E-invoicing and its nuances

Authored by CA Vikas Shenoy

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Even with the pandemic still raging high, the government is steadfast with its plan of strengthening the GST ecosystem by implementing checks and averting leakages. In this regard, although the earlier proposal for implementing e-invoicing from 01 April 2020 was deferred, the same was implemented from 01 October 2020.

Simply put, e-invoicing means preparation of invoice by uploading specified particulars of invoice on the Invoice Registration Portal (‘IRP’) and obtaining an Invoice Reference Number (‘IRN’).

While initially e-invoicing was made mandatory only to such taxpayers who have had annual aggregate turnover of more than Rs 500 crores, it is now sought to be made applicable to taxpayers with annual aggregate turnover of more than Rs 100 Crores with effect from 01 January 2020. Further, it is proposed that e-invoicing be made applicable to all taxpayers with effect from 01 April 2021. As on date, e-invoicing is required for invoices, debit notes and credit notes issued in case of B2B taxable supplies (supplies by a registered person to another registered person), exports, deemed exports and supplies to SEZ.

Given the increasing applicability of e-invoicing, this article endeavours to visit certain aspects of e-invoicing from a procedural and legal standpoint.

Procedural misconceptions and clarifications

The authorities have repeatedly clarified that e-invoicing does not mean generating of invoices on the government portal. Yet, certain part of the trade as well as professionals are worried about the readiness of the common portal to generate and handle huge amount of data that would be thrown at it. It has been clarified that the IRP merely validates the invoice details and generates what is known as an IRN along with a QR code, post digitally signing the same.

At this point, it would also be pertinent to note that QR code generated in case of 
e-invoicing is different from the dynamic QR code which is mandated to be generated in case of B2C supplies. Further, it may also be noted that digital signature of the issuer of invoice is not required for sending the invoice data to the IRP.

In the process of e-invoicing, the IRP pushes the data uploaded thereon to the GST common portal and the e-way bill portal. As such, the form GSTR-1 of the issuer of e-invoice and the form GSTR-2A of the recipient is auto-filled on a real-time basis. Also, details in Part-A of the e-way bill is auto-filled.

With respect to the particulars to be given on an e-invoice, the rules mandate taxpayer to print QR code on invoices while the IRN is not separately required to be printed thereon.

Procedural concerns and safeguards

While generation of invoices can continue on the existing accounting system of the taxpayers, the billing system will have to be tweaked to conform to the e-invoicing schema. In most cases, this would be taken care of by the accounting software provider. In other cases, option has been provided for uploading the invoice data on the IRP through an excel utility.

Given the structured schema to which the invoice data has to adhere to, it would require the taxpayer to tread with caution while issuing an invoice. For instance, in case of a composite supply of supply of goods along with freight charges for transportation thereof, the tax rate that is applicable would be that of the goods, being the principal supply. As such, in the invoice, taxpayer has to provide HSN code and GST rate of the goods against the line item pertaining to freight.

Further, certain non-taxable recoveries such as TCS would have to be mentioned on the invoice. These could be reported under “other charges”, as it has been clarified that items under this category would not be invalidated for not charging tax thereon.

Recourse in case of mistakes

A small window of 24 hours has been provided for cancellation of an e-invoice. No provision has been made for amendment or partial-cancellation of e-invoices. Further, no cancellation is possible if e-way bill auto-populated through such e-invoice is active.

Given the above, taxpayers need to be very careful and have a system in place to internally check and validate invoices before passing them through the e-invoicing process. This being said, it may be noted that it has been clarified that the IRP does not store any data on it but is only a pass-through portal. Therefore, at the most, any e-invoicing wrongly done may only be brought to the notice of the jurisdictional GST authorities. Thus, even if e-invoice could not be cancelled on the IRP, such invoice details may be removed on the GST portal. In such cases, a reconciliation would have to be provided giving the reason for not disclosing the same in the GST returns.

In this regard, it is significant to note that once an e-invoice is cancelled, even within the permitted window of 24 hours, the same invoice number cannot be used again for generating rectified invoice or any other invoice.

What else the law says

It is critical to note that the rules specifically state that an invoice required to be generated electronically but not generated as such would not be treated as an invoice. This means that taxpayers should verify and confirm if the vendors from whom they are availing goods or services or both, are required to issue an e-invoice. In case they are required to issue but have not issued an e-invoice, then the taxpayer would not be able to avail input tax credit (‘ITC’) of GST paid on such inward supplies.

Additionally, it may be noted that the law does not prescribe any time period for uploading the invoice details on the IRP. However, it is noteworthy that since without e-invoicing an invoice would not be treated as an invoice under the GST law, the time limit as would be applicable for generation of an invoice (generally 30 days from the time of supply) would also be applicable to the e-invoicing procedure.

What the trade can expect

With the efforts put by the government in strengthening the system with the introduction of 
e-invoicing and the efforts put in by the taxpayers in adhering to the new system, it is hoped that the rampant increase in availing ITC based on fake invoices is curbed. Further, one may also wish that this would facilitate reconciliation of invoice details in the supply chain and enable availing of ITC without having to verify suppliers’ compliance.

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This article was published in December 2020 issue of the KCCI Journal