Businesses with turnover of over Rs 20 crore will have to generate electronic invoice for B2B transactions from April 1, the Central Board of Indirect Taxes and Customs had said.

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From April 1 last year, companies with turnover of more than Rs 50 crore were generating B2B e-invoices. This is now being extended to companies with turnover of over Rs 20 crore.

With this, more suppliers would be required to raise e-invoices with effect from April 1, 2022. If the invoice is not valid, input tax credit on the same cannot be availed by the recipient beside applicable penalties. Archit Gupta, Founder and CEO, Clear, shares his knowledge on how to generate e-invoice - step-by-step guide.

"An electronic invoice or e-invoice is a tax invoice declared by a GST-registered business with the e-invoice portal and approved by the GST Network. Currently, it covers Business to Business (B2B) transactions as Business-to-Consumers (B2C) transactions are exempt from e-invoicing. Every applicable business must follow the standard format or schema notified by the CBIC, especially those fields that are mandatory. Basic details, supplier and recipient’s information, invoice item details and document total are mandatory by nature. On the other hand, invoice item details and document total details are compulsory annexures for reporting," Gupta said.

"An electronic invoice or e-invoice is a tax invoice declared by a GST-registered business with the e-invoice portal and approved by the GST Network. Currently, it covers Business to Business (B2B) transactions as Business-to-Consumers (B2C) transactions are exempt from e-invoicing. Every applicable business must follow the standard format or schema notified by the CBIC, especially those fields that are mandatory. Basic details, supplier and recipient’s information, invoice item details and document total are mandatory by nature. On the other hand, invoice item details and document total details are compulsory annexures for reporting," he added.

Creation of invoice like before

"The first step involves the creation of an invoice on the taxpayer’s Enterprise Resource Planning (ERP) or accounting system as was carried out before e-invoicing became applicable. A small business mostly uses conventional accounting or billing platforms that may also be capable of running offline," he said. "A business can continue raising invoices in the normal course of business. However, the reporting of these invoices electronically requires some conditions to be fulfilled. It must be done as per the e-invoice schema along with mandatory details. Hence, small businesses should ensure that the e-invoice format is followed by them or by the software that they use for invoicing," he added. 

Generation of the unique IRN and signed QR code

He further explained "The next step involves the generation of the Invoice Reference Number (IRN) (also known as hash) and the signed Quick Response (QR) code. Every B2B invoice or debit note, or credit note must be reported using one of the modes approved by the GST Network such as API integration, offline based excel tools or SMS mode. As a result, a business obtains IRN from the e-invoice portal which is a unique number based on a hash generation algorithm. IRN is of 64 characters and is generated along with the QR code that is signed off by the GST Network. On the other hand, the QR code provides a quick view, sanitation check and access to the invoices from handheld devices. "

He advises, "The details of the two most popular modes of e-invoice generation actively used by businesses are given below.

Using the offline tool

"The business can upload the invoices in the standard format and can generate IRN in bulk. Visit the e-invoice portal available at https://einvoice1.gst.gov.in/, and access the bulk upload tool at “Help tab -> Tools -> Bulk Generation tools” and enter the details. Once the business prepares the bulk upload request file, upload it to generate the IRNs. Once the IRN is generated, the e-invoice portal will allow all details to be downloaded."

Using API (Directly with IRP or through GSP)

"A business can choose a registered GSPs (GST Suvidha Providers) for API integration between their system and the IRP. Alternatively, they can carry out the API integration directly with the IRP. Before the integration goes live, the taxpayer must get it tested in a sandbox environment. Either the business or the GSP must submit the test summary report on the sand-box website for the integration after which IRN generation can be made live. The IRN can be generated in real-time with a click of a button." 

"If the business is already integrated with API on the e-way bill system or the e-way bill system is being used by another GSTIN under the same PAN (sister-concern), API credentials will remain the same as the earlier one for use. Otherwise, the taxpayer must get the IP addresses whitelisted or registered on the e-invoice portal. Once that is done, testing is carried out to ensure no loopholes in the flow of e-invoice generation," he said.

Back-end processing of a validated e-invoice

"The signed data of the e-invoice will be transmitted to the GST portal where Form GSTR-1 of the supplier and GSTR-2B/2A of the customer will be auto-filled based on the information filled in the invoice. Wherever necessary, invoice data is used to auto-fill ‘Part A’ of the e-way bill. It reduces manual efforts and facilitates the generation of an accurate e-way bill easily.  The auto-population of B2B sales invoices and credit-debit notes requires a rigorous invoice reconciliation between the GSTR-1 and the sales register before the return filing happens, which is mostly manually done by small businesses. It can be automated to a greater extent using tech-based software solutions for GST compliance," he added.

"Every eligible business must follow the steps given above strictly to avoid penal consequences. Currently, the law levies a penalty of Rs.10,000 per invoice or tax value, whichever is higher for non-generation of e-invoice wherever required. Where the invoice is incorrectly raised, the taxpayer must cough up a penalty of up to Rs.25,000. Further, small businesses should establish a system of continuous staff training to create enough awareness about the e-invoicing process and error-handling practices," he concluded.