E-invoicing is the process of digitally issuing, storing, processing, transmitting and authenticating invoices; the entire life cycle of the invoice is managed digitally. Under the GST law, registered persons with turnover above 50 crores are required to prepare invoices with an IRN generated on the Invoice Registration Portal. IRN is a unique number issued to an invoice by the Government to identify a valid e-invoice. In short, under GST law e-invoicing is the process of authenticating business to business invoice data, electronically on the GST portal. Upon authentication, IRN is issued for the invoice.
The Central Board of Indirect Taxes and Customs (CBIC) introduced e-invoicing through the Central Goods and Services Tax (Eighth Amendment) Rules, 2019 by inserting sub-rules (4), (5) and (6) under rule 48 of the Central Goods and Services Tax Rules, 2017(CGST) as follows:
Initially, all registered persons with B2B supplies and with turnover above 100 crores in any financial year were required to prepare invoice by furnishing details as per the standard format, e-schema or “FORM GST INV-1” and obtaining IRN by uploading such information on the notified Electronic Portals or Invoice Registration Portal (IRP). Any invoice prepared without IRN would be considered as invalid and the registered person will not be eligible to claim input tax credit. On 8th March, 2021, vide notification no. 05/2021-Central Tax, CBIC reduced the turnover limit for issuing e-invoices to 50 crores, hence all registered persons with turnover above 50 crores are required to issue e-invoices from 1st April, 2021. Every e-invoice must be prepared in compliance with the GST provisions. Certain registered persons are exempted from this requirement such as:
Under the e-invoicing process, the registered person generates invoices on their internal systems and then reports them online to the Invoice Registration Portal with all the necessary details like, billing name and address, GSTN of the supplier, transaction value, etc. in the standard format e-schema. The IRP will then, generate the Hash.
Hash function is a mathematical function which assigns specific values called a hash to digital files. The hash generated by IRP is the IRN of the e-invoice. Each e-invoice has a unique IRN and will be checked from the central registry of the GST system. On confirmation received from the Central Registry, IRP will authenticate the data and add its signature on the Invoice data and the IRN will be generated by the IRP. The signed e-invoice data along within IRN will be shared with the GST system as well as to E-Way Bill System.
A registered person having turnover above Rs. 50 crores have to issue e-invoices from 1st April, 2021. The process of e-invoicing will do away with fake invoicing, tax evasions, duplication, resolve data reconciliation and mismatch errors, speed up input tax credit process, reduce cost, human errors and save time and paper. Since this system is also connected with E-Way Bill System, it will make life easy for people engaged in logistics/transportation mechanism.