Buyers and sellers exchanged millions of invoices every day—yet the process remained extremely labor-intensive and prone to manual errors. Recognizing these challenges, the concept of E-Invoicing was introduced at the 35th GST Council Meeting in September 2019. Initially presented as an optional technological advancement, e-invoicing soon became a strategic move to streamline invoice management by eliminating manual intervention.
Originally, the mandate was set for businesses with an annual turnover of ₹500 crores from October 1, 2020. Since then, the threshold has been reduced progressively, and as per CBIC Notification No. 10/2023-Central Tax, it is now mandatory for businesses with a turnover of ₹5 crores or more—with further reductions on the horizon. Given that mandatory threshold limit can soon be reduced to 1cr+ turnover, it is important to have clarity about E-Invoicing. Businesses should especially understand how it is an imperative part of GST return filing now.
This blog post here will cover detailed information about E-Invoicing, its applicability in GST, how it works, and more.
What is E-Invoicing in GST?
E-Invoicing is the digital evolution of the traditional invoicing process. It allows businesses to generate invoices in a standardized electronic format, thereby eliminating the need for manual intervention and reducing the risk of errors. In simple terms, instead of creating and exchanging paper or manually entered digital invoices, companies now generate invoices electronically, which are then validated by a government portal.
Key Features of E-Invoicing
- Standardized Format:
Invoices must adhere to a specific format (usually a JSON file) as per government-mandated standards. This uniformity ensures that every invoice, regardless of the business, contains all required details in a consistent layout. - Real-Time Validation:
After invoice generation, it is immediately uploaded to the Invoice Registration Portal (IRP) for validation. The IRP checks the details for compliance with GST rules and, if everything is correct, assigns a unique Invoice Reference Number (IRN) along with a QR code. - Data Integration:
After validation, the e-invoice data integrates automatically into the GST system. This automation helps ensure that both the buyer and the seller have consistent records, facilitating accurate tax return filing and seamless reconciliation.
Why E-Invoicing Over Traditional Invoicing?
Before e-invoicing, businesses handled millions of invoices manually, which was not only time-consuming but also prone to errors and inconsistencies. E-Invoicing aims to:
- Reduce Manual Efforts: Automate the creation, validation, and storage of invoices.
- Enhance Accuracy: Minimize errors and reduce the scope for fraud by ensuring every invoice is verified at the time of creation.
- Streamline GST Compliance: Integrate invoicing directly with GST return filing, making tax compliance more efficient.
E-Invoice Schema and Format
The e-invoice schema and format are essential components of e-invoicing for GST compliance and compatibility with the government framework. Although they serve different functions, they are equally useful in enhancing the easy and smooth creation and verifying of invoices.
E-Invoice Schema
The e-invoice schema is what explains how and what happens throughout the creation of electronic invoices. The schema is in a machine-readable format like JSON, enabling a business’s e-invoicing software to generate GST-compliant invoices. It also defines the fields mandatory for an invoice to be valid. Here is a list of all 30 mandatory e-invoicing fields in India:
Mandatory Fields as per e-Invoice Schema (30th July 2020)
| Sl. No. | Field Name | Description |
|---|---|---|
| 1. | Document Type Code | Type of document (Invoice, Credit Note, Debit Note) |
| 2. | Supplier Legal Name | Registered name of the supplier as per PAN |
| 3. | Supplier GSTIN | GSTIN of the supplier issuing the invoice |
| 4. | Supplier Address | Complete address of the supplier |
| 5. | Supplier Place | Location of the supplier (City/Town/Village) |
| 6. | Supplier State Code | State code of the supplier as per GST |
| 7. | Supplier Pincode | 6-digit postal code of the supplier |
| 8. | Document Number | Unique invoice number assigned by the supplier |
| 9. | Preceding Invoice Reference and Date | Details of the original invoice being amended (applicable for Credit/Debit Notes) |
| 10. | Document Date | Date of invoice generation (DD/MM/YYYY) |
| 11. | Recipient Legal Name | Registered name of the buyer as per PAN |
| 12. | Recipient GSTIN | GSTIN of the buyer (for B2B transactions) |
| 13. | Recipient Address | Complete address of the buyer |
| 14. | Recipient State Code | State code of the buyer as per GST |
| 15. | Place of Supply State Code | State code where goods/services are supplied |
| 16. | Pincode | 6-digit postal code of the place where goods/services are supplied |
| 17. | Recipient Place | Location of the recipient (City/Town/Village) |
| 18. | IRN (Invoice Reference Number) | Unique number generated by the Invoice Registration Portal (IRP) |
| 19. | Shipping To GSTIN | GSTIN of the entity to whom goods are shipped, if different from the buyer |
| 20. | Shipping To State, Pincode, and Code | State, Pincode, and State Code of the shipping address |
| 21. | Dispatch From Name, Address, Place, and Pincode | Details of the entity from where goods are dispatched, if different from the supplier |
| 22. | Is Service | Indicator specifying whether the supply is a service (Y/N) |
| 23. | Supply Type Code | Code indicating the type of supply (e.g., B2B, SEZWP, EXPWP) |
| 24. | Item Description | Description of the goods/services |
| 25. | HSN Code | Harmonized System of Nomenclature code for goods/services |
| 26. | Item Price | Unit price of the item (exclusive of taxes) |
| 27. | Assessable Value | Total value of the item after discounts but before taxes |
| 28. | GST Rate | Applicable GST rate (%) |
| 29. | IGST, CGST, SGST Amount | Tax amounts as per applicable GST rates |
| 30. | Total Invoice Value | Total invoice value including taxes |
E-Invoice Format
The e-invoice format refers to the presentation of invoice on the computer, regardless of the software used. While the schema dictates structure of the information, the format determines the delivery of this information to the consumer, whether as a PDF, printed format, or on-screen.
You can also customize the format to match a business’s branding and preferences, but you must include all fields required by the e-invoice schema. Some of the requirements include the invoice reference number (IRN) and the e-invoice QR code to verify the invoice.
Parties Involved in E-Invoice Generation
Several key parties play a critical role in maintaining the E-Invoice system and ensuring compliance:
- Supplier: The entity preparing and delivering an invoice in an electronic format as required by the specific e-invoice system.
- Buyer: Supplier shares the invoice to the recipient for their records and for claiming the input tax credit.
- Invoice Registration Portal (IRP): The government portal which validates the E-Invoice, generates IRN, and the QR Code of e-invoice.
- GST Network (GSTN): It also helps in the transmission of the e-invoice and their integration with other GST systems for the e-invoicing process.
E-invoicing Process in GST
The E-Invoicing in GST incorporates real-time verification and synchronization with the tax return options in the Indian GST structure. The steps below further elaborate on the process of e-invoicing from the generation to automated reporting in accordance with GST.
- E-Invoice Generation: It starts with the business creating a standard invoice from its current accounting software or Enterprise Resource Planning (ERP) system. However, for this invoice to be GST compliant, it should be in a format as defined by the GST Network. The information contained on the invoice must include suppliers and buyers’ information, invoice number, and the taxable value and amount.
- Uploading the Invoice to the IRP: Next, the data must be submitted to the Invoice Registration Portal (IRP) for e-invoice registration purposes. The system automatically transfers these details to the e-way bill system, which generates an e-way bill for transporting goods. Both the e-invoice and the e-way bill are necessary when goods transit over a certain distance or exceed a specific threshold.
- Generating the Invoice Reference Number (IRN): When the user uploads invoice to the IRP, the portal analyzes the data and generates an invoice reference number (IRN) for the invoice. In the context of e-Invoicing in GST, the IRN functions as a reference number, integrating the invoice into GST system.
- QR Code Generation: At the same time, the IRP creates an e-invoice QR code, which reveals invoice details, including the supplier and recipient GSTIN numbers, the invoice number, date, & IRN. This QR code incorporates into the invoice in such a manner that it would not be difficult for anyone to encode it again. The e-invoice QR code is more significant during transportation for authenticity variance.
- Validation by the IRP: The IRP also validates the e-invoice to ensure that the uploaded information does not contradict the GST provisions. It runs thorough checks for duplication and ensures proper formatting of the invoice. Once validated, the IRP uses a digital signature in GST and sends it back to the business along with the IRN and QR code.
- Automatic Transmission to GST and E-Way Bill Systems: Upon e-invoice validation, the IRP then sends the invoice data to the GST portal. This linking also facilitates the automatic mapping of invoice fields with the intended GST returns such as GSTR-1 and GSTR-2A. Furthermore, for the transportable goods, the same data transmits to the e-way bill system. This process supports the integration of e-invoice system with the e-way bill generation.
- Distribution to the Buyer: Once the user validates and registers an e-invoice, they can send it to an e-invoice to a buyer. Thus, the buyer can verify the invoice using the e-invoice QR code or IRN on the GST portal.
E-Invoicing Requirements in India
E-invoicing in India has evolved significantly, with its scope expanding over time. Below is a breakdown of its applicability based on turnover, transaction types, and mandated time limits for e-invoice generation.
1. E-Invoicing Applicability Based on Turnover
The Indian government introduced e-invoicing in a phased manner, making it mandatory for businesses based on their annual aggregate turnover.
| Turnover Threshold | Effective Date |
|---|---|
| Above ₹500 Crore | 1st October 2020 |
| Above ₹100 Crore | 1st January 2021 |
| Above ₹50 Crore | 1st April 2021 |
| Above ₹20 Crore | 1st April 2022 |
| Above ₹10 Crore | 1st October 2022 |
| Above ₹5 Crore | 1st August 2023 |
As of 1st August 2023, businesses with an annual aggregate turnover exceeding ₹5 Crore in any financial year from 2017-18 onwards must comply with e-invoicing regulations.
2. E-Invoicing Applicability Based on Transaction Type
E-invoicing is currently applicable to business-to-business (B2B) transactions, including supplies made to registered persons, exports, and deemed exports. However, the Indian government has been considering its extension to business-to-consumer (B2C) transactions as well. During its 54th meeting on 9th September 2024, the GST Council announced a pilot program for B2C e-invoicing in select sectors and states. The objective behind this initiative is to improve tax compliance, reduce fraudulent transactions, and enhance invoice traceability. If the pilot is successful, mandatory B2C e-invoicing can soon become mandatory by 2026-27.
3. E-Invoice Generation Time Limit
The government has also imposed strict timelines for e-invoice generation to ensure timely reporting. Initially, there were no defined time limits, allowing businesses to report invoices at any time after issuance. However, from 1st May 2023, a 7-day reporting deadline was introduced for businesses with a turnover of ₹100 crore and above, requiring them to upload e-invoices on the Invoice Registration Portal (IRP) within 7 days of generation.
With a recent advisory on revised threshold for e-invoice generation time limit, a 30-day reporting limit is now mandatory for businesses with an Annual Aggregate Turnover (AATO) of ₹10 Crore and above, effective 1st April 2025. This means that the user has to report invoices, credit notes, and debit notes to the IRP within 30 days of issuance. For example, it is important to upload an invoice by 1st May 2025 if issued on 2nd April 2025.
These time restrictions aim to reduce tax evasion and ensure real-time reporting of invoices. Businesses failing to comply within the stipulated time frame may face penalties and non-compliance risks, making it crucial to adapt to these evolving regulatory requirements.
Exemptions from E-Invoicing in India
E-invoicing under GST is mandatory for businesses exceeding a specified turnover limit, but certain businesses, documents, and transactions are exempt from this requirement. Below is a breakdown of these exemptions:
1. Businesses Exempt from E-Invoicing
As per Rule 48(4) of CGST Rules, the following entities are exempt from generating e-invoices, irrespective of their turnover:
| Exempted Business Category | Reason for Exemption |
|---|---|
| SEZ Units (but not SEZ developers) | Special Economic Zones are excluded from e-invoicing. |
| Banks, NBFCs, and Financial Institutions | Regulated under RBI, they issue specific financial documents. |
| Insurance Companies | Operate under IRDAI regulations and issue specialized documents. |
| GTA (Goods Transport Agency) | Issues consignment notes instead of standard invoices. |
| Passenger Transport Services | Includes airlines, railways, and bus services. |
| Government Departments and Local Authorities | Exempt as per GST regulations. |
2. Documents Exempt from E-Invoicing
The following documents are exempt from e-invoicing:
| Document Type | Exemption Reason |
|---|---|
| Bills of Supply | Used for exempt goods/services, which do not attract GST. |
| Delivery Challans | These are not tax invoices but used for goods transportation. |
| Receipt Vouchers | Issued when advance payments are received. |
| Payment Vouchers | Used for transactions under Reverse Charge Mechanism (RCM). |
| Refund Vouchers | Issued when advances are refunded before issuing an invoice. |
3. Transactions Exempt from E-Invoicing
The following types of transactions are exempt from e-invoicing:
| Transaction Type | Exemption Reason |
|---|---|
| B2C Transactions (Business-to-Consumer) | E-invoicing applies only to B2B and export invoices. |
| Exempted Goods & Services | Transactions involving exempt or NIL-rated goods/services are excluded. |
| Import of Goods & Services | E-invoicing is only for outward supplies, not imports. |
| RCM Supplies by Recipients | If the recipient is liable to pay tax under RCM, e-invoicing is not required. |
| Free Supplies or Non-GST Supplies | E-invoicing applies only to taxable supplies. |
Benefits of GST E-Invoicing
GST E-Invoicing benefits businesses in the following ways:
- Reduced Errors: E-Invoicing in GST ensures a standard procedure of generating invoices in a specified format and validation of the same by a government portal- IRP. This process not only minimizes the discrepancies but also simplifies the GST reconciliation process.
- Automated Compliance: E-Invoicing in GST automates processes like e-way bill generation, auto-population of GST returns, and more, consequently reducing human intervention and administrative burden on businesses. This leads to accurate and timely GST return filing.
- Increased Efficiency: Automated and standardized invoicing helps businesses save time and costs associated with manual efforts, adding to the efficiency of the entire tax system.
- Reduced Tax Evasion: With real-time e-invoice reporting with the GST E-Invoicing system, it is quite difficult for businesses to find loopholes and underreport their sales or inflate their input tax credits. This way, the government achieves greater transparency and improved tax collections.
- Enhanced Cash Flow Management: With faster reconciliation and real-time e-invoice validation, businesses can avoid delayed payments. This consequently results in improved cash flow management and better financial stability overall.
- Efficient GST Audits: The e-invoice generation process facilitates easily tracible and verifiable invoices hence facilitating GST audits and making them straightforward. With easily tracible data, there are also minimum instances of disputes with tax authorities.
- Supported E-Invoicing Compliance for SMEs: E-Invoicing for SMEs simplifies GST compliance for small and medium-sized enterprises, bringing them on a level playing field with large enterprises.
- Better Legal Compliance: With the mandate of digital signatures in GST e-invoices, businesses ensure all documents are legally compliant and secure. This effectively protects them from potential legal concerns regarding invoice authenticity.
- Environmental Impact: With no paper usage for E-Invoicing, it is a great step in terms of environmental concerns. Traditional invoicing, on the other hand, was dependent completely on paper invoices.
Conclusion
E-Invoicing has brought a revolutionary impact to the invoicing landscape in India, offering multiple benefits. While this blog informs businesses about E-Invoicing, it might not be enough. There can be multiple challenges when it comes to adapting to E-Invoicing. Such challenges call for a modern solution- GSTrobo! GSTrobo® with its range of offerings including an automated E-Invoicing system helps businesses navigate their GST return filing processes effectively. All this while integrating seamlessly with your existing ERP. So, make a smart choice and opt for GSTrobo today.
