In a recent interview with PTI, Finance Secretary Mr.Ajay Bhushan Pandey said that e-invoice would be mandatory from April 1st, 2021 for all the B2B transactions by businesses with a turnover of over Rs. 5 crores.
In this post, we will look into the evident differences between the existing Invoicing system and the newly introduced E-invoicing system in GST.
GST Council introduced E-invoicing for reporting business to business (B2B) invoices to the GST System. It was to provide better taxpayer services, less tax evasion, increase the efficiency of GST administration, and many other benefits.
The 37th Council meeting held on 20th September 2019 approved the E-invoice standard. Format for E-invoice is available in the GST portal.
You can check out the E-invoice Format in our blog – E-Invoicing under GST [Format & Mandatory Fields]
Now let’s see the topics we have covered in this post:
- What is an E-Invoicing system?
- Process of E-invoicing
- Difference between Invoicing system and E-invoicing system
What is an E-Invoicing system?
E-invoicing involves the submission of an already generated invoice on a common e-invoice portal IRP to obtain the Invoice Reference Number (IRN). This is a system in which B2B invoices are authenticated electronically by GSTN.
You can check out more about E-invoice in our blog – E-invoicing under GST – A brief introduction
Invoices generated by each software may look the same, however, they can’t be understood by another computer system. There are many accounting softwares that generate invoices in their own formats. Therefore, it became essential to standardize a format for E-invoice.
Before E-Invoicing, we use the R2R function to record and report information to the GSTN.
A standardized invoicing format ensures uniformity and allows e-invoices generated by one software to be read by any other software. Thereby, eliminating the need for new manual data entry.
However, E-invoice shared by a seller with their buyer, bank, agent, or any other in the business can be read by any system and thus eliminate any data entry errors.
- E-Invoicing does not mean the generation of invoices on a government portal.
- A new format as notified by CBIC will have 20 new fields and will remove 13 fields.
- CBIC notified that GST e-invoicing for B2B transactions is mandatory for any business whose turnover exceeds Rs 100 crore from January 1, 2021.
- SEZ units are exempted from issuing e-invoices.
Process of E-invoicing
- The taxpayer generates invoices on their accounting and billing software or ERPs in the specified format (GST INV-O1).
- The invoice generated will be then sent to the Invoice Registration Portal (IRP).
- After IRP has validated the invoice, it will have IRN with a digital signature and QR code.
- E-invoices can be shared with your buyers along with a QR code.
Note: An E-invoice is authentic only with a valid IRN.
You can see the detailed E-invoicing process in our blog – E-Invoice generation through Saral GST
Difference between Invoicing system and E-invoicing system
Now let’s look at some major differences between the 2 invoicing systems.
|Situation||Invoicing system||E-invoicing system|
|Physical invoice||A physical invoice is generated as per the rules. There is no change in how an organisation issues invoices.||A physical invoice is generated as per the rules. There is no change in how an organisation issues invoices.|
|Report of invoice on the GST portal||Manual data entry, JSON upload, accounting software that uses the API to upload invoices.||Invoices have a prescribed schema and contain the mandatory parameters.|
|Invoice Reference Number(IRN)||There was only an invoice number no IRN. It had no prescribed format. The invoice number had to be assigned sequentially.||IRN generated through an algorithm. Thus, an easy comparison of e-invoices through unique IRN validates on the Central Registry and is stored for reference.|
|Dispatch of e-invoice||GST portal has no facility for validation and downloading invoices.||Validated e-invoices are sent to the supplier to their registered e-mail ID.|
|Digital Signature||Only the supplier’s digital signature was needed on the invoice and no facility for digital signing uploaded invoices by GST portal.||Validated invoices are digitally signed by the IRP.|
|QR code||Invoices could not be verified by a QR code.||Validated invoices contain generated QR code. Invoice verification can be done even if there is no internet facility.|
|Possibility of mistakes||Higher possibility of mistakes.||Much lower possibility of mistakes. Once you upload the invoice JSON file and it is verified on IRP. The seller’s GSTR-1 is then updated. E-Way bill details under Part A are also filled.|
|To amend invoice||Amendment/cancellation can be done on the GST portal.||E-invoice is only available for 24 hrs in the IRP when it can be fully canceled. You can amend it in the GST portal.|
|To view invoice||Invoice details could be viewed on the GST portal||Necessary invoice details are available on an app that scans the QR code. E-invoices are sent to e-mail ID so the supplier can always save a copy.|
|Verify an invoice||Not easy to verify an invoice||Easy to verify by scanning QR code and also checking of IRN|
|Possibility of search||Relatively higher possibility of a search by the department||Lower possibility of a search by the department. The invoice details (transaction level) is already available.|
It is mandatory for B2C transactions to have a QR code.
With that, we have come to the end of this post. Share with us your views and queries in the comment section below.