Implementation of e-invoicing system for B2B supplies from October 2020

The GST Council has decided to implement a system of e-invoicing for Business to Business (B2B) taxable supplies of goods and services in India from 1 October 2020. The new e-invoicing system shall be applicable to specified categories of registered persons whose aggregate turnover in the preceding financial year exceeds INR 5000 million (approximately EUR 56 million). The Indian Government has exempted certain categories of persons from the issuance of e-invoicing and display of QR code, keeping in view the nature of services rendered and the practical difficulties in complying with e-invoicing requirements, viz. (a) Insurance company, (b) Banking company, (c) Financial Institution including NBFCs, (d) a Goods Transport Agency, (e) Supplier of Passenger Transportation Service, (f) Multiplex cinemas or single screen cinemas operator, and (g) a Special Economic Zone unit.

All B2B invoices including debit notes, credit notes, export invoices, invoices issued by an Input Service Distributor and self-invoices raised under the reverse charge mechanism will be electronically uploaded and authenticated by the designated Invoice Registration Portal (IRP). Post successful authentication, a unique Invoice Reference Number (IRN) will be generated for such invoice by the IRP. Along with IRN, each invoice is digitally signed and added with QR code. The Invoice Registration Portal (IRP) is not an invoice generating system but a mere invoice validation / verification system. The invoices will continue to be generated using existing accounting software, and subsequently convert the invoicing data into JSON format using the e-invoicing schema, which can then be smoothly pushed and synced with the IRP. However, a JSON file will be required to be uploaded on the designated portal.

The information relating to e-invoicing will be transferred on real-time basis to the Goods and Services Tax Network (GSTN) portal for return filing purposes as well as to the e-way bill portal for tracking movement of goods. Hence, it will eliminate the need for manual data entry while filing outward supply returns as well as generation of e-way bills, as the information is passed directly by the IRP to the GSTN portal. In case of any modifications or amendments to the invoice, it needs to be cancelled fully on the IRN portal and corresponding effect has to be manually made on the GSTN portal. Nonetheless, an e-invoice cannot be cancelled after a period of 24 hours.

Supplies made to B2C, import of goods (as bill of entry is generated by customs department and they are not required to obtain IRN), delivery challans and exempt supply invoices (bill of supply) etc., are not covered in the scope of e-invoicing and will be required to be separately included at the time of return filing.

The basic aim behind the adoption of e-invoice system by tax departments is the ability to pre-populate the return and to reduce the reconciliation problems. Once fully operational, the system will considerably reduce reporting in multiple formats and lead to a reduced tax evasion as the portal will have a complete trail of invoices raised by suppliers as well as facility of matching of corresponding input tax credit claimed.