According to the 39th GST Council meeting, the GST e-invoicing of bills under the GST scheme and applicability of QR codes is bound to start from October 1, 2020. The implementation has been postponed from the previously declared date of April 2020, due to the coronavirus pandemic.
What is E-invoicing?
The system of e-invoicing or ‘electronic invoicing’ helps to authenticate B2B invoices electronically by a GSTN for future use on the GST portal.
Owing to the recent electronic invoicing system, every invoice will have an identification number. This number will be issued by the Invoice Registration Portal (IRP) and has to be managed by the GST Network (GSTN).
Your invoice information will be transferred to both – the GST portal and the e-way bill portal in real-time. Therefore, you won’t have to manually enter data when you are filing for ANX-1/GST returns, and when you generate part-A of the e-way bills. Your data will be transferred directly from the IRP to the GST portal.
E-invoicing is not only the generation of invoice on the GST portal, but it also refers to the submission of an already generated standard invoice on the portal. E-invoicing, therefore, makes multi-purpose reporting with one-time input of invoice details.
The e-invoicing system is applicable to those who have a turnover threshold limit as determined by the government.
How to Create an E-invoice?
The implementation of e-invoicing has laid out specific parameters for the generation of invoices as per the e-invoice schema. Let’s understand the process of creating an e-invoice as per the new regulations –
Step 1 – Generate an E-invoice
You will continue to generate the invoice, however, these invoices need to be reported electronically based on the latest criteria of the e-invoice schema. Additionally, JSON software is necessary to generate the final invoice. Be sure to check that your billing/accounting software is capable of generating JSON. You can create a JSON by following the e-invoice schema.
Step 2 – Generate unique IRN
You will have the option to generate ‘hash’ based on specific criteria, usually three, such as supplier’s GSTIN, supplier’s invoice number and Financial Year (YYYY-YY).
To generate a hash, you must use the prescribed algorithm, such as SHA256. After the hash is validated, it becomes the Invoice Reference Number (IRN) of the e-invoice.
Step 3 – Upload the JSON
The JSON of the final invoice may be uploaded by using the following modes:
- Directly on the IRP
- Through GST Suvidha Provider (GSP)
- Third-party apps (including through API)
If you have generated the hash, you can upload it with JSON onto the IRP.
Step 4 – Generate and Validate Hash
In case of invoices uploaded without the hash, the IRP will generate the hash. The hash created by the IRP will then become the IRN.
If you have uploaded the hash, it will undergo a de-duplication check. It is performed by validating the hash/IRN against the Central Registry of GST System. The check ensures that the hash is unique.
After the check, the hash is stored in the Central Registry. The IRP will generate a QR code, digitally sign the invoice, which will then be made available to you. The IRP also sends the e-invoice through email mentioned on the invoice.
How Does the Process of E-invoicing Work?
- As a responsible taxpayer and dealer, it is mandatory to create an e-invoice for your businesses on every sale on your ERPs.
- The standard invoice format for every business is already laid out by the authorities.
- The generated e-invoice has to be reported to the Invoice Registration Portal (IRP) of GST.
- The Invoice Reference Number (IRN) is generated on the portal, and the invoice is signed digitally.
- Then, a QR code is generated. The code contains important information about the invoices. This is re-directed to the taxpayer who files the invoices.
- The IRP sends a copy of the signed invoices to your provided email ID.
Check out more on GST number search by name.
What are the Benefits of an E-invoice?
- E-invoice minimizes the gap in data reconciliation under GST to reduce mismatch errors.
- E-invoices created on one software can be read by another. This allows interoperability and decreases data entry errors.
- It ensures real-time tracking of invoices prepared by the supplier.
- It auto-populates relevant details of the invoices in various returns, especially for generation of the part-A of e-way bills.
- It ensures faster availability of genuine input tax credit.
- It reduces the work of audits/surveys by the tax authorities since the information is available at a transaction level.
- It reduces GST evasion.