India: Key features of mandatory GST e-invoicing as from 1 October 2020 clarified

During a webinar held on 14 August 2020, senior representatives from India’s Goods and Services Tax Network (GSTN), National Informatics Centre (NIC), and Central Board of Indirect Taxes and Customs (CBIC) provided clarification of various important aspects of GST electronic invoicing (e-invoicing), which will be mandatory for business-to-business (B2B) supplies by certain GST-registered persons as from 1 October 2020. The NIC also has uploaded a note explaining the e-invoicing process to the e-invoicing portal.

Scope

• The e-invoicing requirements will apply to all B2B transactions requiring a tax invoice;
• Special economic zone (SEZ) units are to be excluded from the scope of e-invoicing; however, SEZ developers will be required to comply with e-invoicing requirements where their aggregate turnover during the financial year 2019-20 exceeds INR 5 billion;
• E-invoicing will not be required for self-invoicing under the reverse charge mechanism; however, e-invoicing will be required for outward supplies liable to GST under the reverse charge mechanism;
• E-invoicing will not be required for input service distribution invoices;
• Exempt categories of taxpayer (i.e., entities involved in goods and passenger transport, banking companies, non-banking financial companies, insurance companies, etc.) will be required to comply with the e-invoicing requirements for supplies other than their core business supplies where they are required to issue a regular tax invoice; and
• E-invoicing also will apply to business-to-government (B2G) supplies; clarification will be issued on which GST registration number should be used for supplies to government entities that are GST registered only for tax deducted at source (TDS) purposes.

Generation of e-invoices

• The e-invoicing schema provided on Form INV-01 contains the fields that will need to be reported to the NIC for e-invoicing;
• It will not be necessary for all the fields in the schema on Form INV-01 to be printed on the invoice issued to the customer; the format and content of invoices will continue to be governed by the existing provisions of the GST Law;
• It will be mandatory to include the quick response (QR) code somewhere on the invoice at a size that ensures readability by a mobile QR code scanner;
• It will not be mandatory for the invoice reference number (IRN) to be printed on invoice as it will form part of the QR code, nor will the IRN acknowledgement number or date be required to be shown; and
• The NIC are to release a mobile application on Android and iOS platforms to verify the validity of the QR code; it also will be possible to verify the validity of the code by uploading the e-invoicing JavaScript Object Notation (JSON) file on the e-invoicing portal.

Cancellation and other aspects

• It will be possible to cancel an IRN within 24 hours of its generation. However, where an e-waybill is generated for an IRN, the taxpayer will first be required to cancel the e-waybill before canceling the IRN;
• Once cancelled, an IRN cannot be generated again for the same invoice, it will be mandatory to cancel and reissue the invoice;
• Initially, it is not proposed that peer-to-peer sharing of the JSON files of e-invoices will take place, taxpayers will be expected to continue sending an electronic or physical copy of the invoices with the QR code to the recipients;
• E-invoice data will automatically be populated on Form GSTR-1, and taxpayers will be required to upload information relating to the remaining transactions (such as business-to-consumer (B2C) transactions, advances etc.);
• Returns on Forms GSTR-1 and GSTR-2A will not contain IRNs; however, there will be a facility on these forms to identify the transactions carried out through the e-invoicing mechanism; and
• It will be possible to download from the e-invoicing portal IRNs generated in the previous two days.

Proposed mechanism

Two diagrams presented during the webinar describe the proposed mechanism and flow of data for e-invoicing.

The first diagram illustrates the step-by-step flow of data from the supplier to the invoice registration portal (IRP) to generate an IRN.

The second diagram depicts the step-by-step flow of data from the IRP to the GSTN for automatic population of GST returns, and the subsequent flow of the data from the GSTN to the recipient.

It has been clarified that eligible taxpayers will be able to generate IRNs via the following mechanisms:

• Offline utility;
• Application programming interfaces (APIs) for direct connectivity;
• APIs via registered GST “Suvidha Providers”;
• API integration with a sister entity owned by the same parent entity and using the same public IP address; or
• E-waybill APIs (for taxpayers currently using these APIs).

Comments

The comments from GSTN, NIC, and CBIC representatives indicate that the government is fully prepared for implementation of mandatory GST e-invoicing as from 1 October 2020. The webcast is a welcome move, as part of the stakeholder outreach program, and we expect that the points addressed during the webcast will be further clarified shortly by way of a circular, guidelines, and/or FAQs.

Since the introduction of e-invoicing is only six weeks away, it is imperative that the implementation process is expedited to allow eligible taxpayers sufficient time for testing prior to 1 October 2020.

Sources – VATupdate.com, Deloitte