India is poised to witness growth of e-invoicing automation technology by leaps and bounds

The implementation of e-invoicing has now reached a critical stage with less than a few weeks left to the date of launch. The Centre is very clear of their intention to implement e-invoicing from October 1, 2020. Under such circumstances, it would be ill-advised of companies not to start preparing their internal business systems and tax management processes. It is highly unlikely that the implementation of this new system will be further deferred. Even in the rare scenario that it is pushed to a later date, it will only be so if it is crucial. This makes it urgent and imminent for industries to complete the first leg of integration viz. getting acquainted with the process of e-invoicing and selecting the right e-invoicing solution partner.But even before industry players begin this process, they should brush up on the basics and recent updates of e-invoicing.

E-invoicing threshold expanded to INR 500 crores turnover

In a recent notification issued by the Central Board for Indirect Taxes and Customs, it was announced that e-invoicing would be mandatory from October 1, 2020. However, the initial turnover threshold of 100 crores has been expanded to 500 crores (at PAN level in a financial year) for now. Around 48,000 GSTINs contribute to over 45% of the tax revenue and are above INR 500 crores turnover. Each of these companies has received notifications from the Centre apprising them of the new system and asking them to prepare to integrate their tax operations with e-invoicing aligned software. Depending on the response after implementation, this threshold is expected to decrease to INR 100 crores turnover. 

Sample e-invoicing print provided by NIC 

A recently published sample e-invoice document on the NIC portal features an acknowledgement number and date. When a response is received from the IRP, it contains a 64-digit IRN, an acknowledgement number and a date. The QR code must be printed on the invoice where it is readable, and it should not be printed on a separate paper. However, the printing of IRN is not mandatory. Acknowledgement number and acknowledgement date returned by IRP are only for reference purpose. These need not be printed on the invoice.

Version 1.03 of e-invoicing schema released 

The National Informatics Centre (NIC) released a new vision of the standardised schema about a month ago, providing essential information for developers to integrate the e-invoicing. NIC-IRP has shared this new schema along with other information through APIs with ERPs and financial accounting systems. The home page is accessible from anywhere without any login and provides complete details on the APIs exposed so that developers can acquaint themselves with the system mechanism. 

The new schema available on sandbox can have three categories of fields – mandatory, conditional, and optional. There are some new validation rules or checks which have been introduced. Because of these checks, taxpayers will have to consider providing data for some of these optional fields, because if they don’t then while running those validation checks, the government portal will reject their transactions. Let us take an example and see – The IGST field is optional. But there is a check which says that taxable amount multiplied by tax rate should be equivalent to the tax amount. Now for transactions where taxpayers have kept IGST field blank, it is possible that with the new validation check in place the line item or the transaction could get rejected by the NIC.

Suitability for e-invoicing

In a notification dated July 30, 2020, it was announced that a few categories would not fall under the purview of e-invoicing. These include - 

• Special Economic Zone Unit (SEZ) including Free Trade Warehousing Zone (FTWZ)
• An insurer or a banking company or a financial institution, including a Non-Banking Financial Corporation or NBFC
• Goods Transport Agencies who provide services to transport of goods by road and issues consignment notes
• Registered persons supplying passenger transportation service
• Registered persons supplying services by way of admission to the exhibition of cinematograph films in multiplex screens.

Even in some cases such as the following, the generation of IRN is not required:

• Self-invoices for inward RCM supplies (but needed for outward RCM supplies)
• Self-invoices for import of services
• Invoices issued by Input Service Distributor (ISD)

However, supplies made by notified persons to SEZ would need to generate e-invoices. As a facilitator, e-commerce operators may generate IRN on behalf of a supplier, but such platforms must be registered as an e-commerce operator under GST.

Once companies are all caught up on the critical updates around e-invoicing, the next goal is to familiarise with the factors that companies must consider before they implement e-invoicing solutions. 

If we look at the options to generate an IRN, there will be a manual offline utility where the taxpayer can copy-paste the required field details, upload on the invoice registration portal, generate IRN and get the JSON file. But they will face challenges with the completely offline manual tool where there are multiple invoices and when they will need to write back the 64-digit IRN with invoice details to their ERP.

Whether the business has one invoice or one lakh invoices, this manual offline tool should be used when no other options are working from a business continuity standpoint. It is highly recommended that businesses should look for an integrated solution for e-invoicing which can help them send the generated JSON file from IRP to their ERP.

With e-invoicing drawing near, there is an urgent need to review the existing accounting systems or ERPs adapted by businesses and oversee a complete overhaul of related mechanisms to successfully integrate the newest reforms under the Goods and Services Tax (GST). Now that companies only have a limited number of weeks before e-invoicing is rolled out on October 1, they need to adopt an aggressive approach and modify their accounting and tax technology systems. Companies above the revenue threshold should finalise the integration plan with their e-invoicing solution provider and ensure that recent updates to the invoice schema are implemented. To avoid any glitches, companies need to test the new updates and ensure that all associated vendors have been identified and brought up to speed with the changes.

E-invoicing is an initiative that was first introduced in January this year so that taxpayers could familiarise themselves with the system voluntarily. Now that it is all set to become mandatory from October 1, 2020, companies have barely few weeks to align themselves with the new system, choose a partner who can handhold them through the entire process to make the journey from e-invoices to GST compliance seamless. It is for now that companies over INR 500 crores will need to prepare for e-invoicing. Still, the new mechanism will gradually bring companies with lower turnovers also under its ambit. This means companies with annual revenue below INR 500 crores need to start finalising plans with their IT teams, upgrade and integrate their ERPs with e-invoicing solution. As these companies will have enough time, they should better utilise that to get acquainted with the system and even test the mechanism well in time for the next phase of the rollout. 

Avalara's India GST e-Invoicing Solution can help you connect multiple data sources like ERP, e-commerce platforms, accounting systems through API integration as well as direct upload by supporting multiple data formats. Avalara will help you with your preparation for the upcoming mandatory e-invoicing regulations by helping you get on the right track. To start with, we will:

• Understand your requirements 
• Assess ERP integration needs
• Choose the right solution
• Automate GST returns and e-way bills
• Make invoice reconciliation a cakewalk
• Set up GST calculation engine
• Help with GST registration, if required

If you are looking for an e-invoicing software, let our team of solution experts help you. Reach out to us here.

For more information, check out our India GST e-Invoicing solution announcement.