E-Invoice Applicability and useful Insights

Meaning of E-Invoice in GST–

E-Invoice doesn’t mean generation of invoice by a Government portal or e-invoice doesn’t mean invoice being in soft copy like PDF etc.

According to Rule 48(4) of CGST Rules, notified class of registered person, have to prepare invoice by uploading specified particulars of invoice (in FORM GST INV-01) on Invoice Registration Portal (IRP) and obtain IRN number (Invoice Reference Number).

Once the above process is completed, then the invoice/Debit note/Credit note copy containing the IRN (with QR code) issued by the supplier to buyer is known as E-Invoice.

Notified Class of Registered Person

E-invoice became mandatory from 01^st October 2020 to all businesses whose aggregate turnover was more than 500 crore in any previous financial year from 2017-18 to 2019-20. Further, from 1^st January 2021 it became mandatory for the businesses having aggregate turnover more than Rs. 100 crore in any of previous financial year between 2017-18 to 2019-20.

Now it is applicable for the businesses having aggregate turnover more than Rs. 50 crore from 1^st April, 2021.

In sort,

All registered taxpayers with a turnover of more than 50 crore will first generate an invoice and then upload it to the IRP portal (in the format required for E-Invoice), in exchange for which the IRP Portal will provide an IRN number, QR code, and digitally signed invoice, which will be given to the buyer by the supplier instead of the original invoice, it is referred to as an E-Invoice.

Confusion on applicability of E-Invoice

1. One entity’s aggregate turnover had crossed the prescribed threshold during current financial year (e.g. during 2020-21) then from what date, e-invoice supposed to start?

Solution –

If the turnover exceeds the prescribed limit in the current financial year, then starting of e-invoicing would be required w.e.f. beginning of next financial year.

In above example, entity had crossed the threshold limit during 2020-21, e-invoicing will be applicable w.e.f. 1st April 2021.

2. Whether Invoice without IRN is valid tax invoice or not?

Solution –

According to Rule 48(4), notified persons have to issue invoice in E-invoice format.

Further, According to Rule 48(5) any invoice issued by a notified person in any manner other than manner specified in Rule 48(5) then it shall not be treated as an invoice.

 So, by combined reading of both it can be said that the document issued by the notified persons becomes legally valid only with an IRN.

Exempted Businesses from E-Invoice

E-Invoice is not applicable for below units –

1. Special Economic Zone Units
2. Insurers
3. Banking companies or financial institutions, including a non-banking financial company (NBFC)
4. Goods Transport Agency (GTA) supplying services in relation to transportation of goods by road in a goods carriage
5. Suppliers of Passengers Transportation Service
6. Suppliers of Services by way of admission to exhibition of cinematography films in multiplex screens
7. Persons registered in terms of Rule 14 of CGST Rules (OIDAR)

Documents and supplies on which E-Invoice is applicable

Below documents are presently covered in E-Invoice –

• Tax Invoice
• Debit Note
• Credit Note

Below Supplies are presently covered in E-Invoice –

• B2B
• SEZ supply with and without Payment
• Deemed Export
• Export with and without Payment (Outside India)

Insights of E-Invoicing Applicability –

• E-Invoice is not applicable for B2C Transactions
• E-Invoice is not applicable for Nil-Rated and wholly exempt supplies because for these supplies, Bill of supply issued which is not covered as of now.
• Financial/commercial credit notes are not covered, only CDN which are issued under section 34 is covered
• E-Invoice is not applicable for High Seas Sales and Bonded warehouse sales because these transactions are neither supply of goods nor supply of services as per Schedule II of CGST/SGST Act
• Free Trade and Warehousing Zones are also exempt from E-Invoice because according to foreign Trade Policy Free Trade and Warehousing Zones (FTWZ) are only a special category of Special Economic Zones, with a focus on trading and warehousing.
• E-Invoice is not applicable to the invoices issued by the Input Service Distributor.
• E-Invoice is applicable for Reverse charge supplies as well.
• Import Transactions are not covered under E-Invoice, hence it will not be applicable on Import Transactions.

List of vendors on which  E-Invoice is applicable can be found through link- https://einvoice1.gst.gov.in/Others/GSTINsGeneratingIRN