E-Invoicing: A Comprehensive Guide for Businesses in India

What is e-Invoicing?

E-Invoicing refers to electronic invoicing, as defined by the GST (Goods and Service Tax) law. All GST-registered businesses are required to generate an e-invoice for Business-to-Business (B2B) transactions. It does not mean that the invoice has to be generated on the GST portal. Rather it means that the already generated invoice has to be submitted to a common e-invoice portal. This enables standardization and consistency in the system and automates multi-purpose reporting with a one-time input of invoice details to a central portal.

How does E-Invoicing work?

All invoice information gets transferred from the e-invoice portal to both the GST portal and the e-way bill portal in real-time. Therefore, it eliminates the need for manual data entry while filing GSTR-1 returns and generation of part-A of the e-way bills, as the information is passed directly by the IRP to the GST portal.

Under the electronic invoicing system, an identification number will be issued against every invoice by the Invoice Registration Portal (IRP), managed by the GST Network (GSTN).

Before e-invoicing could apply, businesses generated invoices, and the details of these invoices were manually uploaded in the GSTR-1 return or using ERP.

Under the e-invoicing system, the data will seamlessly flow for GSTR-1 preparation and for the e-way bill generation too. The e-invoice data also gets sent to the e-way bill system, where Part A of the e-way bill gets generated, and if transporter details are provided, then Part B gets generated as well.

Who should comply with e-invoicing?

The Central Board of Indirect Taxes and Customs (CBIC) has defined a turnover limit for businesses to comply with e-invoicing which they have revised over a period of time from Rs 500 crore+ in October 2020 to the latest Rs 5 crore+ from August 2023.

Applicability of turnover is dependent on entity’s turnover of any previous financial year starting FY 2017-18 onwards.

It is mandatory for B2B transactions.

Who need not comply with e-invoicing?

• Banks
• Insurance Companies
• Financial Institutions
• Government departments
• Local Authorities
• Goods Transport Agencies (GTA)
• SEZ units
• Any Business-to-Consumers (B2C) sales
• Persons registered under the Rule 14 of CGST Rules (OIDAR)

Benefits of e-invoicing for businesses:

1. Reduces Data handling errors - As the filling of GSTR-1 happens automatically there is no requirement of manually entering the data again.
2. Enables standardized format for invoices - With e-invoicing all the invoices come with a specific format which helps in the necessary checks and controls to be implemented also, reduces effort in filling in different portals separately in different formats.
3. Improves formal credit access - e-invoices are mandatory primarily for B2B transactions which are typically of high value and are also filled directly with the GSTN thus, giving comfort to lenders like banks, NBFCs, and invoicing discounting platforms to provide the required line of credit giving businesses a formal credit access.
4. Auto-filled GSTR 1 - As the request is sent to the IRP portal which is managed by GSTN the details are automatically reflected in the GSTR-1
5. Digital sharing of invoices - Businesses can share the e-invoice or QR with any party over any channel digitally and it will be deemed valid. Anyone can verify the correctness of an e-invoice by uploading the signed JSON into the e-invoice system, by selecting the option ‘Verify Signed Invoice’ under the ‘Search’ option. One can also download the QR Code Verify app and verify the QR code printed on the invoice.
6. Interoperability between businesses.

E-invoicing has become a significant part of India's efforts to modernize its tax and business processes. While these changes may require businesses to adapt, they also offer substantial benefits in terms of efficiency, accuracy, and transparency.