Update as of 11th October 2022
The GST Council may implement the next phase of e-invoicing for businesses with an annual turnover of more than Rs.5 crore from 1st January 2023. The system may get extended to businesses with a turnover of over Rs.1 crore by the end of the next fiscal year.
|Annual Turnover||Date of mandatory implementation of e-invoice|
|Exceeding 500 crore||1st October 2020|
|Exceeding 100 crore||1st January 2021|
|Exceeding 50 crore||1st April 2021|
|Exceeding 20 crore||1st April 2022|
|Exceeding 10 crore||1st October 2022|
|Exceeding 5 crore||1st January 2023 (Tentative)|
|Exceeding 1 crore||The fiscal year 2022-23|
What is an E-Invoice?
An e-invoice, or electronic invoice, is a digital accounting document that is exchanged between a seller and buyer and is validated by the government tax portal. It is not just for invoices but also for debit and credit notes.
To put it simply, it’s your normal invoice/debit note/credit note authenticated by the Goods and Services Tax Network (GSTN).
Why is the government making it mandatory for more and more businesses to use e-invoicing?
Firstly, let’s see what used to happen before e-invoicing was introduced, to understand why the government is pushing it.
Businesses have been using hundreds of different accounting software to generate invoices, and each software has its own unique format. This makes it hard for the GST system to read all this data even though the information in the invoice remains the same across formats.
Due to the lack of a standard format,
- It was really hard for the central system to read all these documents.
- Businesses had to re-submit the same documents manually in different formats to different entities like GST Portal and e-Way Bill, which was inefficient.
- A lot of discrepancies arose during manual data entry and reconciliation.
- There was no interoperability between different systems.
Also, as businesses had considerable time between generating an invoice and filing it to GSTN, they could potentially make changes to the invoices and engage in fraudulent activities.
E-invoicing ensures that a common, standard format is followed by all businesses while reporting invoices to the GST portal. Not only does the standard format make compliance easier, but because it’s followed across industries, interoperability between GST ecosystems is ensured.
Also, once an IRN is generated and the invoice has been authenticated, all the invoice-related information is then transferred to both the GST portal and e-way bill portal in real time. This eliminates the need for entering the data manually for Part-A of the e-way bills and during return filing as invoice data will be pre-populated in GSTR-1 of the supplier and GSTR-2A of the recipient.
It will also help in curbing tax evasion. With an e-invoice, the chances of editing invoices will be low because before any transaction is done, the invoice gets generated. Another thing is that it ensures the authorities have information about all the transactions in real-time. The system can identify fake invoices by matching the input tax credit to the output tax on the GSTN portal, preventing tax crimes.
How does an e-invoice get generated?
There are two parts to generating an e-invoice:
- Preparing the Invoice itself, and
- It’s Electronic Authentication
Firstly, e-invoicing doesn’t mean generating an Invoice. It just means that you have to submit an already generated invoice on a common e-invoice portal by following a standard format notified by GSTN.
So, what happens after you submit an invoice on the e-invoice portal? How does it get authenticated by the portal?
The digital invoice generated by accounting software gets transmitted on the IRP (Invoice Registration Portal), the e-invoicing portal.
Then the portal examines your invoice and tries to identify if the submitted information is valid or not. Once the invoice gets validated, the portal will create an IRN (an Invoice Reference Number that is unique to each invoice) and a QR code, and send this data back to your accounting software. The seller needs to print the QR code and IRN number on the invoice before issuing it to the buyer.
So basically, the government is digitally signing the invoice with an IRN and a QR code to convey that your invoice is authenticated.
Which software should you use for generating e-invoices?
E-invoicing is going to be a critical part of your day-to-day business. So, it’s important that the software you choose is easy to use and reliable, as choosing the wrong software can cause you a lot of headaches in your daily operations, and no one wants that.
Refrens has been a trusted partner to over 140K businesses in over 178 countries for their invoicing needs, and there’s a reason why so many businesses rely on us to run their business efficiently. With Refrens, creating e-invoices is as easy as it can get, and even if you are just starting out, our support team will be always there to help you out.