India e-invoicing

Electronic invoicing (e-invoicing) was introduced in India by the GST Council after the adoption of GST — an indirect tax in India applied to the exchange of goods and services. E-invoicing was implemented in October 2020 for taxpayers with a turnover exceeding INR 500 crore. Since then, the threshold has been amended numerous times to extend e-invoicing liabilities to more and more businesses in a staggered approach:

• January 2021: INR 100 crore
• April 2021: INR 50 crore–INR 100 crore
• April 2022: INR 20 crore
• October 2022: INR 10 crore
• August 2023: INR 5 crore

The objective of the Indian government is to prevent invoice fraud and gain visibility into transactional data. Businesses will also be better equipped to synchronise their sales data and simplify input tax credit claims, ultimately contributing to a broader GST base and greater transparency in the taxation system.

E-invoicing can also help to facilitate transaction standardisation, reducing disputes among transacting parties. This can in turn improve payment cycles and overall business efficiency.

Under India’s e-invoicing system, applicable businesses must report B2B and export invoices to the Invoice Registration Portal (IRP) and get it verified by the Goods and Services Tax Network (GSTN). Businesses then receive a unique Invoice Reference Number (IRN) and a QR code.

E-invoicing in India can help businesses reduce their reporting requirements and workload, as the one-time reporting of B2B invoice data within an e-invoice means it will not have to be replicated in multiple forms such as GSTR-1 or an e-way bill (GSTR-1 can be auto-populated with the e-invoice data; an e-way bill can also be generated using e-invoice data). This can help to reduce the chances of errors in transcription, as data is reported to the relevant tax authorities as well as the buyer to prepare their inward supplies (purchase) register.

Governments around the world are implementing e-invoicing to simplify administration for tax authorities, obtain greater transparency into transaction data, and decrease the amount of revenue lost to fiscal fraud and tax evasion.

For businesses, e-invoicing is an opportunity to streamline their finance functions, reduce costly manual data entry errors, and save on time and costs associated with manual processes. E-invoicing can make tax compliance more collaborative for both parties.

Businesses operating in India must first raise an invoice. Credit and debit notes must also be processed through the system. The invoice is based on an agreed schema.

Export invoices are included within the new schema.

The e-invoice format in India is based on the Pan-European Public Procurement Online (PEPPOL) standard/Universal Business Language, and adapted for the Indian market and consumers. PEPPOL enables trading partners to exchange standards-based electronic documents over the PEPPOL network (based on a 4-corner model). These documents include e-Orders, e-Advance Shipping Notes, e-Invoices, e-Catalogues, Message Level Responses, etc.

The use of PEPPOL is governed by a multilateral agreement structure owned and maintained by OpenPEPPOL.

Initial requirements include the creation of a unique Invoice Reference Number (IRN) for each invoice. This will be generated by application to the Invoice Registration Portal (IRP), which is the e-invoice clearing system. This is done via a JSON file — the open standard file format and interchange format.

Businesses must submit e-invoice details to the IRP in JSON format. The IRP will then generate an IRN. The IRP will add its signature to the invoice data and a QR code to the JSON. The IRP will then return the digitally signed JSON with an IRN back to the business with a QR code.

Approved e-invoices will then be available to the customer and vendor on the GSTN or from approved e-invoice providers. In printed or PDF form, this will include a QR code. The IRP sends the approved invoices to the GST portal and GST returns. The GSTN will therefore be able to produce draft VAT returns for taxpayers.

The Indian government has mandated that businesses with an annual turnover exceeding INR 5 crore must adopt e-invoicing for all business-to-business (B2B) transactions. There are however a small number of exceptions. India e-invoicing shall not apply to the following categories of registered persons, irrespective of the turnover:

• An insurer or a banking company or a financial institution, including an NBFC
• A Goods Transport Agency (GTA)
• A registered person supplying passenger transportation services
• A registered person supplying services by way of admission to the exhibition of cinematographic films in multiplex services
• A special economic zone (SEZ) unit (excluded via CBIC Notification No. 61/2020 – Central Tax)
• A government department and local authority (excluded via CBIC Notification No. 23/2021 – Central Tax)
• Persons registered under Rule 14 of CGST Rules (OIDAR)