How to Meet India’s E-Invoicing Requirements (Easy Checklist)

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 conducted using e-invoicing.

The mandate applies to businesses with an annual turnover exceeding 100 million Indian rupees (roughly $1.22 million).

Like 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 e-invoicing.

This article will include the most important aspects of e-invoicing in India and how the automated reporting system works.

Is electronic invoicing mandatory in India?

Electronic invoicing in India became mandatory on 1 October 2022, requiring businesses with an annual turnover of over INR 10 crore to issue electronic documents, including invoices and credit and debit notes.

The mandate was extended to businesses with a yearly turnover of over INR 5 crore ($610,000).

E-invoicing deadlines in India

The 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 with an annual turnover exceeding 5 billion Indian rupees.

The plan was to gradually implement the system for all business-to-business( B2B) and export transactions. To this end, the e-invoicing mandate has gradually expanded yearly since its initial announcement in 2020 to include smaller businesses.

In the latest implementation (fifth phase) of the system, the Indian government announced that starting from October 1, 2022, all B2B transactions must be conducted electronically.

Businesses that fail to comply with the regulations after October 1, 2022, will be penalized.

Automating electronic invoice generation with an ERP can help businesses avoid such hefty penalties.

E-invoicing under GST in India

E-invoicing in India is regulated by the Goods and Services Tax (GST) law. According to this law, businesses registered under the GST system must use e-invoices for all B2B transactions.

Under the system, export invoices, B2B e-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 GST invoices 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, you can generate and upload invoice details using various software tools that create electronic invoices compatible with the GST site.

What are the characteristics of e-invoicing in India

E-invoicing in India is built on key features that streamline compliance and enhance business efficiency when operating under the GST framework. Its characteristics ensure accuracy and efficiency while meeting GST requirements. Here are the features:

Format

In India, the e-invoicing format is based on a JSON (JavaScript Object Notation) file, which means businesses must submit their invoice details to the government portal in this format to generate an electronically signed invoice with a unique Invoice Reference Number (IRN)

Mandatory for issuing

India's e-invoicing system has been implemented in phases, gradually lowering the turnover threshold for mandatory compliance.

The first phase began on 1 January 2021 and affected businesses with an annual turnover exceeding ₹100 crore (~$12.2 million). It helped ensure large businesses adopt the system first and set an example for smaller enterprises.

The most recent phase affected companies with an annual turnover exceeding ₹5 crore (~$610,000). It marked the inclusion of small businesses, making the system comprehensive for B2B transactions.

The phased approach allowed businesses to gradually adapt to the new system, avoiding disruption and ensuring readiness. Each phase expanded the scope of e-invoicing to include more businesses, enabling the government to:

Mandatory for receiving

There are no explicit requirements for receiving e-invoices in India. However, you should be able to process and generate compliant electronic documents.

Electronic signature

Every electronic invoice issued to the invoice registration portal (IRP) must have an electronic signature. This helps ensure authenticity and track the document’s status.

Archiving

In India, the minimum archiving period for an electronic invoice after a transaction is 72 months (6 years).

You may also like: What Are the E-Invoice Requirements in India.

Who controls e-invoicing in India?

The Indian e-invoicing system is controlled by the GST council, which is under the jurisdiction of the Central Board of Indirect Taxes & Customs (CBIC), the Indian tax authority, and the Government of India.

The GST network (GSTN) manages the e-invoices through an invoice registration portal designed and maintained by the National Informatics Center (NIC).

All electronic invoices uploaded to this portal get a unique identification number called the unique invoice reference number (IRN) and a QR code to keep track of taxation.

Once the new invoice is generated within the system, it is called an e-invoice and 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 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 specific turnover criteria. As of 1 August 2023, all businesses with an annual turnover exceeding ₹5 crore (~$610,000) must 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 ₹5 crore (~$610,000).

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

What is the penalty for not complying with the e-invoicing mandate in India?

Failure to comply with India's e-invoicing mandate can lead to severe penalties, including a fine of either 100% of the tax due or ₹10,000 per instance of non-compliance, whichever is greater.

In addition, issuing an incorrect e-invoice may incur a penalty of ₹25,000 per invoice.

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 JSON format using software solutions or business management software. As a taxpayer, you must ensure that the ERP system meets 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, such as names, addresses, transaction value, item rate, applicable GST rates, etc., is correct.

Once you have generated the e-invoice in the appropriate format, you should log into the GST portal and upload it 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 to the system in the proper format, the IRP portal will validate 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 get these documents in your registered email or print them from the portal.

The IRP will automatically send the authenticated e-invoice to the GST website for tax filing. The GST return form number 1 is automatically populated for the relevant tax period for easy filing.

Best practices for complying with India’s e-invoicing requirements

Business owners in India can gravitate towards electronic invoicing by implementing the following practices:

Understand compliance requirements

Ensure you know the turnover thresholds, mandatory document formats, and applicable deadlines. Stay updated with regulatory changes and confirm whether your business is subject to exemptions, such as Special Economic Zone (SEZ) units or passenger transport services.

Leverage reliable ERP systems

Use enterprise resource planning (ERP) or invoicing software that is compliant with the government-mandated JSON format. Integrate your system with the Invoice Registration Portal (IRP) via APIs to streamline the generation, validation, and storage of e-invoices while minimizing manual errors.

Partner with a reliable e-invoicing provider

Collaborate with a trusted e-invoicing provider like Storecove to simplify compliance. Such providers offer ready-to-use solutions for generating, validating, and archiving invoices.

Train your staff

Equip your accounting and e-invoicing teams with the knowledge and skills to handle the new processes efficiently. The training should cover generating invoices, uploading them to the IRP, understanding IRN and QR codes, and addressing validation errors.

Takeaway: Simplify electronic invoicing compliance in India with Storecove

With the latest implementation of the e-invoice mandate, India has joined several countries that vowed to make tax systems transparent and easy. Using the right tools, you can ensure that the e-invoicing process is correct and up to the code.

A business operating in India 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.

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