The GST council, in its 37th meeting, approved the phase-wise introduction of electronic invoices in India. The electronic invoice generation process includes a business registering on a specified Government portal, sharing details related to GST documents through the portal, and obtaining a unique number.
In this blog, we will understand the electric invoice generation process in detail.
The Government of India has defined a standard template for an invoice as per the global standards. The standard template known as an e-invoice will be acceptable across the entire invoicing ecosystem. It means that an e-invoice generated by any ERP/software/tool would be compatible and understandable by any other ERP/software/tool.
For those businesses that don’t have an invoice system or ERP, the government provides an offline tool to assist them in electronic invoice generation.
As per the guidelines, initially, only the companies (based on PAN) having an aggregate turnover exceeding Rs. 500 crore in any preceding financial year (i.e. from the FY 2017-18 till present) had to generate the e-invoice. That said, from April 1st 2021, e-invoices under GST will become mandatory for businesses having a turnover of Rs. 50 crore and more in the previous financial year. To know more about e invoice applicability and possible solutions available with Microsoft Dynamics read this article, click here
The turnover calculation will include stock transfer transactions, B2B transactions, purchase return, etc. That said the following business entities are exempt from issuing e-invoices:
The following transactions are mandatory to report:
The following transactions are out of scope for e-invoicing:
The company should report the following documents to the e-invoice system:
The company need not report the following documents:
The e-invoice generation process includes the following steps:
The company uses the standard template of the e-invoice to generate an invoice. One invoice can have a maximum of 1000 lines. If a seller has more line items, they may contact the NIC support team with a few sample invoices. Other charges leviable to GST should be added as a separate line item in the e-invoice schema, e.g. Freight charges, insurance, packing and forwarding, amortization charges etc.
Then register the invoice on the Invoice Register Portal, the portal specified by the government. Each organization has to register on the portal for updating the e-invoices. IRP uses PAN number for verification purposes.
An organization with multiple GST registration numbers has to register for each of the numbers. When directly uploading on the IRP, the organization should have the registration username and password, client ID and client secret.
Initially, government had said to upload the invoices within 48 hrs, but currently, there is no specific timeframe mentioned in the guidelines, but currently, there is no specific timeframe mentioned in the guidelines.
Once the invoice is updated, a unique ID, Invoice Reference Number (IRN), is created. IRN has to be printed on the invoice for validation purposes by the company.
IRN is a combination of the following parameters:
An organization with multiple GST and registration numbers have to get the user Id and password for each registration number to have a valid registration. They can then upload the corresponding invoices for each registration number. The government will validate the information and then generate IRN.
A QR code is generated post validation and will include the IRP.
The companies generate a Dynamic QR Code for the buyer to help them make payments. If this is published, it will not be relevant.
IRP will return only the signed JSON and not a PDF. The corresponding ERP or Accounting and Billing software system can generate PDF for internal use or issue it to the buyer. The QR code is mandatory for an invoice.
The IRP will also give an Acknowledgement No. and Date. These are for reference purpose only and need not be printed on the invoice.
In case of a cancellation, first, cancel the IRN in the ERP, followed by the invoice cancellation. Also, partial cancellation of an e-invoice is not permitted.
This entire process is a new one and may feel overwhelming for a business. To make the transition to this new system seamless, Microsoft offers Dynamics 365 Finance solution for your finance team. For more details about it, connect with us at CocoonIT services. We are a Microsoft Dynamics 365 Gold Partner in Mumbai, India. To know more about Microsoft Dynamics 365 Finance solution, refer to the next blog in this series.