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e-Invoicing Impact: Specific business cases and sectoral implications

Updated on:  

08 min read

E-invoicing is being implemented in India in a phased manner. As per the current update, it is applicable to all businesses with turnover greater than Rs. 50 crore from 1st April 2021 in any of the financial years from FY 2017-2018 onwards.

Latest Updates on e-Invoicing

1st June 2021
CBIC has notified vide Central Tax Notification no.23 dated 1st June 2021 that the e-invoicing system shall not apply to a government department and local authority.

8th March 2021
The CBIC has notified that e-Invoicing will be applicable from 1st April 2021 for businesses with an aggregate turnover of more than Rs.50 crores (in any financial year from FY 2017-18 onwards).

29th November 2020
The CBIC issued a notification seeking to waive the penalty imposed on non-compliance of dynamic QR code provisions for B2C invoices between 1st December 2020 and 31st March 2021, provided the eligible registered person complies with these provisions from 1st April 2021.

10th November 2020
The taxpayers having an aggregate turnover exceeding Rs.100 crore should implement e-invoicing from 1st January 2021.

1st October 2020
The applicable taxpayers have been given a grace period of 30 days for generating an Invoice Reference Number (IRN). However, this grace period is valid for the invoices issued between 1st October 2020 to 31st October 2020.

30th September 2020
Now, the aggregate turnover should be checked from FY 2017-18 till FY 2019-20, for checking the applicability of e-invoicing. Also, the date of implementation of the dynamic QR Code for B2C invoices has been extended until 1st December 2020.

30th July 2020
1. A new refined format of e-invoice has been notified by CBIC adding 20 new fields and removing 13 fields. Certain fields have undergone changes in character length as well.
2. e-Invoicing system shall apply to those taxpayers with an annual turnover exceeding Rs 500 crore instead of Rs 100 crore.
3. Special Economic Zones (SEZ) units shall also be exempted from issuing e-invoices.

23rd March 2020
The implementation of e-invoicing and the QR code has been deferred to 1st October 2020.
Exemption from e-Invoicing and QR code has been granted to sectors such as insurance, banking, financial institutions, NBFCs, GTA, passenger transportation service and movie tickets.

Handling e-invoicing validation issues for specific cases

The e-invoicing schema V1.1 was notified via Notification 60/2020. In this schema, there are a total of 132 fields, out of which 28 are mandatory, and 18 are conditional mandatory. When a taxpayer sends the data for IRN generation, a lot of validations occur. There are certain business scenarios where the validations fail. Let us see how to deal with such cases:

(1) TCS on sales- Finance Act 2020 has brought the transaction of sale of goods under the purview of TCS. TCS was already applicable on the sale of a motor car, scrap, services etc. But, in the e-invoice schema, there is no specific field for mentioning TCS. Now the question arises as to where should the TCS amount be reported as the taxpayers have already started deducting TCS and reporting the same in the invoice value.

As per the FAQs provided by NIC, the value of TCS can be reported as other charges and the ‘invoice remark field’ can be updated with the remark ‘TCS is included in other charges’.

(2) Freight, insurance and other charges which are taxable- As per the schema, at the HSN level, there are fields such as gross amount, discount, taxable value, tax amount and other charges. The other charges field is for charges which are at item level but are not taxable. But, there are certain charges like freight and insurance which are taxable. However, as per the built-in validations, the taxable value is derived by reducing the discount amount from the gross amount.

As per the FAQs provided by NIC, in such cases, instead of adding freight and insurance in the taxable value of that particular line item, it should be added as other charges under a separate line item.

(3) Reverse charge and export with payment- In the case of reverse charge transactions, the recipient pays the tax to the Government instead of the supplier. But, the supplier is still required to show the tax amount and the tax rate in the invoice. Also, at the time of sending data for IRN generation, such details are required to be provided by the supplier.

Similarly, in the case of exports, the supplier pays the tax first and then claims a refund. The supplier may or may not want to include the tax amount in the Invoice amount. 

An item value validation earlier used to mandate the inclusion of a tax amount but NIC made changes in this validation rule. Now, if the taxpayer selects reverse charge as ‘Y’ or if the supply type is selected as ‘Export with payment’, then the total value of the Item can match either with tax values or without tax values. That is, the total value of an item can include or exclude the tax values as per the business requirements.

Sectoral implications due to e-invoicing

  1. Pharma, FMCG and Retail: E-invoicing had the following implications:
    • The taxpayer has to keep real-time tracking of taxable and exempt supplies for e-invoice generation.
    • The taxpayer has to keep a continuous track of Invoice Reference Number and e-way bill generation.
    • In case of making a sale to an e-commerce player directly via a website, it has to generate an Invoice Reference Number on a real time basis.
  2. E-commerce industry: 
    • The taxpayer has to enable real-time generation of e-invoices in case of B2B supplies.
    • The taxpayer has to enable real-time generation of invoices on behalf of vendors in the case of B2B supplies.
    • It has to prepare a reconciliation of the Invoice Registration Portal and GST Portal for all its B2B e-invoices.
    • It has to maintain a robust system that can handle multiple cancellations within 24 hours and post that.
  3. Oil and gas: 
    • The taxpayer has to keep a proper track of taxable and exempt supplies for the purpose of e-invoice generation.
    • Prepare a reconciliation of the Invoice Reference Number and GSTR-1.
  4. Hospitality:
    • The taxpayer has to keep a proper track of taxable and exempt supplies for the purpose of e-invoice generation.
    • Prepare a reconciliation of the Invoice Reference Number and GSTR-1.
    • It has to enable real-time generation of Invoice Reference Number in case of B2B transaction.
    • Maintain a robust system to handle multiple cancellations.
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