E-Invoicing Under GST: Definitive Guide

What is e-Invoicing ?

e-Invoice is a system in which B2B invoices are authenticated electronically by GSTN for further use on the common GST portal. Under the electronic invoicing system, an identification number will be issued against every invoice by the Invoice Registration Portal (IRP) to be managed by the GST Network (GSTN).

All invoice information is transferred from einvoice1.gst.gov.in portal to both the GST portal and e-way bill portal in real-time. Therefore, it eliminates the need for manual data entry while filing GSTR-1 return as well as generation of part-A of the e-way bills, as the information is passed directly by the IRP to GST portal.

Businesses have the following benefits by using e-invoice initiated by GSTN

  • E-invoice resolves and plugs a major gap in data reconciliation under GST to reduce mismatch errors.
  • E-invoices created on one software can be read by another, allowing interoperability and help reduce data entry errors.
  • Real-time tracking of invoices prepared by the supplier is enabled by e-invoice.
  • Backward integration and automation of the tax return filing process – the relevant details of the invoices would be auto-populated in the various returns, especially for generating the part-A of e-way bills.
  • Faster availability of genuine input tax credit.
  • Lesser possibility of audits/surveys by the tax authorities since the information they require is available at a transaction level.

Process of e-invoicing System

Supplier Invoice Registration Portal GST System Buyer
Seller will prepare Tax Invoice with its accounting software Validates Invoice data Rules out the existence of same IRN in GST System Buyer can view the Invoice details in GSTR-2A
Upload JSON file on the IRP system Generates IRN Auto Populate Invoice details in GSTR-1/2A Auto populate With QR Code on Invoice Copy he can check the authenticity of e-invoice by uploading the json sent by supplier
  Sends Invoice pay loads to GST System    
  Sends details to e-way bill system    

Who Must Generate E-Invoices?

Phase Applicable to taxpayers having an aggregate turnover of more than Applicable date Notification number
I Rs 500 crore 01.10.2020 61/2020 – Central Tax and 70/2020 – Central Tax
II Rs 100 crore 01.01.2021 88/2020 – Central Tax
III Rs 50 crore 01.04.2021
5/2021 – Central Tax
IV Rs 20 crore 01.04.2022 1/2022 – Central Tax
V Rs 10 crore 01.10.2022 17/2022 – Central Tax

How Can e-invoicing Curb Tax Evasion?

It will help in curbing tax evasion in the following ways-

  1. Tax authorities will have access to transactions as they take place in real-time since the e-invoice will have to be compulsorily generated through the GST portal.
  2. There will be less scope for manipulating invoices since the invoice gets generated before carrying out a transaction.
  3. It will reduce the chances of fake GST invoices, and the only genuine input tax credit can be claimed as all invoices need to be generated through the GST portal. Since the input credit can be matched with output tax details, it becomes easier for GSTN to track fake tax credit claims.

Certicom Realtime Updates

CERTICOM REALTIME UPDATES

1. GST:

The government has clarified that services outsourced to India or carried out in the country for foreign entities will not be treated as intermediary services, and hence not face 18% goods and services tax (GST). This was approved by the GST Council on Friday.

2 . GST:

Wef 1.1.21, relevant FY for the claim of ITC u/s 16(4) shall be as per date of Debit note (& not of underlying invoice). Circular 160/16/2021-GST of 20.9.21.

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3. GST council:

It was decided as a measure of trade facilitation that the unutilized balance in CGST and IGST cash ledger may be allowed to be transferred between distinct persons (entities having the same PAN but registered in different states), without going through the refund procedure, subject to certain safeguards.

The Finance Ministry will begin the budgetary process on October 12th.

4. SEBI

Sebi on September 20, 2021, said that its skin-in-the-game rules can be applied in a phased manner for the junior employees of the mutual fund. For now, ten per cent of the compensation of such employees will be invested in the mutual fund units of the fund house. From October 1, 2022, this will be increased to 15 per cent and from October 1, 2023, it will be brought up to 20 per cent.

5. Government

Is going to Institutionalize a 24 hours “Helpline” for assistance to exporters and resolution of issues “said Shri Piyush Goyal at the launch of nationwide celebrations of the iconic week for Amrit Mahotsav for Commerce & Industry Ministry.

6. IEC:

All IECs which have not been updated after 01.01.2005 shall be deactivated with effect from 06.10.2021.

GST Intermediary Dispute Remains Unresolved

GST Intermediary Dispute Remains Unresolved

Recently, a circular -159/51/2021-GST-Clarification on Doubts Regarding the Scope of ‘Intermediary’ was released, but I’m not sure if the doubts were cleared or persisted…

First and foremost, the term “intermediary” is defined as “a person who acts as a middleman between two parties.”

‘A broker, an agent, or any other person, by whatever name called, who arranges or facilitates the supply of goods or services, or both, or securities, between two or more persons, but does not include a person who supplies such goods or services, or both, or securities on his own account,’ says the definition.

The term “intermediary” was borrowed from the Service Tax Regime in the GST. As stated in the circular, the scope of ‘’intermediary services” under the GST REGIME does not differ from the scope of ‘’intermediary services” in the Service Tax REGIME.

The circular merely mentions who is a middleman, however, it is unclear if the services provided by the intermediary are considered exports of services or not –– the debate continues —–

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Several instances are offered in a circular format but are only described once

Who is the intermediate

I.e., who arranges or facilitates the provision of products or services, i.e., a third party between two parties, although it is unclear if intermediary services are exportable or not?

Let’s look at an example:

A- Machine Manufacturer and Supplier in India

B- if you want to buy a machine but don’t live in India.

C- Assists ‘’B” in identifying customers –

C acts as an intermediary, invoicing ‘’B” in order to complete the transaction between ‘’A” and ‘’B”.

Non-filers of monthly GST returns would be prevented from filing GSTR-1 from next year. 

Why can’t C’s services be classified as exports of services because he provides services outside of India?

The supply of any service when it is exported is referred to as service export.

  • Supplier of service located in India –i.e A and C
  • Recipient of service located outside India- i.e B
  • Payment for such service received in convertible foreign exchange.
  • Place of supply of service is outside India – as per Sec 13(8) clause (b) IGST ACT 2017

IN THE CASE OF INTERMEDIARY SERVICE – SUPPLY PLACE – SUPPLIER LOCATION

The location of the supplier in India does not justify the export of services in this case.

The foregoing is still disputed, and litigation is ongoing, according to the circular.

Conclusion: If GST is a destination-based consumption tax, and C is providing a service to B – OUTSIDE INDIA, and payment is made in convertible foreign currency, why can’t it be classified as a service export?

So, unless the government clarifies the above, the litigation will continue.