Comparative Analysis of E-Invoicing and Traditional Invoicing Systems under GST

The introduction of the e-invoicing framework aimed to enhance taxpayer services, reduce tax evasion, and improve the administrative efficiency of Goods and Services Tax (GST), among other advantages.

Recent Regulatory Updates

On May 10, 2023, the CBIC announced the sixth phase of e-invoicing implementation, extending its mandatory application to businesses with an annual turnover exceeding INR 5 crore in any financial year since 2017-18, effective August 1, 2023. Additionally, on May 6, 2023, the GST department postponed the seven-day deadline for reporting older e-invoices on IRP portals for three months, with a new date yet to be declared. Earlier, on April 13, 2023, GST Network advisories from April 12 and 13, 2023, mandated that taxpayers with an annual turnover of INR 100 crore or more must report tax invoices and credit/debit notes to the IRP within seven days of the invoice date, starting May 1, 2023.

This article will explore how the e-invoicing system transforms the process of generating invoices compared to the traditional method.

E-Invoicing vs. Current Invoicing System: A Comparative Overview

| Point of Comparison | Under the Present Invoicing System | Under the E-invoicing System |---|---|---|| Applicability | All taxpayers fall under the current invoicing regulations. | Mandated for taxpayers engaged in Business-to-Business (B2B) supplies or exports whose aggregate annual turnover has surpassed INR 10 crore (or INR 5 crore from August 1, 2023) in any financial year starting from FY 2017-18. || Physical Invoice | Physical invoices are still created in accordance with legal requirements, with no alterations to an organization's issuance process. | Not specified as different, implying continued generation of physical invoices if desired. || Reporting of Invoices on the GST Portal | Invoices can be reported on the GST portal through manual data entry, JSON file uploads, or by using accounting/billing software integrated via API. | The reporting methods remain similar, but invoices must strictly adhere to a prescribed schema and include all mandatory parameters. || Invoice Reference Number (IRN) | The existing system only recognizes an invoice number, without the concept of an Invoice Reference Number (IRN). Beyond sequential assignment, no specific format or conditions are mandated for invoice numbers. | An Invoice Reference Number (IRN) is generated using a hash algorithm. Its purpose is to facilitate simple comparison of e-invoices through unique IRN validation on a central registry, with records stored for future reference. || Dispatch of E-invoice | The GST portal lacks functionalities for validating or downloading invoices. | Suppliers receive validated e-invoices directly at their registered email addresses. || Digital Signature | Only the supplier's digital signature is required on the invoice, and the GSTN or GST portal does not provide a digital signing service for uploaded invoices. | All validated invoices are digitally signed by the Invoice Registration Portal (IRP). || QR Code | Invoices could not be authenticated using a QR code. | Validated invoices include an IRP-generated QR code, enabling verification even without internet access. For Business-to-Consumer (B2C) transactions, a QR code is mandatory. || Possibility of Mistakes | A greater potential for errors exists due to extensive human involvement in the process. | The likelihood of errors is significantly reduced because, once the JSON invoice details are uploaded and validated on the IRP, the seller's GSTR-1 is automatically updated, and relevant e-Way bill Part A details are populated. || Amendment of Invoice | Invoices can be amended or cancelled on the GST portal in accordance with existing laws. | An e-invoice can be fully cancelled on the IRP within 24 hours of generation. Beyond this period, any amendments must be made via the GST portal as per GST regulations. || Viewing the Invoice | Invoice information entered into the system can be viewed on the GST portal. | Essential invoice details can be accessed through an application that scans the QR code. Furthermore, e-invoices are delivered to the supplier's email ID, allowing them to easily save a copy. || Verification of Invoice | Verifying the authenticity of an invoice during an inspection is challenging. | Authenticity can be easily confirmed by scanning the QR code and validating the Invoice Reference Number (IRN). || Possibility of Search | There is a relatively higher chance of the department conducting a search. | The likelihood of a departmental search is reduced, as transaction-level invoice details are already accessible to the authorities. |