The Central Board of Direct taxes and Customs (CBIC) has made the e-invoicing system mandatory for taxpayers with a turnover higher than Rs.50 crore from 1st April 2021.
Who should comply with e-Invoicing and Roadmap Notified?
The government-mandated e-invoicing to avoid GST tax evasion. The first Committee was set up in May 2019 to discuss the usability of e-invoicing and its implementation plan in India, considering global implementations. Since then, several drafts were issued, and finally, the e-invoice schema was introduced in January 2020. E-invoicing was supposed to be mandatory from 1st April 2020 but was later pushed by the GST Council, and finally, it became live from 1st October 2020 in a phased manner.
In the first phase, companies with turnover higher than Rs.500 crore had to issue e-invoices from 1st October 2020. In the second phase, companies with turnover greater than Rs.100 crore had to issue e-invoices from 1st January 2021. In the third phase, companies with turnover higher than Rs.50 crore must issue e-invoices from 1st April 2021.
How will e-invoicing impact or change business processes?
Businesses will now have to get their systems integrated with the government’s invoice registration portal for a seamless generation of Invoice Reference Number (IRN) for every B2B invoice. They will also have to make changes in their accounting software to comply with the e-invoice schema. Generating e-invoices will impact the business processes as follows-
- The business will now have to identify transactions to which e-invoicing may apply and segregate them accordingly for compliance.
- Businesses will have to maintain a vendor and customer master to incorporate additional information for invoices like bank details and payee details.
- Businesses will have to make changes in the GST return preparation process since the B2B supplies can be auto-populated in the returns, and B2C supplies are manually updated.
- Businesses will have to decide whether they want to comply with e-invoicing via API integration, offline utilities like GePP, or integrate via GSP (GST Suvidha Provider).
- The biggest challenge that the businesses will face is to engage themselves in the continuous generation and capturing of IRNs. Big retailers generate thousands of B2B invoices in a day. They cannot make the customers wait till the time e-invoice is generated. Such businesses need to utilise the services of GSP for smooth implementation.
What happens if an e-invoice is not generated?
Non-generation of e-invoice is an offence and attracts penal provisions. It attracts heavy penal provisions of up to Rs.10,000 per invoice. Further, incorrect invoicing can lead to a penalty of Rs.25,000 per invoice.
Other than penal provisions, if a taxpayer delays in generation of e-invoice-
- His GST returns will not get auto-populated.
- His customers will not be able to claim validated ITC.
- Customers may refuse to accept an invoice that does not comply with e-invoicing provisions.
NIC Guidelines dated 16th March 2021
NIC has issued the below guidelines for the taxpayers whose turnover exceeds Rs.50 crore:
- The specified GSTINs are enabled for e-invoicing, and their registration and login is open.
- A taxpayer can prepare to register live invoices. He may even download e-invoice bulk tools for preparing JSON and IRN generation.
- E-way bills can be generated for the taxpayers IRNs, and he can also register for e-invoice APIs.
The e-Invoice API access mechanism
There are several ways in which the taxpayer’s system can interact with the IRP for IRN generation:
- Companies have direct access to APIs- In this case, a taxpayer can generate his username and password and access API through client ID and client secret of the company that has access to the API.
- Taxpayers having access to e-way bill APIs- If the taxpayer already has access to the e-way bills API, then he can use the same credentials to access the e-invoice system.
- Through GSPs, the taxpayer can generate his username and password and tie-up with GSPs to access API using the Client ID and Client Secret of the GSPs.
- Through ERPs, the taxpayer can generate his username and password and tie-up with ERPs to access API using the Client Id and Client Secret of the ERPs.
Steps to prepare for e-invoicing implementation
E-invoice is a new concept in India. Thus, businesses will have to take certain steps for the smooth implementation of e-invoicing:
- Changes in the accounting software- Businesses will have to re-configure their ERP/accounting system to communicate with the IRP portal for IRN generation. Also, the printing infrastructure will have to be re-configured to incorporate additional fields such as QR code. Such changes will require a significant amount of investment.
- Providing educational sessions to the employees- Before e-invoicing, businesses used to generate invoices using common formats. But, e-invoicing requires organisations to follow standard formats. This format is divided into three parts-e-invoice schema, masters and e-invoice template. Thus, to familiarise the employees with the new compliances, they will have to impart training to its employees.
- Choosing the best ERP integration- The most common integrations for e-invoice generation are API based and SFTP based. An organisation may choose the integration based on its budget and specific business requirements.
- Data security- Ensuring data security is most important as the e-invoices will mostly be directly generated from the organisations ERP/accounting software. This accounting software contains vital information about its business. Also, if a taxpayer is planning to use ASP/GSP services, use two-factor authentication enabled and ISO 27001 certified.
Popular Modes available for IRN generation
- Web-based- A taxpayer can enter the invoice details through the website of IRP for IRN generation.
- API-based- Through this mode, the taxpayers accounting system can interact with IRP and generate IRN. IRN can be generated either one at a time or in bulk.
- SMS-based- This method involves entering invoice details in a specified format and sending it to the IRP through SMS for further processing.
- Mobile app-based- GSTIN has also made mobile apps available for taxpayers for e-invoicing compliances.
- Offline tool-based- The invoice details can be updated through the offline tool available on the IRP portal.
- GSP-based- Taxpayers can take services of GSP for IRN generation.
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