What is E-invoicing?

Why do you think invoices are important? All we do is, throw them in the bin when we receive them. Isn’t it?

But let’s try to understand invoicing in terms of law and its relevance in the ecosystem.

What is an invoice?

An invoice or a bill is a written document that is proof of the sale or supply by one business to another/customer. A tax invoice contains the details of the sale such as the name, address, contact number of the supplier, quantity, value, tax, etc.

In India, the GST law governs the invoicing framework. Earlier there used to be manual invoicing. With time, advancement in technology, and updation of the laws, manual invoicing had its own drawbacks such as being time-consuming, expensive in terms of labour, chances of duplicate invoices being generated, prone to errors as there’s human intervention, etc. So, for transparency purposes, the government introduced the concept of e-invoicing. E-invoicing adoption is a better option as it eliminates the risk by reducing the number of steps and people involved, making the compliance mechanism better.

What is an e-invoice?

E-invoice means electronically generating the invoices. E-invoicing under GST (for B2B) was first implemented from 1st October 2020 onwards for taxpayers whose aggregate turnover exceeded 500 crores. With e-invoicing, the invoices are authenticated electronically by GSTN for further use on the common GST portal.
Also, the aggregate turnover will include the turnover of all GSTINs under a single PAN across India.

:bulb: As per the recent announcement dated 10 May 2023, e-invoicing applies to those with an aggregate turnover of more than ₹5 crores in any FY from 2017-18. It will be applicable from 1 August 2023.

Why e-invoicing?

Before the concept of e-invoicing was introduced, there was no standardized way of generating invoices, and hence invoices were generated through various software and were manually uploaded in GSTR 1. So, the recipient was able to see in his GSTR 2B once the supplier had filed GSTR 1.

With the e-invoicing system in place, invoices can easily be imported using various methods. This will make the preparation of GSTR 1 & E-way Bill seamless.

:bulb: E-way bill is a road permit, which means if you’re transporting goods by road, rail, ship air etc, then you’re required to generate an e-way bill along with the e-invoice.

How does e-invoicing work?

  1. For e-invoicing, a unique identification number (IRN) is issued against every invoice by the IRP (Invoice Registration Portal).
  2. The IRP will auto-populate the details of the GST invoice on a real-time basis on the GST portal which is digitally signed with a QR code attached.
  3. So the taxpayer can use this information directly to file GST returns, making his compliance easier.

On 6th May 2023, the GST department extended the time limit of 7 days to report the old e-invoices on the IRP portals to 3 months. The new implementation date is yet to be announced.

Who need not generate an e-invoice?
Irrespective of the turnover, e-invoicing shall not be applicable to the following:

  1. Insurance or Banking company or NBFC
  2. GTA
  3. A registered person supplying passenger transportation services
  4. SEZ
  5. A government department
  6. A registered person supplying services by way of admission to the exhibition of cinematographic films in multiplex services

What if I don’t generate an e-invoice?

With the latest government announcement, if you’re a registered taxpayer whose aggregate value of sales exceeds ₹5 crores must generate e-invoices.

If you don’t generate an e-invoice, it means you are not reporting your sales to the government. The penalty is as stated below:

  1. Non-generation of invoice: 100% of the tax due or ₹10,000, whichever is higher, for every invoice.
  2. Incorrect invoice: ₹25,000 per invoice

Read more about E-Invoice System under GST - Learn by Quicko

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