FEBRUARY 28, 2020

By Narendra Singhvi, Joint Partner, Lakshmikumaran & Sridharan & Anshul Kumat, Consultant

THE Goods and Services Tax (GST) is perceived to be a technology-driven and automated system for taxing supplies of goods and services. In such integrated system, the process of generation of invoices and their reporting in various statements/ returns by a supplier and their matching at end of the recipient is burdensome. It is in this background that the need for introduction of e-invoicing and its automatic reporting was felt and the said agenda was introduced in the 35th meeting of the GST Council.

In its 35th meeting, the GST Council approved the launching of a pilot project on voluntary basis for online generation of B2B e-invoices from January, 2020. Accordingly, a technical sub-group was constituted to look into technological aspects of e-invoices. The recommendations of the said sub-group were approved by the GST Council in its 37th meeting.

Hitherto, there was time-gap between generation of invoices, filing of statements/ returns declaring details of invoices and their matching at end of the recipient increasing the compliance burden. To ease such burden, the e-invoice system has been introduced to enable real-time reporting of transactions for relevant purposes, such as generation of e-way bills, filing of statements/ returns and digitizing the whole supply chain.

From its name, it appears that it is an invoice generated on computer. While most of the taxpayers are generating invoices from their systems only, there was still a gap in their reporting and related aspects such as e-way bills. To integrate all these requirements, the e-invoicing process has been introduced, wherein generation of invoices will take place in the normal course at the local system of the supplier, but by filling up the mandatory details at the central repository of the GSTN. Given the different practices followed by diverse industries, a standard format of invoice has been developed with certain details mandatory for all transactions and remaining optional details to suit the requirements of a particular transaction.

Generation of e-invoices in a standard format will enable interoperability across the systems and data generated at one system can be read and processed at the other system. It ensures reporting of invoices to a central system on auto-population basis, reducing the manual intervention. The sales and purchase registers will be updated automatically to enable the return filing process and generation of e-way bills. This will also reduce significantly the mismatching of details and reduction in ITC verification issues.

The seller would be responsible for generation of e-invoice, and would be required to report the same to the Invoice Registration Portal (IRP), which will generate a unique Invoice Reference Number (IRN) along with a QR code containing details of the invoices. The system will automatically update the ANX-1 and ANX-2 of the respective parties and which, in turn, would determine the tax liability of the seller and ITC claim of the recipient.

Further, the IRP system would ensure the de-duplication of invoices as the IRN generated would be unique. The QR code generated will enable quick view, validation and access of the invoices from the GST system from hand-held devices. The QR code will be easily verifiable by taxpayers as well the officers to validate the details

Vide Notification No. 68/2019-CT, dated 13.12.2019, sub-rule (4) has been inserted in Rule 48 of the CGST Rules, 2017 to provide that notified class of registered persons shall prepare invoice in prescribed form after obtaining the IRN by uploading information contained therein on the Common Goods and Services Tax Electronic Portal in the prescribed manner. Vide Notification No. 69/2019-CT, dated 13.12.2019, the Government has notified certain websites as the portals for purposes of preparation of e-invoices. Vide Notification No. 70/2019-CT, dated 13.12.2019, it has been mandated for registered persons, with aggregate turnover exceeding one hundred crore rupees in a financial year, to generate e-invoices in terms of Rule 48(4) of the CGST Rules for supplies to registered persons, i.e. B2B supplies.

Further, vide Notification No. 72/2019-CT, dated 13.12.2019, it has been mandated for registered persons, with aggregate turnover exceeding five hundred crore rupees in a financial year, to issue B2C invoices with QR Code. This notification has been issued in exercise of powers conferred by the Sixth Proviso to Rule 46 of the CGST Rules, which was introduced vide Notification No. 31/2019-CT, dated 28.06.2019, w.e.f. 01.04.2020. It needs mention that exercise of powers under the above provision is subject to recommendations of the GST Council. While the GST Council had recommended introduction of e-invoicing for B2B supplies, there was no recommendation of the GST Council regarding mandating of QR code requirements for B2C supplies. In such a case, the validity of the requirement introduced by Notification No. 72/2019-CT, dated 13.12.2019 is subject to question. Further, though assigning of QR code is an integral feature of e-invoicing, its mandatory generation in case of B2C supplies creates confusion, as there is no mandate of generating e-invoices in B2C supplies.

Introduction of e-invoicing is a milestone towards achieving the status of a completely automated GST administration. However, integration of this system with the overall dispensation will continue to be a challenge, particularly with new return formats being introduced this year.

[The views expressed are strictly personal.]