A Goods and Services Tax (GST) law known as the "e-invoicing system" or "electronic invoicing system" gradually applies to some taxpayers. According to the most recent e-invoice notification (17/2022) dated 1 August 2022, starting on October 1, 2022, enterprises with an e-invoice turnover limit of more than Rs. 10 crores up to Rs. 20 crores would be subject to the fifth phase.

This article covers every aspect of the fifth phase of e-invoicing, including its applicability, business process changes, available e-invoice generation methods, registration procedures, obstacles, and tried-and-true solutions for these companies, including e-Invoicing.

Businesses covered in the fifth phase of e-invoicing
 

The government mandated electronic invoicing as of October 1, 2022, for companies having a total yearly turnover of more than Rs. 10 crores in any prior fiscal year between 2017–18 to 2021–22.

The first phase previously applied to e-invoice turnover limits of more than Rs. 500 crores starting on October 1, 2020. Businesses with a revenue of above Rs. 100 crores started issuing e-invoices on or after January 1, 2021, as part of the second phase.

Beginning on April 1, 2021, businesses having a turnover greater than Rs. 50 crore fell under the third phase. In the fourth phase, which will begin on April 1, 2022, the government expanded this system after a year to include Indian businesses with e-invoice limits ranging from Rs. 20 crores to Rs. 50 crore.

However, the government has made it applicable to-

• Tax invoices

• Debit notes
• Credit notes, and 
• Invoice-cum-bill of supply

The system covers transactions such as-
 

• Exports, Business-to-Government (B2G) sales of products or services.

• Business-to-Business (B2B) sales of goods or services are all taxable transactions.
• Materials are produced using the Reverse Charge Mechanism (RCM).

The e-Invoicing scope does not include the following documents, transactions and businesses–
 

• Imports, Job Works, and Exempted Supplies when the Bill of Supply is Raised
• Delivery receipts
• Financial institutions, banks, and insurance companies
• Showing motion pictures on multiplex screens
• Non-banking financial institutions,
• Agencies for the movement of goods and people,
• Units of commerce functioning in special economic zones, and
• Government agencies.

Objective & e-Invoicing impact
 

Reducing the threshold turnover limit for e-invoicing had the primary goal of reducing compliance while preventing fraud and GST evasion. Verified Input Tax Credit can be claimed by companies in the supply chain (ITC). As a result, it closes GST income gaps for the government. E-invoicing enables the capture of transactional information at the point of origin or the invoicing stage, and also strives to expand the GST digitalisation net.

The adjustment of the billing system or software, the GSTR-1 preparation, and the change in the business procedure has the most effects on the applicable firms. While auto-population makes GSTR-1 filing simpler, reconciliations become more challenging, as is discussed in the next section. As these small businesses' invoices are validated, easy access to official credit channels like invoice discounting constitutes a significant benefit of the e-invoicing programme.

However, in order to avoid losing tax credits or experiencing delays in claims, major corporations that source from these applicable organisations must make sure that their vendors follow the directive. Once streamlined, they can now claim real tax benefits.

Changes in business processes & How to prepare
 

Businesses have until October 1, 2022, to get the new system ready, installed, and tested. In July 2022, such applicable enterprises were allowed to test the setup of e-invoicing in a sandbox setting thanks to the GST Network.

In comparison to earlier phases, a greater proportion of taxpayers fell within the Rs. 10–20 crore range of annual turnover. Additionally, the larger volume of transactions that these small enterprises experience presents new compliance problems.

Reporting of tax invoices
 

E-invoicing refers to reporting already generated invoices to the government for certification rather than creating invoices on the government portal.

Setting up continuous staff training
 

Before the implementation date, inform their accounting, tax, and invoicing departments enough about the change in the invoicing procedure. Start with our article "All about e-Invoicing" to have a thorough understanding of the concept. Additionally, Team Online Legal India has compiled useful e-invoicing videos, articles, and whitepapers. A skilled managed services staff at Online legal India provides round-the-clock technical support.

Modifying the billing or accounting, or ERP system
 

The e-invoice schema or format must be adhered to in order for accounting or billing software to function. Recognize when e-invoicing is applicable and separate such transactions and documents from the others for reporting to the Invoice Registration Portal (IRP), such as NIC. Sort the papers appropriately so e-way bills can potentially be automatically generated from the information submitted for e-invoices. Make that the e-IRN invoices and QR codes are captured by the printing setup. These call for adjustments to the current billing, ERP, accounting, or software systems.

Ensuring the accuracy of invoice details
 

If you haven't done so already, start keeping accurate and verifiable records of your suppliers' and clients' master data. Additional invoice details including a valid GSTIN, bank account information, and payee information should be included for correctness. Any IRP denial causes the team issues with invoice cancellation and regeneration, which frustrates consumers with the wait since e-invoice revisions are not possible.

Choosing the mode of e-invoice generation
 

Choose the most appropriate method for creating a signed QR code from the IRP and an invoice reference number (IRN). There are numerous possibilities, ranging from SMS, offline, and batch processing to online and real-time processing. Several of the common modes include:

• Access to IRP via current e-way bill APIs, SFTP or API integration using completely functional, end-to-end solutions like e-Invoicing, Web-based direct interface with IRPs like NIC 
• Using GST to integrate GSP for Suvidha 
• Generation via SMS or mobile apps, and
• Spreadsheet-based tools that may be used offline, such as the GePP.

Utilising a cloud-based solution that offers IRN backup and retrieval service is encouraged. Additionally, make sure the system can handle large-scale bills quickly while maintaining the highest level of data protection. In contrast to the market average of three seconds, e-Invoicing generates IRN at a maximum speed of 200 milliseconds.

Preparing GSTR-1 & reconciliation
 

Take note of the modification to the method for preparing and filing GST returns. Taxpayers must submit the non-taxable and B2C supplies later; the GSTR-1 will automatically populate with the information from the e-invoice. To verify the accuracy of the information reported and prevent notices, reconcile the books of accounts and the e-invoices that were automatically filled out in GSTR-1.

Sorting out network issues
 

A patchy network, particularly in Tier II and Tier III cities, as well as a lack of internal technology to enable the real-time generation and IRN capture on invoices are the main problems that small firms may experience.

Avoiding delays in IRN generation
 

Businesses with this level of turnover generate thousands of B2B invoices each day. Customers shouldn't be kept waiting for so long before e-invoice generation. Therefore, for a seamless deployment, such organisations must use the services of GSP or IRP as the one offered by Online Legal India.
 

Is e invoicing mandatory? – Consequences of not generating e-invoices
 

Large penalties apply if applicable enterprises fail to produce e-invoices as of October 1, 2022. Businesses that do not comply must pay Rs. 10,000 for each invoice that is not produced. Additionally, failure to generate an IRN is regarded as erroneous billing and is subject to a Rs. 25,000 fine each instance.
 

Apart from the penal provisions, small businesses can face the following repercussions-
 

• GSTR-1 is not automatically filled up.

• Buyers may delay payments and fail to timely claim qualifying ITC. Eventually, it has an impact on the working capital of the concerned businesses.
• Buyers reject invoices that are not consistent with e-invoicing and may have a negative impact on business contracts.

Conclusion:

View a brief demonstration of how our Online Legal India e-Invoicing system makes your business compliant with e-invoicing. Unified e-invoice and e-way bill production are made possible by the cloud-based software solution known as Online Legal India e-Invoicing.