e-Invoicing under GST: Must know details for small businesses

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TaxClue Team
TaxClue Teamhttp://taxclue.in
Taxclue is an online news portal for reporting all news, articles, judgments, Circulars, orders, and notifications relating to various corporate and tax laws in India. We use the tagline ‘Simplifying Laws’. Our mission is to Simplify the Laws and make people aware of their rights and duties in relation to tax matters in order to equip them to participate in nation-building.

There has been a sharp rise in the e-Invoicing mandated businesses w.e.f April 1st 2021 after the government decided to lower the aggregate turnover slab to 5 Cr to be eligible for e-Invoicing under GST.

The small businesses which are new to this provision are in a state of confusion and are developing a lot of myths about the e-Invoicing system.

  • Is high-tech technology solution required for e-Invoicing under GST?
  • Do I need to train my staff for the e-Invoice generation task?
  • What kinds of Invoices are required to be reported to the government?

& much more queries like these.

So we’ve decided to provide a one-stop solution to address the maximum possible questions a small business can have w.r.t. e-Invoicing under GST.

Stick till the end to be aware of e-Invoicing under GST and get your business compliant with e-Invoicing.

What is an e-Invoice?

First things first, let us understand what e-Invoice means in the context of GST.

e invoiceAn e-Invoice is a digitally signed & verified invoice generated from the Invoice Reference Portal (IRP) of the government.

Now, how is this e-Invoice generated?

  1. A business uploads his B2B invoices on the IRP portal.
  2. IRP portal then verifies, authenticates and digitally signs this invoice & sends it back to the ERP of the business.
  3. The newly generated w-Invoice has a unique Invoice Reference Number (IRN) & a unique QR code embedded in the e-Invoice.
  4. This e-Invoice can further be used for e-Way bill generation & GSTR filing.

MYTH1: e-Invoicing means generating invoices directly from the GST portal.

FACT: – In e-Invoicing, a business has to submit an already generated invoice of the transaction between two businesses.

In simpler words, it is just the reporting of the already existing invoices to the government through the IRP portal and validating it with a unique IRN and QR code.

MYTH2: Special expertise is required to carry out the e-Invoice generation process.

FACT: e-Invoice generation is a simple process & no special expertise is required for the same. Furnishing the details in the prescribed schema as provided by the government is the key to this process.

MYTH3: This will increase the cost of software or ERP for small businesses.

FACT: e-Invoicing is introduced for the benefit of the taxpayer and hence you are not expected to have any specialized ERP or software solution for e-Invoicing.

However, when bulk invoices are to be uploaded on the e-Invoice portal, you need to be careful while filing the information as there can be errors introduced in the filing. Hence, for the long term benefits, it is advised by the GST experts to have a robust IT infrastructure in place which will allow you to automate this process.

To whom is this e-Invoicing applicable?

Eligibility for the e-Invoicing under GST provision is dependent on the Annual Aggregate Turnover of the e invoicebusiness.

w.e.f 1st April 2021, the businesses whose Annual Aggregate Turnover lies above 5 Cr are eligible for an e-Invoice generation under GST.

So if your annual aggregate turnover is greater than 5 Cr then you will have to generate e-Invoices corresponding to your invoices.

Now, there’s a catch here, there are certain businesses who are EXEMPTED from e-Invoice generation irrespective of their annual aggregate turnover.

Following is the list of the exempted categories of taxpayers:

  • Special Economic Zones (SEZ) Units
  • Goods Transportation Agency
  • Insurance company
  • Banking company
  • Non-Banking Financial Companies
e-Invoice Generation Process in Short

e invoice

We will show you a step-wise guide for e-Invoice generation.

  1. Generate Invoice in ERP or Billing Software
  • Registered taxpayer generates an invoice in his ERP or Billing software.
  • This invoice shall contain all mandatory and optional fields as required by the e-Invoice schema.
  1. Generate JSON file for this invoice
  • The registered taxpayer is now required to generate a JSON file of the invoice generated from either their billing software or the ERP.
  1. Upload this JSON file on the IRP
  • The JSON created on the ERP or the billing software should now be uploaded on the Invoice Registration Portal (IRP).
  1. IRP Validates the Uploaded Data

IRP will now validate the JSON file uploaded by the taxpayer on the IRP.

IRP will check this data from the Central registry of the GST Portal & validates the invoice on the following 4 validation checks:

  • Customer GSTN 
  • Invoice number
  • Type of Document
  • Financial Year

Every invoice will be assigned a unique Invoice Reference Number (IRN).

  1. IRP generates IRN

IRP generates a unique IRN for every invoice.

Along with the IRN, IRP will also digitally sign this e-Invoice and add a QR code on the newly generated e-Invoice.

  1. E-Invoice returned to the taxpayer

This newly generated e-Invoice is now sent to the ERP of the taxpayer by the Invoice Registration Portal (IRP).

This e-invoice is returned with the QR code and the uniquely identified IRN number.

NOTE: The government has now introduced a new automation facility in the GST portal which shall auto-fetch the e-invoice data from the IRP. Now, the e-Invoice details will get auto-populated in the GSTR-1 of the Recipient.


Why Is e-Invoicing Essential?

e invoice

e-Invoicing is seen as an important step towards curbing the malpractices like tax evasion and fake invoices.

e-Invoicing under GST will help eliminate the fake invoice and thus will encourage more transparency in the taxation system.

 Following are some of the key benefits; e-Invoicing shall have on small businesses:

  • Multipurpose use– Once an e-Invoice is generated, it will be used for GST Returns (GSTR-1 auto-population) as well as the e-way bill generation.
  • Eliminates the generation of fake invoices. As the invoices are reported to the IRP portal for authentication, furnishing incorrect or fake detail can have very severe consequences legally.
  • With e-Invoicing under GST, tax authorities will have a complete trail of all the B2B invoices uploaded by the taxpayers which will help in stopping tax frauds.
  • Small businesses will benefit from this provision as they will be enabled to claim maximum eligible Input Tax Credit if appropriate & on-time furnishing of the invoice details is done.

How Should Small Businesses Prepare For e-Invoicing?

e-Invoicing is a relatively new provision for businesses which are recently added to the e-invoicing regime.

These businesses need to prepare themselves with the infrastructure which will enable them for a smoother e-Invoice generation process.

  • Businesses should adapt to the changing reporting requirements as per the GST laws.
  • Although any special software is not mandatory for the e-Invoice generation process, having e-Invoicing software will make the task much easier for you.
  • Using the ERP connectors can make your e-Invoicing process faster and more accurate as compared to the manual uploading of your invoices to the Invoice Registration Portal (IRP).
  • Staying compliant with the GST laws all the time is a MUST, small businesses can find it very difficult to stay 100% compliant with the ever-changing GST laws.

However, businesses should be aware of the compliance requirements or outsource this task to the ERP solution they are using.

To Conclude 

Small businesses are advised not to be scared of the fact that e-invoicing has been made mandatory for you.

e-Invoicing is the new era of invoice keeping and it is for your benefit.

You are expected to keep your IT infrastructure up-to-date so that you can stay 100% compliant with the GST laws.

Having an automated solution would be a great choice for you to stay ahead in this new & improved regime of e-Invoicing.

Stay aware, stay ahead!

Until the next time…

About the Author– GSTHero– Making GST Simple! GSTHero is the best GST filing, e-Way Bill Generation & E Invoicing Software in India. GSTHero is a government authorized GST Suvidha Provider. Both Businesses and Tax Practitioners can file GSTR 1, GSTR 3B, GSTR 9 and GSTR 9C with all supporting reports. 1 Click Auto Reconciliation & report-matching feature helps you in claiming up to 100% ITC and finds your GST Defaulting Suppliers. GSTR2A vs GSTR-3B, GSTR-1 vs GSTR-3B, ‘GSTR-1, GSTR-2A & GSTR-3B’ annual report matching is also provided by GSTHero.

GSTHero ERP Plugins provide 1 Click e-Way Bill & E-Invoice, Generation, Operation & Printing from your own ERP like Tally, SAP, Marg, Busy, Microsoft Dynamics, Oracle & others itself with high data security

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