E invoice has emerged as one of the path-breaking additions under the GST laws. The main point of concern of the lawmakers has been fake invoicing that result in tax evasion and frauds. With the introduction of the concept of e invoice, this has been standardized to reduce instances of such evasion by providing a comprehensive trail of all B2B invoices.
The GST Council, in its 37th meeting held on 20.09.2019, approved introduction of electronic invoice in GST in a phased manner. Accordingly, steps have been initiated to introduce ‘e-invoicing’ for reporting of Business to Business (B2B) and export invoices. E invoice means reporting details of specified GST documents to a Government-notified portal and obtaining a reference number. It doesn’t mean generation of invoice by a Government portal.
What is an e invoice?
As per Rule 48(4) of the CGST Rules, 2017 certain registered individuals must generate invoices by uploading the required details in the specified format (FORM GST INV-01) on the Invoice Registration Portal (IRP) to obtain an Invoice Reference Number (IRN).
Once this ‘e-invoicing’ procedure is completed, the invoice, which includes the IRN and a QR code, is provided by the registered supplier to the buyer. This document is commonly referred to as an ‘e invoice’ under GST.
The standard schema for e-invoices (INV-01) enables seamless exchange of invoice data between the supplier and the buyer in a structured electronic format. It’s important to note that ‘e invoice’ does not imply that the invoice is generated by a government portal, but rather, that it is validated through the IRP.
E invoice applicability
As discussed above, the applicability has been introduced in a phased manner i.e. e invoice generation for all B2B and export invoices will be mandatory for a taxpayer with an annual aggregate turnover exceeding the limits as mentioned below in any financial year from FY 2017-18 onwards:-
| Annual aggregate turnover in any financial year from FY 2017-18 onwards | Date of applicability |
| Rs. 500 crores | 01.10.2020 |
| Rs. 100 crores | 01.01.2021 |
| Rs. 50 crores | 01.04.2021 |
| Rs. 20 crores | 01.04.2022 |
| Rs. 10 crores | 01.10.2022 |
| Rs. 5 crores | 01.08.2023 |
As per Notification No. 10/2023-Central Tax dated 10.05.2023, e invoicing will be applicable on the taxpayer w.e.f. 01.08.2023 if the annual aggregate turnover in any financial year from FY 2017-18 onwards exceeds Rs. 5 crores.
Entities exempted for generation of e invoice
The applicability of e invoice has been exempted on the following classes of registered persons:-
- Special Economic Zone units
- Insurance companies
- Banking companies/NBFC/Financial institutions
- Goods transport agency
- Passenger transport service providers
- Suppliers of services by way of admission to exhibition of cinematograph films in multiplex screens
- OIDAR suppliers
Documents and supplies covered under the e invoice system
The documents presently covered under the e invoice system are invoices, debit notes and credit notes.
B2B supplies i.e. to registered persons, Supplies to SEZs (with/without payment), Exports (with/without payment), Deemed Exports, by notified class of taxpayers are currently covered under this system.
Procedure to generate e invoice
The steps involved in the generation of e invoices with respect to invoices, credit notes and debit notes are as under:-
- Generate tax invoice using the accounting software like Tally or any ERP
- Report such invoice to the Invoice Registration Portal (IRP)
- IRP generates a signed e invoice with a QR code and a unique Invoice Registration Number (IRN). IRN is a unique 64-character hash.
- Provide the buyer with the invoice along with the QR code.
GSTN had issued an advisory on 21.02.2024 on the enhanced e invoice portal.
Consequences of non-compliance
Failure to generate e-invoices as required by the GST law may result in penalties. As per Section 122 of the CGST Act, non-compliance can attract a fine of up to ₹10,000 per invoice or 100% of the tax due, whichever is higher. This can lead to significant financial penalties, particularly for businesses that deal with large volumes of invoices.
If a supplier fails to generate an e-invoice, the buyer may not be able to claim the Input Tax Credit (ITC) on that transaction. This is because the invoice won’t be reflected in the GST portal, leading to issues with matching invoices, a key aspect of availing ITC. This can result in financial losses and disrupt cash flow for both buyers and suppliers.
The generation of e-invoices is linked to the generation of e-way bills, which are required for the movement of goods. Without a valid e-invoice, businesses may face difficulties in creating e-way bills, leading to disruptions in logistics and the movement of goods. This can hinder business operations and lead to delays.
Non-generation of these could be viewed as a violation of the GST law, which may lead to additional scrutiny by tax authorities. Businesses that are non-compliant may face audits, investigations, or other legal actions, which can further increase operational risks and compliance burdens.
Advantages of e invoice system
The system stems from transparency and accuracy as its foundation and thus has the following benefits to name a few:-
- Eradication of fake invoicing and thus reducing fake ITC credits being availed by the taxpayers
- Automated updation of GSTR 1/2A and 2B and even eway bills
- Compliance has been made easy
- Better information available to tax authorities
- Reduction of disputes between the parties.
Difficulties associated with the e invoice system
E-invoicing under GST faces several challenges:
- SMEs may struggle with the required tech infrastructure.
- Implementing e-invoicing involves costs for software and employee training.
- Concerns about the safety of sensitive financial data uploaded to government portals.
- Slow response times and technical glitches with the IRP portal can disrupt transactions.
- Less organized businesses may find it hard to adapt to the digital process.
FAQs
Q1. Whether e-invoicing is applicable for invoices between two different GSTINs under same PAN?
A1. Yes, e-invoicing is applicable for invoices between two different GSTINs under same PAN.
Q2. How to check that IRP has registered the reported invoice?
A2. Upon successful registration of invoice on IRP, it will return a signed e-invoice JSON to the supplier with IRN and QR Code.
Q3. How to amend details of a reported invoice for which IRN has already been generated?
A3. Amendments are not possible on IRP. Any changes in the invoice details reported to IRP can be carried out on GST portal (while filing GSTR-1). In case GSTR-1 has already been filed, then using the mechanism of amendment as provided under GST. However, these changes will be flagged to proper officer for information.
Q4. Can an IRN/invoice reported to IRP be cancelled?
A4. Yes. The cancellation request can be triggered through ‘Cancel API’ within 24 hours from the time of reporting invoice to IRP. However, if the connected e-way bill is active or verified by officer during transit, cancellation of IRN will not be permitted. In case of cancellation of IRN, GSTR-1 also will be updated with such ‘cancelled’ status.