India Adds Clarity to New E-Invoicing Regime

This blog was last updated on February 26, 2024

Following India’s recent public consultation looking at the proposed introduction of an e-invoicing regime, the GST council has now released a white paper on the architecture of the new framework and also provided answers to a number of outstanding questions.

From 1 January 2020, taxpayers in India can start to use the new e-invoicing framework, which relies on connectivity to the GST system for reporting of all B2B invoice data.  The first part of the roll-out starting from this date will be voluntary for businesses.  It will only become mandatory at a later stage, the timing of which is still to be communicated by the relevant authorities.

The new e-invoicing system, considered to be not only a tax reform but also a business reform, has two key aims:

• To ease the process and format of standard reporting between taxpayers and the authorities.
• To prevent tax evasion by monitoring all B2B invoices and taxes involved within the transactions.

Under the e-invoicing system, taxpayers will be obliged to create the e-invoice in the structured JSON format and transmit it to the Invoice Registration Portal (IRP). The IRP will then check the e-invoice according to the requirements of the schema and determine if a duplicate record is already registered on the GST system.

After this check, the IRP will digitally sign the e-invoice, assign a unique number – the invoice registration number (IRN) – to the invoice and create a QR code, before submitting the invoice to the GST system. The QR code will help to authenticate the e-invoice by the seller and buyer and to confirm that the invoice is successfully registered in the GST system. Connection to the portal is needed to see all the e-invoice data and to view all the details online. A digital signature by the taxpayer is not mandatory, but it is permitted before submission to the IRP.

An IRN can also be generated by the seller with the required parameters, which would then be validated by the IRP and transmitted to the GST System if it meets the predefined criteria.

Once the e-invoice has been cleared by the IRP, it will be transmitted to both the seller and the buyer by email.

Taxpayers can use several methods to connect to the IRP including web, API, SMS, mobile app, offline tool or GSP based.

The IRP keeps the e-invoices for just 24 hours as its main function is to validate and assign the IRN. Invoices submitted to the GST system will be archived for the whole financial year by the GST system and taxpayers must keep the IRN for each invoice to ensure compliance.

The new system will simplify the preparation of Goods and Services Tax (GST) returns by auto-populating the returns with the data from the e-invoices. The GST System will update the ANX-1 of the seller (sales registers) and ANX-2 of the buyer (purchase register).

Data from the e-invoice will also be used as a basis to populate the current e-waybill (auto-generation of Part-A), where only the vehicle registration number will need to be added in Part-B of the e-waybill.

Whilst the white paper has provided some guidance for businesses ahead of the introduction of this e-invoicing framework, there are still some grey areas to be addressed in the coming months, including the timeline for submitting e-invoices.