Understanding Difficulties in the GST e-Invoicing Framework

The Goods and Services Tax (GST) e-invoicing system was introduced in India on October 1, 2020, initially for large taxpayers. Its scope has since expanded, now encompassing businesses with an annual turnover exceeding INR 10 crore, with further extension to those above INR 5 crore expected from August 1, 2023. Recent updates from May 2023 indicate that taxpayers with an annual turnover of INR 5 crore or more in any financial year from 2017-18 must comply with e-invoicing requirements starting August 1, 2023. Additionally, the GST Network temporarily postponed the 7-day time limit for reporting older e-invoices to IRP portals. An advisory issued in April 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 their issuance, effective May 1, 2023. The system for Business-to-Business (B2B) transactions was also broadened in October 2022 to include businesses with an aggregate annual turnover between INR 10 crore and INR 20 crore. Despite these expansions, several challenges arise during the implementation of these e-invoicing provisions for taxpayers. An Invoice Registration Portal (IRP), GST Suvidha Provider (GSP), and Application Suvidha Provider (ASP) are key entities involved in this process.

Key Modifications to ERP Systems and Integration Requirements

Businesses need to integrate their Enterprise Resource Planning (ERP) systems with the IRP, GSPs, or ASPs to ensure a seamless exchange of invoice data. The GSTN has provided Application Programming Interfaces (APIs) for this purpose. Since most ERPs are customizable, adapting them to the standard e-invoice structure is feasible. Furthermore, printing a QR code on the invoice, which enables the identification of the Invoice Reference Number (IRN) upon scanning, is now a mandatory requirement. While the IRP offers an Excel-based tool for generating bulk e-invoices, negating the absolute necessity for ERP integration, companies processing a high volume of invoices may find non-integration to be a significant hurdle.

Differentiating B2B from B2C Invoices

E-invoicing protocols apply exclusively to B2B invoices. Consequently, B2B transactions require both e-way bills and e-invoices, whereas Business-to-Consumer (B2C) invoices only necessitate e-way bill generation where applicable. In many scenarios, the transporter's identification details must be included at the source when an e-way bill is required. This distinction necessitates efficient invoice sorting, ideally automated, to avoid substantial time and effort expenditure.

Procedures for e-Invoice Cancellation and Amendment

Partial cancellation of an e-invoice is not permitted; any modification requires the entire e-invoice to be cancelled. Cancellations can be processed on the IRP within 24 hours of generation. Beyond this 24-hour window, cancellations must be handled directly through the GST portal. It is important to note that a new e-invoice cannot be generated using the same invoice number as a previously cancelled one. Taxpayers must issue a new e-invoice with a revised invoice number after correcting any errors.

Necessity for Alternative Data Storage Solutions

The IRP retains invoice data for only 24 hours. Therefore, businesses must establish alternative data archiving mechanisms, as the IRP currently does not provide long-term data storage. Nevertheless, e-invoice data is transmitted to the GST portal and can be reviewed within the GSTR-1 return.

Reconciling e-Invoice Data Across Portals

Taxpayers are advised to reconcile their e-invoice data with information on the e-way bill and GSTR-1 portals. Although e-invoice data is automatically routed to these platforms, the government still recommends independent reconciliation to identify and resolve any inconsistencies. Failure to address discrepancies could result in penalties. Reconciliation processes can be streamlined using specialized tools or utilities.

E-Invoicing's Limited Scope for B2C Transactions

A significant portion of fraudulent activities occurs within B2C transactions due to the absence of Input Tax Credit (ITC) involvement. Currently, e-invoicing does not extend to B2C transactions. However, the law mandates certain businesses (those subject to e-invoicing, specifically those with over INR 500 crore turnover as of December 15, 2020) to generate and print a dynamic QR code for B2C invoices. This requirement became effective on December 1, 2020. The CBIC subsequently waived penalties for non-compliance with dynamic QR code provisions between December 1, 2020, and March 31, 2021, provided that eligible registered persons complied from April 1, 2021.

Adjustments to Workflows for Diverse Document Types

As previously stated, e-invoicing is confined to B2B invoices. This necessitates the creation of distinct workflows for other transaction types, such as delivery challans, bills of supply, job work, and similar documents. Developing separate workflows for various transaction categories can be both time-consuming and labor-intensive.