Changes in GST E-Invoice Rules from April 1, 2022: What Businesses Should Note

Posted by Written by Naina Bhardwaj Reading Time: 8 minutes

The Indian government has reduced the threshold for mandatory issuance of e-invoice for businesses from INR 500 million to INR 200 million annual turnover. This step is expected to affect smaller businesses, who will now have to mandatorily issue electronic invoices. Below we discuss the change in policy as well as the process of generating e-invoices. 

India’s nodal body for administering indirect taxes – CBIC (Central Board of Indirect Taxes and Customs) – has reduced the turnover limit for mandatory issuance of e-invoice (electronic invoice) under the goods and services Tax (GST) to INR 200 million (US$2.64 million) from the earlier prescribed limit of INR 500 million (US$6.6 million). On failure to produce a valid invoice, the input tax credit (ITC) on the same cannot be availed by the recipient, besides attracting penalties.

The change, effective from April 1, 2022, suggests a substantial increase in reporting requirements among business entities. With this move, the government intends to enable small businesses to embrace technology and plug leakages around tax compliance, including tax evasion among small businesses. These small businesses who usually issue informal sale invoices or “kacha bills” will have to mandatorily issue e-invoices. Consequently, they will find it difficult to under report their sales as the business-to-business transactions of these entities will be captured at the e-invoicing portal.

To prevent confusion regarding key GST compliances and reporting, businesses are welcome to reach out to our tax advisors at india@dezshira.com.

How is e-invoicing implemented under GST?

With the objective of enhanced interoperability and uniform interpretation across the entire GST ecosystem, e-invoicing has been implemented in a phased manner in India, since October 1, 2020.

E-invoicing under GST necessitates the registration of all invoices with the government on the Invoice Registration Portal (IRP). Once the supplier has uploaded the specified particulars on the IRP, a unique Invoice Reference Number (IRN) and Quick Reference (QR) code is generated.

It must be noted that only a registered e-invoice with IRN is considered to be valid and non-adherence will result in non-compliance.

Who is liable to issue an e-invoice?

With effect from April 1, 2022, the fourth phase of e-invoice implementation is set to begin wherein all the businesses with an annual turnover of INR 200 million or above in the previous financial year are liable to issue e-invoice.

Annual turnover in the previous financial year

Date of implementation of e-invoice

INR 200 million and above

April 1, 2022

Are there any exemptions for e-invoicing under GST?

E-invoicing shall not be applicable to the following categories of GST registered persons irrespective of the turnover:

  • Insurer or a banking company or a financial institution, including an NBFC
  • Registered person supplying passenger transportation services
  • Goods Transport Agency (GTA)
  • Registered person supplying services by way of admission to the exhibition of cinematographic films in multiplex services
  • SEZ unit (excluded via CBIC Notification No. 61/2020 – Central Tax)

How does the e-invoice generation process work?

E-invoicing requires the user to generate the invoice data in the prescribed format, which is JavaScript Object Notation (JSON), either using the enterprise resource planning (ERP)/business management software or offline tool provided by the portal. Following this, the e-invoice is to be uploaded to the IRP, which further validates and authenticates the invoice data with the IRN and QR code.

The process to generate e-invoice is mentioned below:

Registration on the e-invoice system

Visit the IRP portal

  • If a taxpayer is registered on the e-way bill portal: In this case, a taxpayer can use the same login credentials to login onto the e-invoice portal.
  • If a taxpayer is not registered on the e-way bill portal: In this case, the taxpayer should have a GSTIN and mobile number registered with the GST system. Once they enter the URL of the e-invoice system, the registration will appear.

Registration

A first-time GSTIN can register by clicking on the e-invoice registration tab, which will open the e-invoice registration form. Once the form is filled, the taxpayer must verify the form with a one-time password (OTP), which will be sent to the registered mobile number.

Application Programming Interfaces (APIs) facilitate the communication and exchange of data between taxpayers or GST Suvidha Providers (GSPs) and the e-invoice system. In case e-way bill API access is not available, the taxpayer will have first to register themselves on the e-invoice portal. API can be accessed in the following ways:

  • Direct API access: A taxpayer with a turnover higher than INR 200 million can use direct API to connect with IRP. For this direct API integration, a taxpayer needs to test the API integration in a sandbox environment (https://einv-apisandbox.nic.in/) and then send the test summary report support.einv.api@gov.in. After verification, the taxpayer will be provided API production details.
  • API access through GSP: This is the fastest way to connect with IRP as it provides scalability along with real-time support. An enterprise can work with massive volumes as the GSP ensures stable connection with fast performance.

Creation of the invoice on the taxpayer’s ERP

The taxpayer will continue to generate invoices in the normal course of business. However, the reporting of these invoices electronically has criteria. It needs to be done as per the e-invoice schema along with mandatory parameters. The mandatory fields of an invoice for the supply of goods are listed below:

Mandatory Fields of an Invoice for the Supply of Goods

Sl. no.

Name of the field

List of choices/ Specifications/sample inputs

Remarks

1

Document Type Code

Enumerated List such as INV/CRN/DBN

Type of document must be specified

2

Supplier Legal Name

String Max length: 100 

Legal name of the supplier must be as per the PAN card

3

Supplier GSTIN

Max length: 15  Must be alphanumeric 

GSTIN of the supplier raising the e-invoice

4

Supplier Address

Max length: 100 

Building/Flat no., Road/Street, Locality, etc. of the supplier raising the e-invoice

5

Supplier Place

Max length: 50 

Supplier’s location such as city/town/village must be mentioned

6

Supplier State Code

Enumerated list of states

The state must be selected from the latest list given by GSTN

7

Supplier Pin code

Six-digit code

The place (locality/district/state) of the supplier’s locality

8

Document Number

Max length: 16 Sample can be “ Sa/1/2019”

For unique identification of the invoice, a sequential number is required within the business context, time-frame, operating systems and records of the supplier. No identification scheme is to be used

9

Preceding Invoice Reference and date

Max length:16 Sample input is  “ Sa/1/2019” and “16/11/2020”

Detail of original invoice which is being amended by a subsequent document such as a debit and credit note. It is required to keep future expansion of e-versions of credit notes, debit notes and other documents required under GST

10

Document Date

String (DD/MM/YYYY) as per the technical field specification

The date when the invoice was issued. However, the format under explanatory notes refers to ‘YYYY-MM-DD’. Further clarity will be required. Document period start and end date must also be specified if selected.

11

Recipient  Legal Name

Max length: 100

The name of the buyer as per the PAN

12

Recipient’s GSTIN

Max length: 15

The GSTIN of the buyer to be declared here

13

Recipient’s Address

Max length: 100

Building/Flat no., Road/Street, Locality, etc. of the supplier raising the e-invoice

14

Recipient’s State Code

Enumerated list

The place of supply state code to be selected here

15

Place of Supply State Code

Enumerated list of states

The state must be selected from the latest list given by GSTN

16

Pin code

Six-digit code

The place (locality/district/state) of the buyer on whom the invoice is raised/ billed to must be declared here if any

17

Recipient Place

Max length: 100

Recipient’s location (City/Town/Village)

18

Invoice Reference Number (IRN)

Max length: 64 

Example: ‘a5c12dca8 0e7433217…ba4013 750f2046f229’

At the time of registration request, this field is left empty by the supplier. Later on, a unique number will be generated by GSTN after uploading of the e-invoice on the GSTN portal. An acknowledgement will be sent back to the supplier after the successful acceptance of the e-invoice by the portal. IRN should then be displayed on e-invoice before use.

19

Shipping to GSTIN

Max length: 15

GSTIN of the buyer himself or the person to whom the particular item is being delivered to

20

Shipping to State, Pin code and State code

Max length: 100 for state, six-digit pin code and enumerated list for code

State pertaining to the place to which the goods and services invoiced were or are delivered

21

Dispatch From_ Name, Address, Place and Pin code

Max length: 100 each and six digits for pin code

Entity’s details (name, and city/town/village) from where goods are dispatched

22

Is Service

String (Length: 1) by selecting Y/N

Whether or not supply of service must be mentioned

23

Supply Type Code

Enumerated list of codes Sample values can be either of B2B/B2C/ SEZWP/S EZWOP/E XP WP/EXP WOP/DE XP

Code will be used to identify type of supply such as business to business, business to consumer, supply to SEZ/Exports with or without payment, and deemed export.

24

Item Description

Max length: 300 The sample value is ‘Mobile’ The schema document refers to this as the ‘identification scheme identifier of the Item classification identifier’

It means the relevant description generally used for the item in the trade. However, more clarity is needed on how it needs to be described for every two or more items belonging to the same HSN code 

25

HSN Code

Max length: 8

The applicable HSN code for particular goods/service must be entered

26

Item Price

Decimal (12,3) Sample value is ‘50’

The unit price, exclusive of GST, before subtracting item price discount, cannot be negative

27

Assessable Value

Decimal (13,2) Sample value is ‘5000’

The price of an item, exclusive of GST, after subtracting item price discount. Hence, gross price minus discount equals the net price item, if any cash discount is provided at the time of sale

28

GST Rate

Decimal (3,2) Sample value is ‘5’

The GST rate represented as a percentage that is applicable to the item being invoiced

29

IGST Value, CGST Value and SGST Value Separately

Decimal (11,2) Sample value is ‘650.00’

For each individual item, IGST, CGST and SGST amounts have to be specified

30

Total Invoice Value

Decimal (11,2)

The total amount of the Invoice with GST. Must be rounded to a maximum of 2 decimals

The seller has to ensure that their accounting or billing software is capable of generating a JSON file of the final invoice. The seller can create a JSON file following the e-invoice and mandatory parameters through following modes:

  • An accounting and billing system that offers this service
  • A utility to interact with the accounting/billing system, or ERP, such as an excel/word document or a mobile app
  • An offline tool to generate e-invoices by keying-in invoice data

Uploading of JSON

The invoice JSON for every business-to-business invoice generated using accounting software or any other utilities are uploaded to the IRP system. If the ERP software is integrated with IRP via GSP, the upload of the JSON file will be automated, meaning the system sends the required details directly to the IRP portal. 

Verification of e-invoice JSON

In this step, the IRP system validates the e-invoice JSON and checks the central registry of GST for any duplication.

Generation of IRN

After successful validation of e-invoice JSON, the IRP system will generate IRN. Additionally, the e-invoice JSON will be updated with a digital signature along with a QR code.

The QR code will consist of the following parameters:

  • GSTIN of supplier
  • GSTIN of recipient
  • Invoice number as given by supplier
  • Date of generation of the invoice
  • Invoice value (taxable value and gross tax amount)
  • Number of line items
  • HSN code of the main items (the line item having the highest taxable values)
  • The unique IRN (hash)

Receipt of a digitally signed e-invoice JSON

In this step, the digitally signed e-invoice  JSON along with QR code is sent to the supplier. The IRN and QR code will be printed on the invoice before issuing it to the buyer. In case the ERP and IRP are integrated via GSP, the software will automatically fetch and print such details.

Transfer of data to e-way bill system and GST system

Once the invoice JSON data is uploaded, it will be shared with the e- way bill and GST system, for preparing e – waybills and for auto-population of GST return.

  • Part-A of e-way will be auto-populated with e-invoice data
  • GSTR-1 of the supplier will be auto-populated as per the e-invoice details uploaded into IRP portal 
  • GSTR-2A will be updated, giving a real-time view to the buyer

E-Invoice

What are the advantages of e-invoicing?

  • Backward integration and automation of the tax return filing process: The relevant details of the invoices are auto-populated in the various returns.
  • Lower costs and faster returns on investment: With the conversion to e-Invoicing, 60 to 80 percent of the process costs per invoice are eliminated.
  • More efficient processes and higher compliance: E-invoicing ensures more efficient and transparent processes, thereby facilitating better compliances.
  • Added security: Exchange of all invoices through encrypted transmission procedures ensures better safety.
  • Reduced errors: E-invoice helps in plugging the major gap in data reconciliation under GST to reduce mismatch errors.
  • Better cash flow: Immediate delivery of invoices cuts the time lag in payment and thus improves cash flow
  • Greater transparency: Automated processing of incoming invoices with workflow-based approval processes ensures greater transparency.

About Us

India Briefing is produced by Dezan Shira & Associates. The firm assists foreign investors throughout Asia from offices across the world, including in Delhi and Mumbai. Readers may write to india@dezshira.com for more support on doing business in in India.

We also maintain offices or have alliance partners assisting foreign investors in Indonesia, Singapore, Vietnam, Philippines, Malaysia, Thailand, Italy, Germany, and the United States, in addition to practices in Bangladesh and Russia.

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