, as the details directly get conveyed from the IRP to the GST portal.
Besides ensuring a smooth and efficient process, e-invoicing under GST has been introduced against fake invoicing. Even before introducing the GST laws, tax frauds through fake invoices have been the government’s point of concern. With the help of e-invoicing, every invoice will be authorized, and that can be quickly done with the generation of electronic invoices from the GST portal.
Applicability of E-invoicing
Starting from 1st October, 20202, e-invoicing has been made mandatory for all businesses, provided its combined turnover has crossed the Rs. 500 crore mark in any previous financial years, counting from 2017-18 to 2019-20. This notification associated with the turnover limit was prescribed by notification no. 61/2020-Central Tax. The next notification released in this regard is notification no. 71/2020-Central Tax concerns the time for deciding the eligibility of a certain case’s e-invoicing.
Moreover, as per the latest notification, 88/2020-Central Tax, released on 1st January 2021, the initiative of e-invoicing will also be applicable for businesses and organizations that have exceeded the aggregate turnover limit of Rs. 100 crore in any one of the financial years from 2017-18 to 2019-20.
However, according to the rules prescribed in CBIC Notification No. 13/2020-Central Tax, no matter the turnover aggregate, e-invoicing will not apply to the following categories of taxpayers:
- A banking company or an insurance company or a financial organization, or an NBFC
- A GTA (Goods Transport Agency)
- A registered individual associated with supplying passenger transportation services
- An SEZ unit
- A registered person in charge of providing services for use in cinematographic movies.
Will E-invoicing Help Businesses?
Businesses will surely benefit from this latest initiative introduced by the government. Some of the ways in which e-invoicing can help businesses are:
- E-invoicing works significantly in eliminating the gap created in data reconciliation under GST and reducing mismatch errors.
- E-invoices created on one software can be easily read by another one, therefore, eliminating the chances of data entry errors and allowing interoperability.
- The e-invoice will enable real-time tracking of the invoice devised by the suppliers.
- E-invoicing will allow for an automatic tax filing process, which means that the invoices’ relevant inputs will be automatically filled in various other returns, including the generation of part A of the e-way bills.
- The chances of audit or survey by the tax officials will lessen as the information required will be readily available during the proceedings.
- With the implementation of e-invoicing, the chances are that the credit regarding the genuine tax input will be available earlier.
When Will the E-invoicing Initiative Begin?
The primary phase of the e-invoicing initiative has already begun from 1st October 2020 for individual taxpayers whose combined turnover is more than Rs. 500 crore. In the next phase, starting from 1st January 2021, the e-invoicing process was extended to the businesses and organizations that have an aggregate turnover of more than the limit of Rs. 100 crore.
As per reports, the government is x to extend this e-invoicing initiative to all organizations and businesses from 1st April 2021. From now, the combined turnover will be the income of all the GSTINs under a single PAN across the country.
Ways in Which E-invoicing Can Help to Stop Tax Evasion
E-invoicing initiatives can help the government eliminate tax evasion in several ways. Some of these ways would include:
- The tax officials and authorities will have direct access to the transactions as the e-invoice needs to be generated through the GST portal mandatorily, which takes place in real-time.
- As the generation of the e-invoice is done before a transaction is done, the chances of manipulating invoices are reduced.
- As all invoices need to be generated through the GST portal, the possibility of false GST invoices is reduced, and only the actual tax credit can be claimed. Moreover, as the input tax details can be tallied with the output tax information, it becomes comparatively easier for the GSTIN to get hold of fraud tax credit claims.
The Process to Follow for E-invoice Generation
One needs to follow the following steps for e-invoice generation.
Step 1: The concerned taxpayer needs to make sure that he is using a reconfigured EPR system in accordance with the PEPPOL standard. Or the user may talk with the software service provider to include the configuration for e-invoicing. Moreover, it must include the parameters marked mandatory by the CBIC.
Step 2: Next step includes IRN generation. Generally, in this step, people are provided with two different options. The concerned person can choose an appropriate step and get the IRN generated.
Step 3: Once the IRN has been generated, the taxpayer will have to raise a standard invoice from the software. This invoice must include transaction value, concerning address and name, GSTN of the supplier, tax amount, GST rate, etc.
Step 4: The IRP then generates the IRN (Invoice Reference Number) and provides a QR code.
The government has been trying hard to keep the tax system transparent and ensure people a seamless service. However, cases of tax evasion are still prominent. So, here’s hoping that the initiative e-invoicing under GST will help the government fight fake invoicing and create a genuine and reliable system.
To get more details regarding e-invoicing under GST, get in touch with FinGurus today!