Best e-invoicing software to generate GST e-Invoices

What is e-invoicing under GST?

E-invoicing, or electronic invoicing, is a method for validating invoices within the Goods and Services Tax (GST) system. It involves generating a digital invoice with specific details required for GST compliance. An e-invoice must include two key elements: an Invoice Reference Number (IRN) and a digitally signed QR Code. These components are printed directly on the invoice to confirm its authenticity and enable easy tracking.

In short, e-invoicing ensures that GST invoices are valid, reducing errors, speeding up the process, and enhancing transparency. It also helps businesses generate, manage, and track invoices more efficiently using GST einvoicing software. This system is an essential part of the digital transformation of tax systems.

How does e-invoicing work under GST?

1. Invoice creation and submission

The e-invoicing process begins when a business generates an invoice for a transaction. Once created, this invoice is submitted to the Invoice Registration Portal (IRP), an online platform the Government provides for e-invoice verification. The invoice submitted for authentication must include all the details required by the GST system, such as the seller's and buyer's GSTIN, transaction details, and the value of goods or services.

2. Verification by the Invoice Registration Portal (IRP)

Once submitted to the IRP, the invoice undergoes a verification process. The system checks the validity of the details, ensuring that the invoice meets the necessary GST compliance criteria. This verification involves confirming the GSTINs, checking the invoice amount, and ensuring no discrepancies.

3. Assignment of a unique Invoice Reference Number (IRN)

After successful verification, the IRP generates a unique Invoice Reference Number (IRN) for the invoice. This IRN is assigned only once and serves as a distinct identifier for that specific invoice. This ensures that each invoice has a unique ID, making it easier for businesses and tax authorities to track and verify invoices. The IRN helps avoid issues such as duplicate invoices, ensuring smooth transactions within the GST system.

4. Generation of the QR code and digital signature

Along with the IRN, the system embeds a QR Code in the invoice. This QR code is digitally signed, making it tamper-proof and authentic. The QR Code contains critical information about the invoice, such as the GSTINs of the supplier and buyer, the IRN, invoice number, and other essential invoice details. The digital signature affixed to the invoice confirms that it has been verified and is in compliance with GST rules.

The QR code can be scanned by any GST officer or business to verify the authenticity of the invoice quickly. It ensures data integrity and prevents fraud by making it impossible to alter the details once they are digitally signed.

5. Government oversight and automated processing

The entire process is overseen by the Government’s IRP. Once the invoice is submitted, the platform automatically handles the signing and verification of the invoice, removing the need for manual intervention. The Government system extracts the necessary details from the invoice, checks for compliance, and signs it digitally. This automation makes the process fast, efficient, and reliable, ensuring that businesses stay compliant without delays.

Who needs e-invoicing?

Mandatory for GST-registered businesses

e-Invoicing is mandatory for all businesses that are registered under GST and involved in Business-to-Business (B2B) transactions, Business-to-Government (B2G) transactions, and exports. If your business falls into any of these categories, you must create e-invoices under the GST regime. This system ensures that all GST-registered businesses comply with tax regulations efficiently.

Threshold limits for e-invoicing

Initially, e-invoicing was made mandatory for businesses with a turnover above a certain threshold. However, this requirement has expanded, and now businesses of various sizes must comply with e-invoicing. It's best to check if your business falls within the compliance range to avoid penalties.

Real-time compliance and uploading

Post-authentication requirements

Once the invoice is verified, the IRP generates the IRN and QR code, making the invoice officially valid under GST. After receiving these details, businesses must upload the e-invoice on the GST portal immediately. The real-time upload is critical for ensuring immediate GST compliance. If businesses fail to upload the e-invoice within the required time frame, they may face penalties or delays in claiming input tax credits.

The real-time process ensures that all transactions are recorded and processed without delays, helping businesses maintain transparency and accurate records. It also allows for better tracking of invoices, preventing fraudulent practices.

Benefits of e-invoicing under GST

Streamlined invoicing process - e-Invoicing simplifies the entire invoicing procedure by automating the verification, authentication, and data entry steps. Businesses no longer need to manually verify or input invoice data on the GST portal. This reduces the possibility of errors, and speeds up the process, ensuring that businesses maintain smooth operations.

Improved accuracy and reduced errors - With e-invoicing, data entry errors are minimized since the invoices are validated automatically. The system checks for mistakes and ensures that all necessary details, such as GSTINs and invoice values, are correctly entered. This helps businesses avoid costly mistakes and penalties for non-compliance.

Enhanced security and transparency - The use of QR Codes and digital signatures ensures that e-invoices are tamper-proof and authentic. This added layer of security not only improves data integrity but also enhances transparency, as each invoice can be verified instantly.

Faster input tax credit claims - e-Invoicing makes it easier to claim input tax credits (ITC) because the system ensures that invoices are promptly and accurately uploaded to the GST portal. This reduces the chances of disputes or delays in receiving ITC, improving cash flow for businesses.

Cost and time savings - By reducing manual processes and paperwork, e-invoicing saves businesses both time and money. Automation speeds up invoice processing, reducing administrative costs and making it easier to track payments.

Who can generate an e-Invoice under GST?

1. Issuing authority - The exclusive right to generate e-invoices is granted to suppliers registered under the Goods and Services Tax (GST) system. This ensures that only authorized entities issue valid invoices, maintaining authenticity and compliance with GST regulations.

2. Eligible transactions: B2B, B2G, and exports - e-Invoices are mandatory for businesses engaged in Business-to-Business (B2B), Business-to-Government (B2G), and export transactions. These types of transactions are crucial for the e-invoicing system because they ensure transparency and accurate recording within the GST framework.

3. Annual turnover requirement - Businesses with an aggregate annual turnover exceeding ₹5 crores** are mandated to generate e-invoices. This threshold ensures that larger businesses, that deal with higher volumes of transactions, comply with GST e-invoicing standards, promoting efficiency and tax transparency.

Who can not generate an e-invoice under GST?

Transporters and buyers are not authorized to generate e-invoices. The responsibility falls solely on GST-registered suppliers, ensuring a clear chain of accountability. This helps maintain accuracy and prevents misuse of the e-invoicing process.

Reverse charge mechanism (RCM) Transactions - Transactions under the Reverse Charge Mechanism (RCM)**, including B2B supplies from *Special Economic Zones (SEZ)* and certain eCommerce transactions, are also incorporated into the e-invoicing system. This inclusion ensures that RCM transactions are accounted for accurately, aligning with GST compliance standards.

Role of eCommerce operators - eCommerce operators play a unique role in the e-invoicing process. While transporters and buyers cannot generate e-invoices, eCommerce platforms are authorized to issue e-invoices on behalf of the seller. This arrangement simplifies invoicing for online transactions and ensures that the integrity of e-invoicing is maintained across multiple entities.

B2C transactions and turnover requirements - Business-to-consumer (B2C) transactions do not require e-invoicing. However, B2C businesses with an aggregate turnover exceeding ₹500 crores are required to include a self-generated QR Code on their invoices. This helps enhance transparency for larger businesses that deal directly with consumers.

NBFCs (Non-Banking Financial Companies) - NBFCs are not required to generate e-invoices. This exemption is based on the unique nature of financial institutions, where transactions are typically more complex and do not fall under the standard invoicing process required for goods and services.

Banking companies - Banking companies are also exempt from e-invoicing obligations. These institutions, being central to the financial sector, conduct a different set of transactions that do not require e-invoice generation. This ensures smoother operations within the banking system, which handles specialized financial transactions.

Insurance companies - Insurance companies are not mandated to generate e-invoices. Since their transactions often involve policies, premiums, and claims rather than the sale of goods or services, the e-invoicing requirement does not apply to them, keeping the process simple and tailored to their specific needs.

Financial institutions - Financial institutions, including providers of various financial services like lending, leasing, and investment, are excluded from the e-invoicing process. This exemption allows these entities to operate without being burdened by the e-invoicing requirements, which are more suited to businesses dealing in goods and tangible services.

Businesses registered under SEZ (Special Economic Zone) - Entities operating within Special Economic Zones (SEZs) are not required to generate e-invoices. SEZs have special regulations aimed at promoting exports and foreign investments, and businesses within these zones have different compliance procedures that do not require e-invoicing.

Suppliers of passenger transportation services - Suppliers providing passenger transportation services are also exempt from generating e-invoices. This exception applies to service providers in the transportation sector, recognizing the diverse nature of passenger services, which do not always require invoicing in the same way as goods or other services.

Types of documents created under GST e-invoice

1. GST invoice

The GST invoice is the fundamental document in the e-invoicing system. Issued by the supplier, it serves as the primary record of the transaction between the supplier and the recipient. This document contains all necessary details, including the goods or services supplied, their value, applicable taxes, and the buyer's information. Under the e-invoicing system, the GST invoice is standardized, ensuring that it meets the required GST compliance standards. This process helps in reducing errors and improving transaction accuracy. You can create free GST invoices here.

2. Debit note

A Debit Note is an adjustment document issued by the supplier to indicate an increase in the amount payable by the recipient. This could happen due to various reasons such as additional charges or corrections to the initial invoice. The Debit Note helps rectify discrepancies in the original invoice, maintaining the accuracy of financial records. Like the GST invoice, the Debit Note is also generated electronically, ensuring it adheres to GST regulations and provides a clear and accurate record of any adjustments.

3. Credit note

A Credit Note is another essential document within the e-invoicing system, issued by the supplier. It signifies a reduction in the amount payable by the recipient, often issued when the buyer returns goods or when there is an overcharge in the original invoice. The credit note serves to correct errors or provide adjustments to previously issued invoices. This document ensures that the financial transactions between businesses are fair, transparent, and accurately recorded.

Documents not considered under GST e-invoice

1. Delivery challan

A delivery challan is a document used to accompany goods during transportation. Its primary purpose is to validate the delivery process, confirming that goods have been dispatched or delivered. However, despite being essential for tracking the movement of goods, the delivery challan is not part of the GST e-invoicing system. It is not used for tax purposes but rather for logistical and tracking reasons, and therefore, does not require e-invoicing. To create delivery challan on Refrens invoicing software use delivery challan format for free.

2. Bill of supply

The Bill of supply is another document excluded from the e-invoicing system. This document is used when a supplier is not eligible to collect GST (e.g., in cases where the supply is exempt from tax) or when the goods/services provided are not subject to GST. The bill of supply is not considered an invoice under the GST framework, and as such, it does not require e-invoicing. It serves as a simple record of the transaction without involving GST collection, making it outside the scope of the e-invoicing requirements.

Generating an e-Invoice under GST on Refrens is a seamless process. Here's a step-by-step guide to help you navigate through the process effortlessly:

1. Create an Invoice with Valid Data

   Utilize Refrens' online invoice generator to create your invoice. Ensure all necessary details are accurately filled in, including: Supplier GSTIN (GST Number) Supplier’s Invoice Number Financial Year (in the format YYYY-YY) Supplier’s Information Buyer’s Information Description of Goods or Services HSN Code GST Rate (5%, 18%, 28%) GST Type (CGST/SGST/IGST) GST Amount Total Invoice Value

2. Click on Generate IRN

   After inputting all valid details, click on "Generate IRN." This action sends a request directly to the Invoice Registration Portal (IRP) through the Refrens software.

3. Authorization by IRP System

   The invoice request is processed by the IRP system. Once authorized, the invoice is assigned a unique Invoice Reference Number (IRN) and is digitally signed with a QR Code.

4. Receipt of e-Invoice

   The finalized document, now an e-Invoice, will contain the unique IRN and the digital signature QR Code. This authenticated e-Invoice is now ready for use, ensuring compliance with GST regulations.