Invoices, in general, are commercial documents that depict the transaction between a buyer and a seller and entail all the necessary details related to the said transaction. E-invoicing, or Electronic-Invoicing, is a system under which taxpayers having an annual turnover above a specific threshold are required to report B2B (Business-2-Business) invoices and export B2C (Business-2-Customer) invoices to the Invoice Registration Portal (IRP) to generate a unique reference number call Invoice Registration Number (IRN) which is used to identify and differentiate each transaction from another.
e-Invoice reporting has only been mandatory for B2B transactions and has recently been suggested for B2C transactions simply to make them easy to refer to. QR codes for B2C invoices do not need to have an IRN or upload these invoices to the IRP as they will simply be rejected by the portal. An IRN is a unique identification number used to track B2C transactions since e-invoicing isn’t conducted for them. It enables the government to easily get a hold of and refer to the details on B2C transactions when necessary.
This process was developed to promote a more digitalized form of conducting payments via a UPI (Unified Payments Interface). Developed by National Payments Corporation of India, this interface enables easy inter-bank, peer-to-peer, and person-to-merchant transactions to be conducted.
Benefits of e-Invoicing
This system is extremely beneficial to businesses for the following reasons:
- Helps in auto-populating GST returns: There is no need for manually entering the data as all the invoices are automatically uploaded onto the GST portal and E-way bill portal after being authenticated, enabling multi-purpose reporting, and reducing errors.
- Enables real-time tracking of invoices: Since this facility is available to suppliers, they can gain faster access to input tax credit.
- Requires only one-time reporting of invoices: Once the invoice is uploaded onto the IRP once, it is automatically sent to the GST portal, reducing the time and efforts required to manually enter the data and invoices once again.
- Easy creation of e-way bill: Since the first half of an E-way bill contains the same information as an invoice, and those details are automatically passed onto this portal, one must only enter the vehicle details and can easily generate an E-way bill.
- Allows interoperability: Since an invoice is generated in a standardized format, one that is generated on one software can easily be read on another.
- Curb tax evasion: Since invoices are generated prior to the actual transaction, and information on the input tax credit and output tax is readily available, officials can easily track fake invoices.
- QR code: It is possible for taxpayers to misplace invoices, and for that reason might have several copies of the same, but the QR code allows them to generate an invoice several times in a PDF format, eliminating the need for multiple copies.
While B2B invoices require a lot of details, B2C invoices do not and are a little different. Both the invoices, however, have a QR code on them which provides easy access to the details entailing the transaction in question.
QR codes (Quick Response codes) are two-dimensional barcodes that can be scanned by smartphones or other devices with a camera. They contain encoded information and can link directly to specific content, such as a website or a payment gateway.
QR codes for B2B transactions contain:
- GSTIN of the supplier and buyer.
- Invoice number.
- Date of invoice registration.
- Invoice value.
- HSN (Harmonized System of Nomenclature) code: for classification of traded products.
- Unique Invoice Reference Number.
- Digital signature of IRP.
However, B2C invoices are different, and only require:
- GSTIN of the consumer.
- Date of supply.
- Value of goods or services supplied.
- Amount of GST charged.
- Name of recipient.
Differences between Invoices and E-Invoices
The major difference between both these invoices, as mentioned before, is that while one needs to report B2B invoices onto the IRP, they mustn’t do the same for B2C invoices. This is because B2C invoices are only prepared for the reason of simply tracking the transactions. While B2B transactions occur on a much larger scale, with a possible purchase of enumerable goods with multiple companies, there is only 1 B2C transaction where the finished product is sold to the customer. So, there isn’t a need to report them per se, but just have them ready for any reference if ever needed.
Here’s how dynamic QR codes for B2C transactions work:
- The business generates an electronic invoice for the customer, containing all the relevant details such as the transaction amount, invoice number, and due date.
- The B2C invoice shall include a QR code that represents the payment information.
- The customer can scan the QR code. This action will automatically retrieve the encoded payment information.
- The customer’s device will typically prompt them to review the details and select a payment method, facilitating quicker payments.
Who should and should not generate E-Invoices
All taxpayers with an annual turnover of more than Rs. 500 crores in any of the financial years post 2017-18 are compulsorily required to generate QR codes for any B2C transactions conducted after the 1st of December 2020. Failure to comply with this before the 31st of March 2021 would result in a penalty of Rs. 25000.
However, there are certain businesses and industries that are not required to generate E-invoices. Exempted suppliers include insurance companies, banking businesses or financial organizations, non-banking financial corporations, goods transport agencies, passenger tickets by transport businesses, movie tickets by multiplex screens, and non-residents making Online Information Database Access and Retrieval services.
Exports of goods or services to unregistered people also do not require dynamic QR codes as these are considered B2B transactions and therefore only e-Invoicing shall apply to such transactions.
E-invoices can be generated by uploading details of a specific transaction onto the IRP via an e-invoice generation tool to generate an IRN. Once the details are validated, the invoice will be updated with the IRP’s digital signature and a QR code and will be sent to the supplier along with the IRN.