E-Invoicing under GST was introduced 2 years back in 2020 to facilitate automation and compliance for businesses. E-Invoicing is one of the biggest reforms under GST. It fetched numerous questions about its meaning, practicality and of course, benefits.
E-Invoicing or electronic invoicing, is a system designed for B2B invoices and several other documents to be electronically authenticated with the GSTN system.
It is how businesses submit an already generated standard invoice to a common portal and get it registered with the government systems to generate a unique identifier – Invoice Registration Number (IRN). In addition to the IRN, the IRP also provides a QR code to each invoice for easy interoperability of physical invoices.
It all began in the 35th meeting of the GST Council as they took a decision to implement a system of e-invoicing. Initially, it covered only specific categories of persons, mostly larger corporations. Eventually, it expanded to cover small and medium businesses as well. The mandate was scheduled to go live from April 1, 2020, but it was pushed to October 1, 2020, starting in a phased manner.
In the E-Invoicing system, an identification number is issued to every invoice. This is done by the Invoice Registration Portal. The identification number is managed by a government-authorised portal and the registered invoice data is simultaneously shared with the supplier as well as the GST portal at the same time. From the GST portal, this info is auto populated in the buyer’s GSTR 2B.
This real-time information transfer makes manual data-entry redundant when it comes to filing GSTR-1 returns since the information is directly passed to the GST portal by the IRP.
The identification number is called an Invoice Reference Number, or the IRN.
Benefits of E-Invoicing | How does E-Invoicing help businesses?
Let us explore some of the advantages.
Since the introduction of GST, companies are struggling to match their purchase data with supplier’s returns in GSTR 2A. The computer readability and auto-population of E-Invoices reduces mismatch errors and aids in data reconciliation.
With invoice data available in a consumable format, it opens credit opportunities for businesses as many lenders have already started building their credit models around GST data. This gives simpler access to credit avenues like bill discounting or financing.
The IRN and QR code and JSON Response make invoice data interoperable. Hence, E-Invoices created on one software can also be accessed by another, thereby reducing data-entry errors.
Easier GST filing since most details get auto populated.
The status of invoices can be tracked in real-time.