What is e-invoice?

Introduction

‘E-invoicing’ is a system in which B2B (Business-to-Business) invoices are authenticated electronically by GSTN (GST Network, the IT backbone for new indirect system) for further use on the common GST portal. An identification number will be issued against every invoice by the Invoice Registration Portal (IRP) to be managed by the GSTN. 

All invoice information will be transferred from this portal to both the GST portal and e-way bill portal in real-time. Therefore, it will eliminate the need for manual data entry while filing ANX-1 (Annexure 1, part of new return mechanism going to be implemented from April 1) as well as generation of part-A of the e-way bills, as the information is passed directly by the IRP to E-way bill portal.

Key definitions:

Invoice Registration Portal (IRP): IRP is an Indian government system that will register the B2B transactions like invoices, generate IRN (Invoice Reference Number) and QR code. It will share relevant information with GST portal, e-way bill portal, and the buyer. 

Invoice reference number (‘IRN’): IRN will be a unique number per invoice generated by IRP and will be based on 3 parameters Supplier GSTIN, invoice no. and financial year.

Digitally signed: IRP will sign the invoice digitally with the private key of the IRP. Only signed e-invoice will be a valid invoice and used by GST/ E-way bill system. The digitally signed invoice will be shared by IRP to the buyer.

QR code: IRP will generate QR code which will contain GSTIN of seller and buyer, invoice number, invoice date, number of line items, HSN, invoice reference number, etc. This will be helpful for the tax officers to check the invoice where the internet may not be available.

E-invoice standards: A technical group of GST council has drafted standards for e-invoice after consultation with the industry. The standards are the format in which electronic data of an invoice will be shared with others to ensure there is interoperability of the data. Organizations would need to adopt the new e-invoice standard wherein they would realign their data access and retrieval in the standard format.

Benefits to organizations

The fundamental principle behind introducing the e-invoicing is to put the technology at the service of the people to support ease of doing business. The E-invoicing will pre-populate the GST returns besides reducing the reconciliation problems. Some key advantages:

  • One time reporting of B2B invoices and further authentication from GST Portal will auto prepare ANX-1, ANX-2 in new return format and GSTR-1 in current format up to B2B Supplies. 
  • Substantial reduction in input credit verification issues as same data will get reported to tax department as well to buyer.
  • E-waybill part A will be created through E-Invoicing data only and vehicles details need to be updated. 
  • An authenticated invoice will be shared with buyer on his/her mail id mentioned on e-invoice, hence buyer can do reconciliation with his purchase order and accept/reject in real time under New Return. 
  • E-Invoice will be created for Invoices, Debit Note, Credit Note and other documents required by law.

Essential Timelines

The GST Council, in its 35th meeting decided to implement the new system while standard was adopted during 37th meeting. Following are the plans for the key dates:

  • Businesses having a turnover of Rs 500 crore or more would take up e-invoicing from January 1, 2020 on voluntary and trial basis 
  • Businesses with a turnover of Rs 100 crore or more would start e-invoicing on voluntary and trial basis from February 1, 2020. 
  • It will be mandatory for both the above categories from April 1, 2020 
  • Businesses having turnover less than Rs 100 crore, it would remain voluntary and on a trial basis from April 1.

Impact for organizations running ERP

Organizations will have to adapt their ERP for manual, semi automatic or fully automatic process to synchronize their invoice data with IRP. In case the invoice standards are not matching as prescribed by the GST council, there may be a need to adapt the ERP for changing the invoice formats. The E-invoice standards mandate that the IRN and QR code needs to be printed in the invoice copy and it will impact the formats. In addition, there is a limit of 100 line items in an Invoice. This may also need some changes in the ERP side.

Impact for organizations running ERP

The integration and changes done rightly may reduce continuous manual work as maintenance efforts. Overall, with all the systems working automated and in tandem will ensure major gains to an organization in terms of reduction in efforts, reduction in errors and better fund management.