Goods and Services Tax (GST) e-invoicing is the most discussed topic for businesses today.

E-invoicing is a system wherein invoices are registered electronically by the Invoice Registration Portal (IRP) for use on the common GST portal. As per the latest notification, firms having an annual turnover above Rs 500 crore have been mandated to initiate generating their e-invoices w.e.f. 1 October 2020.

The Government intends to mandate B2B e-invoicing for taxpayers with turnover more than INR 100 crore w.e.f. 1 January 2021 and for all taxpayers by April 2021.

In view of this, let’s understand the concept in detail:

Need of e-invoicing

According to Cygnet GSP -- one of the country's GST Suvidha provider – e-invoicing aims to provide better taxpayer services by restraining multiple reporting and smoothening filing of new returns. E-invoicing system helps in curbing tax evasions and checks fake and fraud invoices.

Additionally, it will help in establishing an audit trail of B2B invoices which will allow system-level matching of credit. Further, it will allow the inter-operability of systems, standardization of data and reporting into a central system thereby clearing jurisdictional challenges, mentions Cygnet GSP in its e-book on 'getting Ready for e-invoicing'.

The e-book has been authored by Niraj Hutheesing, Founder and Managing Director of Cygnet Infotech and Jigar Doshi, Founding Partner, TMSL.

Myths and facts about e-invoicing (Compiled by Cygnet GSP along with TMSL)

Myth 1

E-invoice will have to be generated through the GST portal.

Fact

The tax invoice will continue to be generated from the existing ERP system. It will only need to be registered on IRP.

Myth 2

E-invoicing is applicable to all.

Fact

Organisations with turnover exceeding INR 500 crores are mandatorily required to file e-invoicing. Those above INR 100 crores are required to follow from January 1st, 2021 followed by a roll-out for all taxpayers w.e.f. 1 April 2021.

Myth 3

A new software/ERP system will be required for e-invoicing.

Fact

No new software will be required. Existing software will have to be geared up to implement additional E-invoicing features.

Here are the steps to create an invoice (As compiled by Niraj Hutheesing and Jigar Doshi):

Step 1: Confirm the e-invoice schema using the GSTN’s offline utility or third-party application. The software should be capable of reading the prescribed language, which is JSON. JSON is a data interchangeable format that converts human-readable language into machine-readable language and vice versa.

Step 2: Upload the invoice information onto the IRP with the required parameters. This may be done directly by accessing the IRP or by using GSPs or third-party applications.

Step 3: Upon validity of the data received, IRP will digitally sign and add a QR code to the invoice. In case of an invalid result, an error code will be generated.

Step 4: IRP will then return the digitally signed invoice containing QR code. In case of an error, the error code will be sent back to the generator. Such erred invoice data will not get stored in the central registry

Step 5: At the same time of communicating with the generator, the signed e-invoice will be sent to GST portal and e-way bill portal. This signed e-invoice received by GST portal will get stored in the central registry.

Step 6: Once the e-invoice is generated, the information available on E-invoicing will get auto-populated in the e-way bill through NIC.

Cygnet GSP processed over 85,15,000 e-invoices in the first month itself which is 18.6 percent of the total e-invoices generated on the NIC portal. With e-invoice going to become mandatory for all businesses from April 1, 2021, it would be good to start preparing in advance and evaluating your vendor partner.