e-Invoicing is an initiative to enhance the ease of doing business. It involves reporting GST document details to the official portal and obtaining a reference number, eliminating the laborious work of compiling invoices when filling them. This article will explore everything you need to know about e-invoicing.
What is e-Invoicing?
e-Invoicing is a system in which B2B invoices are verified electronically on the Invoice Registration Portal or IRP. After verifying or authenticating it, the IRP generates the invoice reference number (IRN), QR code, and digital signature. Data from the GST e-invoice page is auto-populated to both the GST portal and e-way bill system.
e-invoicing applies to B2B and export invoices; the government has exempted industries like banking, insurance, financial institutions, non-bank financial corporations (NBFC), insurance, passenger transport services, movie theatres, and SEZ units.
e-Invoicing Journey in India
During the 35th GST Council meeting on 21st June 2019, a proposal for e-invoicing under the GST was made. As a result, on 1st October 2020, a voluntary GST-phased approach was put into place for the online creation of B2B GST e-invoices by registered individuals with an annual aggregate turnover exceeding Rs.
500 Cr. 1st January 2021 saw a reduction in this e-invoicing turnover limit to Rs.
100 Cr. This cap was lowered to Rs. 50 Cr in April 2021, then to Rs.
20 Cr, Rs. 10 Cr, and so on. As per the latest notification, the turnover limit for e-invoicing is Rs.5 Cr.
The aim is to eventually enforce e-invoicing for all transactions and businesses to prevent tax evasion and foster interoperability between the business and tax ecosystems.
How does e-invoicing benefit the Government as well as Taxpayers?
e-Invoicing aims to achieve interoperability between the tax and business ecosystems and standardise the invoice format. e-Invoicing has many advantages over traditional methods. Input tax credit (ITC) fraud and fraudulent invoices are reduced when the government can track every B2B transaction companies do in real-time. A QR code is printed on every electronic invoice to aid tax officers in verifying its legitimacy, mainly when items are transported. There are many advantages for businesses as well.
The GST reports, and e-way bills automatically include the information from e-invoices.
As a result, the entire data duplication exercise is reduced. In addition, it guarantees taxpayers that only legitimate ITC is being submitted and expedites the ITC claims procedure.
Consequences of not generating e-invoices
Newly added companies will face penalties if they fail to generate e-invoices by the deadline. Non-generation of e-invoices may lead to a penalty of Rs.10,000 for non-generated each invoice. Furthermore, failing to obtain an IRN is considered an incomplete invoice, which leads to a penalty of Rs. 25000 for each inaccurate invoice.
Small businesses experience the following effects: Buyers cannot claim qualifying Input Tax Credit (ITC), Delays can occur and payment “particularly the GST portion” is delayed.
GSTR-1 may auto-populate all the B2B sales information. Non-compliance of the invoices with e-invoicing system can be rejected by buyers which can compromise the validity of business contracts and harm their working capital.
Summing up, implementing the e-invoicing system has simplified the GST process. Using e-invoices helps businesses to comply with all the e-invoicing rules and regulations that prevent tax fraud.
