e-Invoicing Under GST: Simplifying B2B Compliance for Indian Businesses

e-Invoicing under GST refers to the electronic invoicing system mandated by the GST law. Similar to how a GST-registered business uses an e-way bill for transporting goods, certain notified GST-registered businesses must generate e-invoices for Business-to-Business (B2B) transactions. Taxpayers with an annual aggregate turnover exceeding Rs. 5 crore in any financial year from 2017-18 onwards are required to comply with e-invoicing starting from 1st August 2023.

e-invoicing under GST

e-Invoicing is a system in which Business-to-Business (B2B) invoices and other specified documents are electronically authenticated by GSTN for use on the common GST portal.

The GST Council introduced e-Invoicing for specific categories of businesses, initially targeting large enterprises. Over time, it was expanded to include mid-sized and small businesses as well.

It’s important to note that e-Invoicing does not involve generating invoices directly on the GST portal; rather, it requires submitting an already created standard invoice to the common e-invoice portal. This process automates reporting by capturing invoice details once and using them across multiple platforms. The CBIC notified the implementation of e-invoicing through Notification No. 69/2019 – Central Tax.

Under this system, the Invoice Registration Portal (IRP), managed by GSTN, issues an identification number for each invoice. The National Informatics Centre launched the first IRP. Invoice details are transferred in real-time from the IRP to both the GST portal and the e-way bill portal. This seamless integration eliminates manual data entry when filing GSTR-1 returns and generating Part-A of the e-way bill.

Turnover Criteria for e-Invoice Generation Applicability

The implementation of e-invoicing under GST has been rolled out in phases, with the turnover limit gradually decreasing over time. Below is the summary of turnover criteria and their applicable dates:

• Phase I: Rs. 500 crore – From 01.10.2020 (Notification No. 61/2020 & 70/2020).
• Phase II: Rs. 100 crore – From 01.01.2021 (Notification No. 88/2020).
• Phase III: Rs. 50 crore – From 01.04.2021 (Notification No. 5/2021).
• Phase IV: Rs. 20 crore – From 01.04.2022 (Notification No. 1/2022).
• Phase V: Rs. 10 crore – From 01.10.2022 (Notification No. 17/2022).
• Phase VI: Rs. 5 crore – From 01.08.2023 (Notification No. 10/2023).

Transactions and Documents Where e-Invoicing Applies

The following documents and transactions are subject to the e-invoicing requirements under the GST framework:

Documents:

• Tax invoices, credit notes, and debit notes as per Section 34 of the CGST Act.

Transactions:

• Taxable Business-to-Business (B2B) sales of goods or services.
• Business-to-Government (B2G) sales of goods or services.
• Exports, including deemed exports.
• Supplies to Special Economic Zones (SEZs), whether with or without tax payment.
• Stock transfers or supply of services to distinct persons (within the same organization).
• Supplies to SEZ developers.
• Supplies under Reverse Charge Mechanism (RCM) as outlined in Section 9(3) of the CGST Act.

These documents and transactions are required to be processed through the e-invoicing system, ensuring real-time validation and seamless integration with the GST portal and e-way bill system.

Exempt Categories from e-Invoicing Applicability

As per CBIC Notification No. 13/2020 – Central Tax, amended from time to time, e-invoicing is not applicable to the following categories of registered persons:

1. Insurers, Banking Companies, Financial Institutions, and NBFCs: These entities are exempt from e-invoicing for their transactions.
2. Goods Transport Agencies (GTAs): Registered GTAs are also excluded from the e-invoicing requirements.
3. Registered Persons Supplying Passenger Transportation Services: This category does not require e-invoicing for their services.
4. Registered Persons Supplying Admission Services for Cinematic Exhibitions in Multiplexes: These businesses are not subject to e-invoicing.
5. Special Economic Zone (SEZ) Units: As per CBIC Notification No. 61/2020 – Central Tax, SEZ units are excluded from e-invoicing requirements.
6. Government Departments and Local Authorities: Per CBIC Notification No. 23/2021 – Central Tax, government departments and local authorities are not required to generate e-invoices.
7. Persons Registered under Rule 14 of CGST Rules (OIDAR – Online Information and Database Access or Retrieval Services): These persons are exempt from e-invoicing.

Exempt Documents and Transactions:

• e-Invoicing is not applicable to the following documents:
  • Delivery Challans
  • Bill of Supply
  • Financial or Commercial Credit Notes
  • Debit Notes
  • Bill of Entry
  • ISD (Input Service Distributor) Invoices
• e-Invoicing is also not required for the following types of transactions:
  • Business-to-Consumer (B2C) sales
  • Nil-rated, non-taxable, or exempt B2B sales
  • Nil-rated, non-taxable, or exempt B2G sales
  • Imports, high sea sales, bonded warehouse sales
  • Supplies to Free Trade & Warehousing Zones (FTWZ)
  • Reverse charge transactions under Section 9(4) of the CGST Act

Deadline for Generating e-Invoices

Earlier there was no specific time limit set by the GST system or law for generating e-invoices. However, starting 1st May 2023, the government introduced a new rule for taxpayers with an Annual Aggregate Turnover (AATO) of Rs. 100 crore or more. These taxpayers were required to generate e-invoices for tax invoices, credit notes, and debit notes within 7 days from the date of issue. Failure to comply would result in the invoices and documents being considered non-compliant.

However, this 7-day rule was not implemented. Instead, from 1st November 2023, the government revised the requirement. Businesses with an AATO of Rs. 100 crore or more must now report all tax invoices, credit notes, and debit notes to a notified Invoice Registration Portal (IRP) within 30 days from the date of issue of the document.
Now the threshold has been lowered to cover taxpayers with an AATO of 10 crores and above.

This rule does not apply to taxpayers whose AATO is less than Rs. 10 crore.

Key Benefits of e-Invoicing for Businesses

Businesses can enjoy the following benefits by adopting e-invoicing through the GSTN system:

1. Improved Data Reconciliation: e-Invoicing helps address data reconciliation issues under GST, reducing mismatch errors.
2. Interoperability: e-Invoices created on one software can be read by others, minimizing data entry errors.
3. Real-Time Invoice Tracking: Enables suppliers and buyers to track invoices in real-time.
4. Automated GST Filing: e-Invoicing integrates with the GST return process, auto-populating invoice details, including Part-A of e-way bills.
5. Faster Input Tax Credit: Facilitates quicker and more accurate availability of genuine input tax credit.
6. Reduced Audits and Surveys: By making transaction-level data available, the need for audits or surveys by tax authorities is minimized.
7. Access to Credit: Small businesses gain easier access to formal credit facilities like invoice discounting or financing.
8. Improved Customer Relations: e-Invoicing can help small businesses strengthen relationships and enhance opportunities with large enterprises.