India has gradually implemented electronic invoicing, or e-invoicing, for B2B transactions, in phases since the last quarter of 2020. In the latest phase of this implementation, the Indian government has made e-invoicing mandatory for all B2B transactions beginning October 2022.
The Indian government has been shifting to the e-invoicing model to prevent tax evasion and improve the transparency of the taxation system.
Other benefits of electronic invoicing, like reduced manual errors and an automated filing process, are supposed to make businesses more compliant with the regulations.
With the latest implementation of the new taxation policy, the Indian government has mandated that all B2B transactions be done using the e-invoicing process.
The mandate applies to businesses with an annual turnover exceeding 100 million Indian rupees (roughly $1.22 million).
As with many other countries adopting the system, adherence to the laws and correctly formatting the invoice is essential. Understanding how the electronic invoicing system works is the first step to avoiding common mistakes during the e-invoicing process.
This article will include the most important aspects of e-invoicing in India and how the automated reporting system works.
E-Invoicing deadlines in India
Indian government started implementing an e-invoicing system for business transactions on October 1, 2020. However, during the initial phase, the mandate included only businesses exceeding an annual turnover of 5 billion Indian rupees.
The plan was to implement the system to all B2B transactions in a gradual step-by-step manner. To this end, the e-invoicing mandate has gradually expanded every year since its initial announcement in 2020 to include smaller businesses.
In the latest implementation (fifth phase) of the system, the Indian government has announced that, starting from October 1, 2022, all B2B transactions must go through an electronic system.
Businesses that fail to comply with the regulations after October 1, 2022, will be penalized with 100% of the tax due or 10,000 Indian rupee, whichever is higher.
Automating your electronic invoice generation with an ERP can be a great way for businesses to avoid such hefty penalties. Schedule a demo with Dolf Kars, Storecove’s e-invoicing expert, or visit our website for more information.
E-invoicing under GST in India
E-invoicing in India falls under the Goods and Services Tax (GST) law. According to the law, businesses registered under the GST system must use e-invoices for all B2B transactions. Under the system, B2B electronic invoices and other documents must be authenticated electronically by the goods and services tax network for use on the common GST website.
The e-invoicing under the GST system involves submitting an already generated electronic invoice in a standard format on a common GST e-invoice portal. One of the system's biggest advantages is that it automates multipurpose reporting with a one-time input of your invoice details.
When you upload the e-invoice to the invoice registration portal (IRP), an identification number will be generated against every invoice. All the information from the IRP is transferred to the GST portal in real-time. Consequently, it eliminated the need for manual data entry while filing tax returns.
Under the new system, generating and uploading invoice details can be done using various software tools that generate electronic invoices compatible with the GST site.
Who controls e-invoicing in India?
The e-invoicing system in India is controlled by the GST council that falls under the jurisdiction of the Central Board of Indirect Taxes & Customs (CBIC), Indian tax authority, Government of India.
The e-invoices are managed by the GST network (GSTN) through an invoice registration portal designed and maintained by the national informatics center (NIC).
All electronic invoices uploaded on this portal get a unique identification number called the unique invoice reference number (IRN) and a QR code to keep track of the taxation.
Once the new invoice is generated within the system, it is called an e-invoice and then returned to the original taxpayer. The invoice data is sent electronically to the GST portals to generate e-way bills and to populate GST returns.
With the implementation of electronic invoicing, there will be no need to file separate documents while filing GST, as all the pertinent invoice data is already uploaded to the network.
Who should issue e-invoices in India?
Businesses mandated to issue e-invoices for B2B transactions must meet certain turnover criteria. As of October 1, 2022, all businesses that have an annual turnover exceeding 100 million Indian rupees are mandated to use the e-invoicing system.
A business with a lower turnover than the above limit can continue using the traditional paper-based invoicing system. According to the CBIC, the government has no plans to implement e-invoicing mandates for businesses with a turnover of less than 100 million.
The CBIC is scheduled to reassess the situation in the last quarter of 2023 and suggest changes, if required, to the GST council.
Who does not need to comply with the e-invoice mandate?
Certain registered businesses are exempt from the e-invoice mandate, irrespective of their turnover. Examples of such business entities include:
- An insurance agency, bank, or other non-banking financial companies
- A goods transport agency
- A registered person providing passenger travel services
- A special economic zone (SEZ) unit
- A government department or a local agency
How does automated invoice reporting work in India?
The e-invoice system requires you to generate invoices in a prescribed format using enterprise resource planning (ERP) or business management software.
Once the invoice is generated, it must be uploaded to the IRP for validation and authentication to generate a QR code and an IRN.
The process of getting an e-invoice involves the following steps:
Step 1: Generation of the e-invoice
You can generate an e-invoice in JASON format using software solutions or business management software. As a taxpayer, you must ensure that the ERP system is per the PEPPOL standards.
Apart from this, you have two options for IRN generation:
- You can get your IP address of the computer system filing the e-invoice on the portal for a direct API integration via a GST Suvidha Provider (GSP)
- You can also download the offline tool provided on the GST website
The taxpayer must ensure that all pertinent information, like names, addresses, transaction value, item rate, applicable GST rates, etc., are correct.
Step 2: Login and upload
Once you have generated the e-invoice in the appropriate format, the next step is to log into the GST portal and upload the e-invoice to the invoice registration portal (IRP).
You can automate this process if the software used to generate the e-invoice is integrated with the IRP via the GST Suvidha Provider.
Step 3: Validation and generation of IRN
Once you upload the e-invoice in the proper format to the system, the IRP portal validates it. Upon successful validation, each invoice will be assigned a unique number and a QR code.
There are four parameters on which a unique invoice reference number (IRN) code is generated:
- The seller’s GST number
- The invoice number
- The financial year (YYYY-YY format)
- Document type (IDV/DN/CN)
Step 4: Download the documents
In the next step, you can download or receive the digitally signed invoice file, the IRN, and the QR code for your uploaded invoices. You can either get these documents in your registered email or print them off from the portal.
The IRP will automatically send the authenticated e-invoice to the GST website for tax filing. For easy filing, the GST return form number 1 is automatically populated for the relevant tax period.
Start stress-free e-invoicing today
With the latest implementation of the e-invoice mandate, India has joined several countries that have vowed to make tax systems transparent and easy. With the right tools, you can ensure that the e-invoicing process is correct and up to the code.
If you are a business operating in India, you must have a reliable method to generate e-invoices that comply with tax regulations to avoid penalties.
The transition to e-invoicing can become easy with a service like Storecove that provides complete support to your business for sending and receiving electronic invoices.
You can schedule a demo with one of our e-invoicing experts to learn more about our e-invoicing solution and how it can help you in Indian markets.
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