Is GST e-Invoicing Mandatory in India?

The Goods and Services Tax (GST) system defines a standard format for tax invoices. Under Section 31 of the Central Goods and Services Tax, 2017, it is mandatory to issue an invoice/bill of supply for every supply of goods or services.

During its 37th meeting on 20 September 2019, the GST Council approved the method of ‘electronic invoices’ (e-invoice) in GST. In accordance with this decision, certain steps have been taken to implement usage of e-invoices to report Business-to-Business (B2B) and export invoices. In the meetings held thereafter, the GST Council suggested that certain categories of individuals be exempted from issuing such invoices and recommended some limitations on the aggregate turnover for which such invoices should be applicable.

e-Invoice in GST

e-Invoicing system facilitates electronic authentication of B2B invoices by the Goods and Services Tax Network (GSTN) for various uses on the GST portal. The Invoice Registration Portal (IRP) issues unique identification numbers for each invoice; these unique identification numbers are managed by the GSTN.

• All details of an invoice are transferred from the e-invoicing portal – einvoice1.gst.gov.in – in real time to both the GST portal as well as the e-way bill portal.
• It completely erases the need to manually enter data when filing GSTR-1 return and when generating part-A of e-way bills, as the details are automatically transferred from the IRP to the GST portal.

Why was e-Invoicing Introduced?

While the invoices generated by different software look relatively similar and users can make out their content, the computer system fails to understand them. For example, the system using an accounting software ‘X’ cannot read invoices generated by an accounting software ‘Y.’

There are numerous accounting/billing software that generate invoices and store relevant data as per their own format. As such, the GST system cannot process these invoices even though the data provided in them is the same. As the data is provided in different formats, there is no system capable of understanding and processing the information presented in them.

This created the need to have a specific format in which the electronically stored data would be shared with others and ensure it is understandable and operable by all systems.

Benefits of e-Invoicing System

The primary goal behind adopting such an e-invoicing system was to populate the returns in advance and reduce the problems associated with reconciliation. This was attained through the IRP system’s structure, which shares all the data of invoices with the GST system and e-way bill system. As such, simply uploading invoices regularly would make sure that all the details needed in returns and e-way bills are automatically filled.

Following are some major advantages of e-Invoices:

• Eliminates the need to report the same invoice details several times in different forms. You need to upload it once, and the system will use the same to auto-fill thereafter.
• Part-A of e-Way bills are automatically recorded, and you only need to update the transporter details.
• B2B details are automatically captured in GSTR-1 return when you upload invoices. Substantial reduction in input credit certification challenges as the same data will get reported to the tax department as well to the buyer in their inward supply (purchase) register (GSTR-2A).
• After the GST system shares the data with them, buyers can do a reconciliation with their purchase register and choose to accept or reject it on time under New Return.
• The complete sequence of B2B invoices and system-level matching of input credit and output tax helps reduce tax evasion.
• Tax administration’s efficiency is increased by removing fake invoices.

Introducing e-Invoicing in Phases

The GST Council suggested and approved that e-invoicing should be introduced in phases to make sure businesses have enough time to adapt to this new system.

Annual Aggregate Turnover* (in INR)	Dates for Mandatory Implementation of e-Invoicing
> 500 crores	1 October 2020
> 100 crores	1 January 2021
> 50 crores	1 April 2021
> 20 crores	1 April 2022
> 10 crores	1 October 2022
> 5 crores	1 August 2023

As per a recent update, e-invoicing shall be vital for all registered individuals who have an aggregate turnover that exceeds INR 5 crore in any fiscal year after 2017-18.

*Note: Section 2(6) of CGST Act, 2017 defines ‘aggregate turnover’ as the combined value of all taxable supplies, exempt supplies, exports of goods/services or both, and inter-state supplies of individuals that have the same Permanent Account Number (PAN), to be computed on all India basis but excludes central tax, state tax, union territory tax, integrated tax and cess.

Who is Exempted from e-Invoicing?

Although all registered taxable individuals with an aggregate turnover that exceeds the limits stated above are required to generate e-invoices, there are a few exemptions as well.

Exemptions on the Entity-Level

In accordance with Notification No. 13/2020 CT dated 21 March 2020, registered individuals that fall under sub-rule (2), (3), (4), and (4A) of Rule 54 shall not be required to issue e-invoices. This includes:

• Banking, insurance or financial entities including Non-Banking Financial Companies (NBFC).
• Goods transport agencies.
• Suppliers of passenger transportation service.
• Special Economic Zone (SEZ) Unit.
• Individuals involved in exhibiting cine cinematographic films in multiplex screens.

Exemptions on the Document-Level

• Self-invoices (in the case of Reverse Charge Mechanism (RCM) under Section 9(4)).
• Advance Payments.
• Delivery Challans.
• Financial Debit/Credit Notes.
• Bills of Supply.

Exemptions on the Transaction-Level

• B2C Transactions: B2C transactions refer to all supplies made to unregistered individuals/consumers. Such invoices are currently exempt from e-invoicing. However, if the aggregate turnover is more than INR 500 crores, a dynamic QR code must be generated to permit digital payments on all B2C invoices.
• Non-GST supplies like petrol, diesel, etc.
• Bills of Entry (in case of imports).
• Nil-rated or supplies that are exempted.

Documents covered by e-Invoice

• Invoices
• Credit notes
• Debit notes

Although several documents apart from invoices are covered, for better understanding, the system is called ‘e-Invoicing.’

Amendment & Cancellation of e-Invoices

• Is there an option to cancel e-Invoices? Yes. Taxpayers may cancel e-Invoices within 24 hours of reporting it through the GST portal. Post cancellation, the GSTR-1 shall be updated. However, if the relevant e-way bill has been verified during transit and is still active, taxpayers shall not be allowed to cancel their e-invoices.
• Amending e-Invoices: Taxpayers are not allowed to make any amendments to e-invoices. Although if there is a need to make certain changes, it may be done through the usual process on the e-filing portal while submitting GSTR-1.

Note: Relevant officers shall be intimated about any changes made to e-Invoices by the taxpayers.

Conclusion

e-Invoicing does not mean that the invoices shall be generated by a Government portal. You will be required to continue creating your own GST invoices on your own Accounting/Billing/ERP Systems and responsible for reporting such invoices to the ‘Invoice Registration Portal (IRP).’ After receiving the same, IRP shall generate unique ‘Invoice Reference Numbers (IRN)’ for every invoice, sign it digitally and return the e-invoice. It must be noted that a GST invoice shall only be valid if it has a valid IRN attached to it.