Everything about the electronic invoice system introduced under GST

Last Updated On: Feb. 9, 2020, 1:09 p.m.

Electronic invoice system under GST

The government introduces an electronic invoice mechanism under GST but could restrict it to large companies in the initial phase.This will automatically register every transaction on the GST network. It is being examined, we are looking at if bigger companies could be brought in to begin.

The GST Council has approved the introduction of ‘E-invoicing' or ‘electronic invoicing' in a phased manner for reporting of business to business (B2B) invoices to GST System, starting from 1st January 2020 on a voluntarily basis. Since there was no standard for e-invoice existing in the country, standard for the same has been finalized after consultation with trade/industry bodies as well as ICAI after keeping the draft in public place. Having a standard is a must to ensure complete interoperability of e-invoices across the entire GST eco-system so that e-invoices generated by one software can be read by any other software, thereby eliminating the need of fresh data entry.

A committee appointed by the GST Council has constituted a sub-group that will examine issues connected to e-invoicing, including optional treatment of sectors such as banking and telecom as also a tentative timeline for execution. This sub-group will examine and recommend the business process, policy and legal aspects for the generation of e-invoice. It will also consider matters such as format for invoice, modification or cancellation of invoice, turnover threshold for invoice generation from the portal, immediate steps for B-to-B supplies with a high threshold turnover and the format for exceptional circumstances.

Tax experts say e-invoicing should make it easier for businesses, but adequate time needs to be given. “To the extent of e-invoices, data should be automatically populated in the GST returns and hence compliances would be simplified.

Technology will continue to have a major play in the future of taxation in the country. Through the e-way bill system, we already have a real-time authentication mechanism for manufacturers and a trader, which essentially needs to be extended for service sector as well. Standards are generally abstruse and thus an explanation document is required to present the same in common man's language. The present document is an attempt to explain the concept of e-invoice, how it operates and the basics of standards. 


It is expected that the document will also be useful for the taxpayers, tax consultants and software companies to adopt the designed standard 

E-invoicing will allow all the transactions on a real-time basis and it will be auto-populated in the returns so in the end there would be very few entries or fields which needs to be provided by the entity hence it will be beneficial for both government for curbing tax evasion as well as for the business entities. This system will also help to negate any gaps between GSTR-1 and GSTR-3B and ensures that the input tax credit does not get misused. The most important effect of E-invoicing would be simplified returns for those subject to e-invoicing on GSTN since the sales details are already uploaded at the time of invoicing.

"E-Way bills" have been successfully implemented which in turn has given confidence to the authorities for the introduction of "E-Invoicing" which will help to curb tax evasion to its entirety. Large companies in the country may soon have to rely on a common goods and services tax portal to issue invoices to their customers but there can be some difficulties as well because a business entity has to generate multiple sets of invoice because the first one would be on the GST Portal and a separate invoice for the books of accounts.




Business has to upload invoices, generate e-way bills when goods are transported and file returns as well. Effectively, it has to do these three processes separately. Now, with e-invoicing, invoices can be generated on a portal and those invoices then can act as e-way bills. And since invoices are generated on a portal, the collection of invoices can become returns."     




The government is aware of the fact that a longer time lag could slow down the process. Therefore it is working on to create a model that would ensure the verification is done in real-time. There are other issues such as cancellation or correction of invoices that need to be addressed. Besides, the effective implementation of an electronic invoicing system needs good internet connectivity in far-flung areas of the country.







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