What is GST e-Invoicing?
What is an invoice?
An invoice records the seller and buyer tax details, the items sold, their quantity and unit price, and the grand total with tax.
Now imagine the sheer amount of invoices created monthly across India. According to a Bloomberg report in 2017, more than 350 crore invoices are created on a monthly basis by 80 lakh businesses across India¹. This translates to reporting these sales invoices and filing GST Returns. This brings in operational, and compliance overheads as well as gruelling manhours going into filing and reconciliation of issues like non-reporting, under-reporting and over-reporting. The compliance overheads that come with running a business are also one of the reasons that many businesses avoid registering for GST.
e-Invoice, the game-changer
On 1st Oct 2020, the GST Department introduced the e-Invoicing system to businesses, implemented in a phased manner based on the annual turnover. e-Invoice system is applicable to B2B sales, where B2B stands for registered business (supplier) to registered business (buyer). The goal is to better the ease of doing business in India by handling the overheads of reporting, reconciliation and filing.
How is it game-changing?
e-Invoice is like a normal sales invoice, the only difference is that now there is a standard structure that needs to be followed for generating invoices through an Invoice Registration Portal (IRP). Under the e-Invoicing system, an identification number called Invoice Registration Number (IRN) will be issued against every invoice by the IRP.
The clever thing is that all e-Invoices generated will port to the GST Portal after 2 days and the GSTR will already have B2B sales data. Businesses now only need to report B2C and other types of invoices to GSTN. Not just this, there are other benefits like
- No need for manual data entry for filing GSTR-1
- Reduction in processing costs and disputes
- Eliminates the huge gap and overheads involved in data reconciliation under GST
- Interoperability as e-Invoices created on one software can be read by other tools
- Relevant invoice details would be auto-filled in the various GST returns, which is especially helpful for generating part-A of E-Way bills
- Improving overall business efficiency
End-goal and benefits to the India Inc
The e-Invoice system is a move not only to improve business efficiency but to also curb tax evasion. By mandating sales invoice reporting as per applicability, the data is seeded to the IRPs which then port the data to the GST Portal. With GST-registered businesses in 2023 nearing 1.4 crores, the GST gross revenue is also growing. April 2023 clocked the highest-ever GST revenue collection of 1.87 Lakh Crores². The e-Invoice system adds much necessary oil, stability and trackability to the GST engine.
e-Invoice Applicability
e-Invoice system was launched with the mandate applicable only to businesses having turnover of more than 500 crores. At the end of the first launch month itself (31st Oct 2020), close to 5 crore e-Invoices were generated³.
As the e-Invoice system enters into its 6th phase, businesses having turnover over 5 crores will be liable to generate e-Invoices for all B2B sales. This is applicable from 1st August 2023⁴. If a business has an annual aggregate turnover of over Rs. 5 crore in any previous financial year from 2017–18, it will be mandatory for them to generate e-Invoices.
It would be 3 years from the introduction to the e-Invoice system on 1st Oct 2023. And the turnover applicability has gradually decreased during this period. This is to bring all businesses on board the e-Invoice system in a planned manner instead of a brute-force manner. This gives businesses time to prepare and automate their GST as well as e-Invoicing workflow as per the compliance requirements laid down by the GST Department.
How does Sandbox fit in the scenario?
Sandbox is a SaaS-based API platform that enables businesses to automate end-to-end tax compliances. Businesses can plug Sandbox API into their existing workflows and/or ERP Accounting tools for automating GST e-Invoicing as well as GST Return filing and reconciliation.
e-Invoice generation using API
Why Sandbox
- In-depth and rich APIs, compliant with the latest government guidelines
- Developed by developers, for developers
- Reliable REST-like API with 99.99% uptime
- Exciting, up-to-date API docs
- No setup and annual maintenance fees
If you are looking to automate tax compliance, you can get started with a Free Trial or drop a note on the Sandbox contact page!
References
¹The Economic Times. 2017. “3.5 Billion Invoices Every Month! All about the Technology That GST Will Bank on from July,” May 30, 2017. https://economictimes.indiatimes.com/news/economy/policy/3-5-billion-invoices-every-month-all-about-the-technology-that-gst-will-bank-on-from-july/articleshow/58907708.cms.
²‘GST System Statistics | Goods and Services Tax Council’. n.d. Accessed 9 July 2023. https://gstcouncil.gov.in/gst-system-statistics.
³“E-Invoice — A Path Breaking Initiative Completes One Month on 31st October.” n.d. Accessed July 6, 2023. https://www.pib.gov.in/Pressreleaseshare.aspx?PRID=1669430.
⁴“Central Board of Indirect Taxes & Customs Circular for E-Invoice Phase 6.” n.d. Accessed July 6, 2023. https://taxinformation.cbic.gov.in/view-pdf/1009732/ENG/Notifications.
