Tips to adopt e-invoicing and avoid penalties for businesses with revenue over 10 crore


By: Mohan D, Director-Product Management, Tally Solutions

E-invoicing was introduced in the year 2020 to plug a major gap in data reconciliation under GST to reduce mismatch errors, moving to digitalize the invoice allowing interoperability and helping reduce data entry errors. Real-time tracking of invoices prepared by the supplier is enabled by e-invoice

Now in its fifth phase, the e-invoicing purview has been extended to include businesses with an annual turnover of Rs. 10 crores or more starting 1st of October 2022 as per the mandate by The Central Board of Indirect Taxes and Customs (CBIC) on 1st August 2022. While it is indeed a positive move, however, this transition will not be devoid of challenges due to a lack of clear understanding and teething trouble that are expected to persist. One month’s timeline for this transition may be challenging for small businesses, especially for first-time technology adopters, though, it’s a journey that needs a beginning.

The amendment is clear. It will cover all businesses with an annual turnover of Rs. 10 crore and businesses can check the eligibility criteria on the GST portal- The first and most critical step for a business owner is to build the infrastructure and adopt a business management software or ERP system that will help in not just managing the finances but will also help in seamlessly generate e-invoices for their B2B transactions. In the second step, it’s important to understand the flow of the process. For e-invoicing, a business first engages with the buyer through the Invoice Registration Portal (IRP). Upon successful validation of the invoice at IRP, an IRN (Invoice Reference Number) is generated which is digitally signed and has a unique QR code. If both the supplier and the buyer are in the integrated environment of ERP and IRP via GSP (GST Suvidha Provider), the software will automatically fetch and print the invoice, unlike the manual disconnected process. The invoice details is also sent to the E-Way Bill System for the generation of the e-Waybill number and invoice data will get auto-populated to the GST system and both the buyer and the seller will have a real-time view of the entire process. This digitization process of e-invoicing not only reduces data error and data fraud, but it also curbs tax evasion while allowing accessibility, safety, and interoperability.

For small businesses who are in their comfort zone for decades, adapting to this new norm might look like a herculean task, however, once the transformation is underway it brings efficiency, accuracy, and economic savings. Though adoption is just one level of transformation, understanding the nuances to avoid penalties is the second most critical knowledge businesses should possess. As per sub-rule (5) of Rule 48 under the CGST Act 2017, there are two penalties in case of any discrepancies in e-Invoices:

  • Penalty for non-issuance of e-Invoice – 100% of the tax due or Rs.10,000 whichever is higher
  • Penalty for incorrect or erroneous e-Invoice which is Rs.25,000

How can an incorrect entry be resolved?

In case of incorrect or wrong entry in the e-invoice, it cannot be edited or corrected. The only option is to cancel that invoice/IRN and report a new document (with a new number) and generate a fresh IRN. The canceled document (with the same document number) can’t be reported again for the generation of IRN. The cancellation is required to be done within 24 hours from the time of generation else it will attract a penalty.

What are the mandatory prerequisites for filling out e-invoicing?

  • It is compulsory to be registered on the GST portal and e-invoice portal or the e-way bill portal
  • Valid documents like invoices, debit notes,s and credit notes should be available
  • If the invoices are being raised in bulk, a valid JSON file as per the e-invoicing rulebook should be available else the ERP system should be integrated with the Application Programming Interface.

Another crucial element while adopting e-invoicing is understanding what a digitally signed QR code means The IRP will generate a QR code containing the unique IRN (hash) along with some important parameters of invoice and digital signature so that it can be verified by an Offline App It is basically a tool to verify the correctness of an invoice as it entails all the critical information about the supplier and the buyers business. Through this process, the government is authenticating the genuineness of the invoice, by preparing the important information of the invoice in QR Code form and signing it so that its authenticity can be verified offline by anyone using offline tools. This will be helpful for tax officers checking the invoice on the roadside where the Internet may not be available all the time. The QR code will consist of the following e-invoice parameters:

  • GSTIN of Supplier
  • GSTIN of Recipient
  • Invoice number as given by Supplier
  • Date of generation of invoice
  • Invoice value (taxable value and gross tax)
  • Number of line items
  • HSN Code of the main item (the line item having the highest taxable value)
  • Unique Invoice Reference Number (IRN)
  • Date of generation of IRN

As many small businesses adopt technology for the first time in this phase & also while processing the e-invoice or during the transactions, businesses are susceptible to unprecedented situations such as internet downtime or other technical issues – understanding the processes clearly is the key. Beyond gaining the right knowledge, it is very important for businesses to select the right business management software which connects seamlessly to the department e-invoice system (IRP) and automatically downloads the required data to print the QR code and IRN on the invoice. In this transformational journey, the software will play a crucial role and it should simplify the user experience by hiding the complexity from the users which makes it easy to transiting into new digital compliance requirements.


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