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E-invoicing under Goods and Services Tax - An Overview

  • Nov 26, 2019 | Divita S Gupta

It has been two years since the Goods and Services Tax (GST) was first levied in India. Naturally, like any other newly launched system, the mechanism, in this case, GST return filing system, has seen its share of glitches and teething problems. In a bid to curb issues that seem to make the filing of returns a cumbersome task, the Goods and Services Tax Network, announced the introduction of some radical changes including a New GST return filing system or GST 2.0.

Under the new GST return filing system, taxpayers would have access to simplified return forms. Taxpayers will also be introduced to an e-invoicing system (this will be applicable to specified categories of taxpayers for now). Here's an overview to help you understand e-invoicing under Goods and Services Tax in India.

At the moment, businesses issue invoices using accounting software and the same are uploaded to the online GST portal while filing returns. Businesses are also required to generate e-way bills while moving goods across the country and ensure that those e-way bills and invoices match for smooth and efficient filing of GST returns.

The proposed e-invoicing system will witness the integration of GST returns and e-way bill systems. Under the new e-invoicing system, business invoices will be authenticated electronically by the GST Network for use on the common GST portal. Information will be uploaded to the portal in real time and businesses won't have to make manual and/or multiple data entries every time they file their returns. This system will also eliminate the need to generate separate e-way bills used while transporting goods. In a nutshell, e-invoicing will automate multi-purpose reporting with a one-time input of invoice details.

How does e-invoicing work?
Unlike what most taxpayers perceive, e-invoicing is not the generation of an invoice on the GST portal. This system simply ensures that your invoices are electronically authenticated by GSTN. An Invoice Registration Portal (managed by GSTN) will issue an identification number against each invoice. When a business submits the standardised invoice to the common portal, all invoice information will be automatically read by the system and transferred from the e-invoicing portal to the GST and e-way bill portals in real time. Using the identification number, business can access that information on GST and e-way bill portals.

Standardized invoice format
After the 37th GSTN Council Meet in September 2019, the GSTN, in association with the Institute of Chartered Accountants of India, released an e-invoice format in an MS Excel template. This invoice format is compliant with GST laws as well as other Indian tax laws and adheres to international standards. As such, GST Suvidha Providers/GST Applications Providers will be required to adhere to this prescribed format for invoice generation moving forward.

The GSTN’s e-invoice will include an e-invoice schema, a Masters and an e-invoice template. The schema will consist of technical field names along with optional or mandatory description of each field. It will also contain sample values and reference notes for easy understanding. A Masters will specify predefined inputs for certain fields including State Code, Type of Invoice etc. This will be followed by an e-invoice template prescribed as per tax laws and colour coded mandatory or optional fields.

Why e-invoicing?
One of the major issues faced in the current version of the GST returns filing system is that information is uploaded manually across varied invoice formats - obviously there is a large scope for human error. Subsequently, taxpayer returns are riddled with errors resulting in mismatched data and a large gap in data reconciliation. Hopefully, with a standardised invoicing template and the fact that this template can be read by any accounting software, invoices will be interoperable. Fewer errors will lead to faster availability of input tax credit, lower probability of tax audits, an efficient collection system and a possible containment of tax evasion.

A voluntary e-invoicing system is expected to be implemented by the GST Network starting January 2020 and is mostly likely to commence in phase wise pockets.

Avalara is an experienced application service provider (ASP) and partner of authorized GST Suvidha Providers (GSPs). To understand how our cloud-based application Avalara India GST can help you with GST compliance automation, contact us through https://www.avalara.com/in/products/gst-returns-filing

For more information on GST and GST Compliance, visit www.avalara.com

Avalara helps businesses of all sizes get GST return filing, e-way bill generation and e-invoicing right with cloud-based GST compliance solutions in India. Goods and Services Tax (GST) rates, rules, and regulations change frequently. Although we hope you'll find this information helpful, this blog is for informational purposes only and does not provide legal or tax advice.
Avalara Author
Divita S Gupta
Avalara Author Divita S Gupta
Divita has served as a writer and editor for top financial services organizations in India. She has written on topics like mutual funds, insurance, taxes, SME financing for globally recognized banking and financial organizations including ICICI, Aditya Birla Group, News Corp. With a Masters in Business Administration from Symbiosis International University, she currently owns a small business in Mumbai.