E-Invoice under GST – Applicability, Concept, How to Generate, Legal Backdrop and Format

E-Invoice under GST – Applicability, Concept, How to Generate, Legal Backdrop and Format

By CA Ankit Gulgulia (Jain)

The Biggest buzz in GST currently is E-invoice and QR Code and its implementation being made mandatory w.e.f 1^st April, 2020. In such a scenario there are multiple aspects to be understood in detail regarding e-invoices, this article is just an attempt to have complete bird eye view of the matter and how the industry and tax professionals should approach the implementation. Broadly, there are 8 sections of this article

There can be several other discussions possible on this topic which I am looking to cover in second volume of this article so that we can discuss what’s most relevant first. Let’s Start !

1. Applicability of E-Invoice
   1. As per Notification No. 70/2019 – Central Tax dated 13^th December, 2019, A registered person, whose aggregate turnover in a financial year exceeds one hundred crore rupees, as a class of registered person who shall prepare invoice in terms of sub-rule (4) of rule 48 of the said rules in respect of supply of goods or services or both to a registered person
   2. 5 Keywords here i) Aggregate Turnover ii) In a Financial Year iii) Exceeds 100 Cr iv) Rule 48(4) and v) to a Registered Person
      1. Aggregate Turnover is defined in the Act under Section 2(6). It is for turnover on PAN Basis and not individual State GSTIN Basis. Turnover includes all taxables, local, interstate, export and exempt supplies to check 100 Crores.
      2. In a Financial Year It does not say, previous financial year but in a financial year. Safely one should implement E-Invoicing even if in previous year 100 Cr have been exceeded. If during the year it increases, one has to implement on prospective basis.
      3. Exceeds 100 Crores hence upto 100 Crores there is no requirement
      4. Invoice as per Rule 48(4) has to be prepared. Rule 48(4) required Invoice to be as per INV-01 format along with IRN (Invoice Reference number) generated from specified Portal (10 Portal’s specified we shall discuss later)
      5. To a Registered Person – Currently only B2B invoices needs to be e-invoiced.
   3. Applicability Date of Notification :-> 1^st April, 2020
2. Applicability of QR Code
   1. As per Notification No. 72/2019 – Central Tax dated 13^th December, 2019, an invoice issued by a registered person, whose aggregate turnover in a financial year exceeds five hundred crore rupees, to an unregistered person (hereinafter referred to as B2C invoice), shall have Quick Response (QR)code. Dynamic QR Codes with cross reference of payment also allowed.
   2. 4 Keywords here :-> i) Aggregate turnover ii) In a Financial year iii) Exceeds 500 Crores iv) to a Unregistered Person.
      1. Aggregate Turnover is defined in the Act under Section 2(6). It is for turnover on PAN Basis and not individual State GSTIN Basis. Turnover includes all taxables, local, interstate, export and exempt supplies to check 500 Crores
      2. In a Financial Year It does not say, previous financial year but in a financial year. Safely one should implement E-Invoicing even if in previous year 100 Cr have been exceeded. If during the year it increases, one has to implement on prospective basis.
      3. Exceeds 500 Crores hence upto 500 Crores there is no requirement
      4. To a UnRegistered Person – Currently only B2C invoices needs to be e-invoiced
   3. Applicability of QR Code :- 1^st April, 2020

EXAMPLE ON APPLICABILITY :

• XYZ Limited has aggregate turnover of 650 Crores – In such a case, it must issue e-invoice with IRN to B2B customers and also QR Code Invoice to B2C customers.
• ABC Limited has aggregate turnover of 250 Crores – In such a case, it must issue e-invoice with IRN to B2B customers but QR Code is not applicable on B2C Transactions.
• What is clearly evident is the IRN is mandatory for B2B while QR Code is mandatory for B2C on mutually exclusive basis.

1. CONCEPT OF E-Invoice
   1. First of all, e-invoice does not means generation of Invoice from the portal itself. It simply means that such invoice must have a IRN Number which gets generated only from portal.
   2. Hence one has to generate IRN from the portal and disclose the same on Invoice which is as per Format of INV-01 specifically. Any invoice not as per above shall not be a valid invoice w.e.f 1^st April, 2020 as per Rule 48(5).
   3. So, the accounting software need not be changed but most accounting software will be the way of patch (FTP/API Mode) directly feed the information to the IRP Portal (GST Portal which will generate IRN) and IRP portal will generate a unique IRN to be used for every invoice.
   4. IRN will be hash from three constituents
      1. GSTIN of Supplier
      2. Financial Year
   5. Invoice Number The accounting software vendors would enable this aspect by way of an interface between the accounting software and the common portals and the assessee will only have to click a button to get the Invoice Reference Number (IRN) generated from the Invoice Registration Portal (IRP). Thereby, the generation of the IRN would be a faceless interface wherein the assessee will not know the process of the generation but will be given with the desired output.
   6. Generation of e-invoice will be the responsibility of the taxpayer who will be required to report the same to Invoice Registration Portal (IRP) of GST, which in turn will generate a unique Invoice Reference Number (IRN) and digitally sign the e-invoice and also generate a QR code. The QR Code will contain vital parameters of the e-invoice and return the same to the taxpayer who generated the document in first place. The IRP will also send the signed e-invoice to the recipient of the document on the email provided in the e-invoice.
2. GST Legal Backdrop on Introduction of e-invoice
   1. Notification 70/2019 – Central Tax defines specified persons who must generate invoice as per INV-01 as mentioned in Rule 48(4) of CGST Rules, 2017 along with IRN generated from GST Portal
   2. Rule 48(4) is concerned with Manner of Issuance of Invoice.
   3. Rule 48(5) says any invoice issued by Specified Assessee without IRN is invalid. Remember specified assessee here is assessee with aggregate turnover exceeding 100 Crores as discussed above
   4. Rule 48(6) says in such cases of E-invoices, duplicate/triplicate compliance not required
   5. Notification 68/2019 – Central Tax vide GST 8^th Amendment Rules amended Rule 48 to include above Sub rules 48(4), 48(5), 48(6)
   6. Notification 69/ 2019 – Central Tax – Laid 10 Websites as IRP. These are :- (i) www.einvoice1.gst.gov.in;

(ii) www.einvoice2.gst.gov.in; (iii)www.einvoice3.gst.gov.in; (iv) www.einvoice4.gst.gov.in;(v) www.einvoice5.gst.gov.in; (vi) www.einvoice6.gst.gov.in; (vii) www.einvoice7.gst.gov.in; (viii) www.einvoice8.gst.gov.in; (ix) www.einvoice9.gst.gov.in; (x) www.einvoice10.gst.gov.in.

• 1. As on current date, i.e. 7^th March, 2020 none of the above are operating.
  2. Notification 02/2020 – Central Tax for Prescribing Format of INV-01 as mentioned in 48(4). This format will be used to create standard JSON file for each invoice to further create the IRN Hash tag.

1. Format of E-Invoice

In the said rules, for FORM INV-01, the following form shall be substituted, namely:-

“Note: Cardinality Means occurance of field in the schema. Below are the the meaning of various symbol used in this column:

0..1 : It means this item is optional and even if mentioned can not be repeated

1..1: It means that this item is mandatory and can be mentioned only once.

1..n: It means this item is mandatory and can be repeated more than once

0..n: It means this item is optional but can be repated many times. For example: Previous invoice reference is optional but if required one can mention many previous invoice reference.

1. Workflow of E-Invoicing
   • 1. The e-invoice system being implemented by tax departments across the globe consists of two important parts namely,
        1. Generation of invoice in a standard format so that invoice generated on one system can be read by another system.
        2. Reporting of e-invoice to a central system.
     2. The basic aim behind adoption of e-invoice system by tax departments is ability to pre-populate the return and to reduce the reconciliation problems. Huge increase in technology sophistication, increased penetration of Internet along with availability of computer systems at reasonable cost has made this journey possible and hence more than 60 countries are in the process of adopting the e-invoice.
2. How to Generate E-Invoice

The flow of the e-invoice generation, registration and receipt of confirmation can be logically divided into two major parts;

PART A: The first part being the interaction between the business (supplier in case of invoice) and the Invoice Registration Portal (IRP).

PART B: The second part is the interaction between the IRP and the GST/E-Way Bill Systems and the Buyer.

This involves following steps;

Step 1 is the generation of the invoice by the seller in his own accounting or billing system. The invoice must conform to the e-invoice schema (standards) that is published and have the mandatory parameters. The optional parameters can be according to the business need of the supplier. The supplier’s (seller’s) software should be capable to generate a JSON of the final invoice that is ready to be uploaded to the IRP. The IRP will only take JSON of the e-invoice.

Step 2: This includes generation of the unique Invoice Reference Number (IRN). This is an optional step. The seller can also generate this and upload along with invoice data. The 3 parameters which will be used to generate IRN (hash) are:

i. Supplier GSTIN,

ii. Supplier’s invoice number and,

iii. Financial year (YYYY-YY).

Step 3 is to upload the JSON of the e-invoice (along with the hash, if generated) into the IRP by the seller. The JSON may be uploaded directly on the IRP or through GSPs or through third party provided Apps.

Step 4: The IRP will also generate the hash and validate the hash of the uploaded json, if uploaded by the supplier. The IRP will check the hash from the Central Registry of GST System to ensure that the same invoice from the same supplier pertaining to same Fin Year is not being uploaded again. On receipt of confirmation from Central Registry, IRP will add its signature on the Invoice Data as well as a QR code to the JSON. The QR code will contain GSTIN of seller and buyer, Invoice number, invoice date, number of line items, HSN of major commodity contained in the invoice as per value, hash etc.

Step 5 will involve sharing the uploaded data with GST and e-way bill system. This  includes following

• Share the signed e-invoice data along with IRN (same as that has been returned by the IRP to the seller) to the GST System as well as to E-Way Bill System.
• The GST System will update the ANX-1 of the seller and ANX-2 of the buyer, which in Turn will determine liability and ITC.
• E-Way bill system will create Part-A of e-way bill using this data to which only vehicle Number will have to be attached in Part-B of the e-way bill.

Step 6 will involve returning the digitally signed JSON with IRN back to the seller along with a QR code. The registered invoice will also be sent to the seller and buyer on their mail ids as provided in the invoice.

Before Parting..

E-Invoice is a welcome step but CBIC as always have been late with IRP Test Portals and laying the infrastructure in front of users on test Basis. By now, the e invoice portals needs to be opened for all and voluntary beta runs should be allowed. Also the GSP’s and third party softwares should be indicated on the portal itself so that companies can appoint the right vendors.