Updated on 10 Nov 2020: E-invoicing is mandatory for taxpayers having aggregate turnover above Rs. 100 Cr from 01st Jan 2021 | GST Notification 88/2020
Updated on 23 July 2020: Taxpayers with turnover of Rs. 500 cr & above in the FY 2019-20 are mandated to generate e-invoice from October 2020. Login to the e-invoice portal enabled.
The e-invoicing implementation was pushed to 1st Oct 2020 in the 39th GST Council Meeting. Though it appears to be a respite on the face, and gives time for businesses to be prepared, the overarching impact on e-invoicing on the business process, IT system and other compliances such as GST returns, and last but not the least COVID-19 impact makes the deferment time seem not enough.
With e-invoicing implementation, both the Government as well as entities, stand to benefit. However for the benefits to reap in the future, efforts and investment is needed now to get the systems and processes ready. Just for a quick recap, e-invoicing in India is two-fold – a standard for entities to adopt internally and a system for registering the generated invoices.
The first version of e-invoicing specification was released in Oct 2019 and subsequently, there have been changes in the specification. Along with specification, a set of APIs under GST and trial system is also made available in early Jan 2020, which can be used by taxpayers for testing. On 14 May 2020, a new version of API specification was released.
Change in the Business process as per Second E-invoicing API Specification Released
In the new version, there is no data field related changes and hence does not impact the IT system work done by the business so far. However, now that E-invoicing and E-way Bill generation can be done simultaneously, entities need to revisit and consider if any changes are required in their business processes.
Well, does that sound like going backwards?
Doing the tasks already done maybe a few months ago?
Entities have been busy conducting gap analysis and updating their internal IT systems as needed. And needless to state, there will be challenges to be overcome and strategic decisions to be taken, for being fully e-invoicing ready.
Given the time available now for being prepared, let us ponder over a few decisions at hand –
1. Aligning internal systems to the e-invoicing implementation standard
The e-invoicing format published by the Government has about 150 data fields and is based on the best practices followed globally and takes into account some of the industry peculiarities. However, all the internal data fields may not be needed to be fully mapped to the e-invoicing specification. Hence the decision to be taken is whether to go for full overhauling or to meet the minimum e-invoicing implementation compliance requirements. We have listed down a few factors that may help you in decision making:
|Heads||Only to meet the compliance requirement||Complete overhaul of invoicing process|
|Internalising e-invoicing standard||Update in the IT systems be limited to the mandatory items||Full adoption and alignment to e-invoicing standard|
|Scope of gap analysis||Identify if the mandatory fields for generating IRN are captured in current system and if not, provide for the same||Identify all items being captured currently and its fitment to the e-invoicing standard and the changes required|
|Impact of IT system||Minimum Change to internal system||Significant changes in existing system|
|Automating data input for purchase invoices||
To the extent of data fields available in the IT system and information uploaded by suppliers.
Drawback if supplier has adopted full e-invoicing standard and all data is made available
|To the extent of data fields information uploaded by supplier|
|Invoice templates and printing||Minimum changes to include the IRN related details. Rest of the custom template||May require considerable changes. Not every component of current invoicing templates could be met e-invoicing standard|
At the outset it could appear that meeting minimum requirements is the fastest way forward. However, the compelling reason for internalising e-invoicing standards should be to bring efficiency in the processes. e-invoice at large will help to automate data input of purchase invoices and sharing of self-invoices with counterparties. More the adherence to standard by all the parties in the supply chain, better is scope for all the participants to gain efficiency.
2. Revisiting billing system and processes for e-invoicing implementation
In addition to the standard data fields, there are workflow and validation rules defined for e-invoicing. These could impact the way billing processes are currently carried out. Some such rules are
- The document data can be that of either today or yesterday. There is a window of 24 hours a day to generate an IRN and IRN cannot be obtained for backdated invoices.
- The document number cannot start with 0. If any invoice numbering starts with 0, the same needs to be modified in the billing system
- Maximum of 1000 line items will be allowed. Either separate invoices will need to be created if the line items are exceeding 1000 or alternatively aggregate or group the line items so as to fit within the limit.
- IRN can be generated by suppliers. So in case of RCM transactions, where usually invoices are generated by the recipient, now the supplier would need to generate. While are some categories of taxpayers excluded from e-invoicing implementation, and there are exclusions, for the cases where applicable, generating RCM invoices by suppliers might be necessary
Further, there are rules related to tax amounts, acceptable rounding off margin etc. which entities need to carefully analyse for the impact on their current processes.
3. Meeting the B2C E-invoicing Implementation Requirements:
E-invoicing mandate is all about B2B transactions, however, for entities having turnover above ₹500 crores, they also need to have a self-generated QR code on B2C invoices. Looking at the nature and volume of B2C transactions, the QR codes are best generated by the systems installed at the point of sale. But it is easier said than implemented owing to some challenges as listed below
- Numerous locations from where the sales are effected and systems at all locations need to be updated
- Remote locations could have connectivity and power issues and hence standby options need to be in place
- Systems at point of sale may be dated and not equipped to generate QR code. Overhauling entire system could be expensive
The good part of B2C invoices is that the QR code is self-generated and does not require interaction with the Government’s system. Businesses can define their own QR codes, however, it is recommended to keep it aligned as closely as possible to the B2B QR code for greater consistency.
Beginner’s guide to
e-invoicing mandate in India
4. It’s not only IRN but also E-way bill
The new API released in May 2020 has the E-way bill generation flow enabled.
After generating E-way bill number, all subsequent activities such as updating Part b or extension of E-way bill or cancellation etc. are to be done through the E-way Bill System. E-way Bill is needed before the movement of goods and there can be a time gap between IRN generation and obtaining E-way bill number.
With e-way bill flow enabled along with IRN, entities now need to decide the flow they want to adopt. The E-way bill flow, which is currently available on the E-invoice trial system, is summarised below
|Data you send||Response you get IRP||Points to note|
5. Invoice Printing
Be it in digital format or physical copy, the invoice can be shared only after it is successfully registered, the proof of which is getting an IRN and QR code from the Government system. The IRN and QR code will now need to find a place on the invoice format shared with the receiving party.
While the e-invoicing standard does not specify any pattern for invoice template, entities need to ensure all relevant data gets printed on the invoice. Entities need to decide the changes to their invoice formats which could be more than one based on different transaction types. The QR code, which has select details of the invoice itself needs to be of the proper size for it to be scannable.
These are some of the key areas which need to be strategized considering the overall impact of e-invoicing on current practices, cost and efforts. While these actions are internal to entities, there are external factors which at times are more challenging to address. Updates and revisions to the E-invoice standard and API specifications, being one of the main concern areas. Rework and at times, revisiting the approach becomes necessary to incorporate the changes in the schema.
The frequent changes in specification and the e-invoicing mandate itself might appear tedious and overwhelming; however, standardisation and interoperability of data, the efforts and cost invested in becoming e-invoicing ready could be worthwhile.
And that’s how we look at e-invoicing at IRIS. E-invoicing combined with E-way bill and GST compliance – our integrated IRIS GST solution will assist you in coping with all current and future compliance in a seamless and hassle free manner.
IRIS Onyx is an automated, integrated and seamless e-invoicing solution!
It is a one-stop e-invoicing solution that can integrate with your billing systems seamlessly in multiple ways and generate IRN with zero disruption to your business.