E-invoice has become the new normal as it is now mandatory in the GST regime. It has started in October 2020. GST E-invoicing is now compulsory for all the taxpayers with a combined turnover of more than Rs. 500 Cr in the former financial year. In order to help all of these taxpayers with this new system, the government gave the option to voluntarily generate and report the e-invoice. Its trial was enabled in August 2020 in the e-invoicing portal. To help you understand this topic further, here are a few things that you need to know.
APIs and who uses them –
API stands for an application programming interface. It is a software intermediate that allows two applications to interconnect with each other. In the e-invoicing system, APIs play a very important role. They facilitate the communication and transfer of data between GSPs (GST Suvidha Providers) or the taxpayers and the e-invoice system. The government will need two different software components in order to develop a platform to provide all the GST services to the taxpayers. These software components then need to interact with each other according to the API specifications. This e-invoice system uses the RESTful web services for providing these taxpayers the various functionalities like making online payments, filing returns, viewing ledgers, registration, etc.
Purpose of APIs under GST –
The only key to the successful implementation of GST is the taxpayer’s convenience and comfort. All of these taxpayers can easily use third-party applications that provide a great variety of interfaces on mobiles, desktops, and laptops, etc to connect with the filling system of GST. Now, these third-party applications that taxpayers use connect with the GST filing system through GST API. Thus, it enhances the convenience of taxpayers a lot. Under e-invoicing in GST, the taxpayers will generate the e-invoice in their respective ERP software and then they will report it on the invoice registration portal (IRP). The invoice registration portal constructed the e-invoice process with the help of an API mode. The taxpayers of the GSPs can directly generate the e-invoice through their systems by integrating these APIs in their existing ERPs.
What is an e-invoice?
E-invoice, also known as electronic invoice, is an electronic mechanism under GST. In this mechanism, every B2B invoice is generated by a particular business that has an aggregate turnover of more than Rs. 500 Cr will have to be authenticated electronically on the GSTN portal. Further, for managing all the invoices, the IRP or the invoice registration portal has to issue a unique identification number for each invoice that is called the invoice reference number (IRN). Once the invoice has been authenticated, its details should be made available on the EWB portal or the GST portal in real-time.
Details contained in an e-invoice under GST –
The e-invoice contains the following details as per the draft format that the GSTN generates.
- E-invoice schema: This contains the technical field name as well as the description of each field. Also, it specifies if a field is compulsory or not. E-invoice schema has a few sample values along with some explanatory notes.
- Masters: This part will specify a certain set of inputs for particular fields that are already defined by the GSTN itself. It also includes fields such as supply type, UQC, invoice type, state code, etc.
- E-invoice template: The E-invoice template is as per the rules of GST and it enables the reader to correlate to the terms that we use in other sheets. The compulsory fields are always in green color whereas optional fields are present in the color yellow.
How API helps in generating an e-invoice?
As discussed above, APIs play a very important role in generating an e-invoice. The taxpayers need to enter the significant details of their invoices into their respective accounting system. It sends the data through the application programming interface to the invoice registration portal (IRP). In the next process, the invoice by the taxpayers gets registered under the IRP, the IRN gets generated and then the invoice is sent back to its taxpayer along with the QR code and the digitally signed e-invoice. After that, the taxpayer’s system prepares the invoice for the print. It contains the IRN and also the QR code embedded in it.
What happens when someone uses third-party applications or their own setup for e-invoice?
Generation of IRN in e-invoice under GST can be a three-level interaction if in case a person uses ASP or application service provider. The application service provider pulls out all the invoice data from the client’s billing or accounting system and then it puts that data in the right format so that they can send it to the IRP. This interaction happens through the APIs. Comparatively, this model is a good option for most of the taxpayers because of its cost-effectiveness. Now if talking about the taxpayer that has his/her own ERP system that is capable to interact with the IRP through the APIs, they can easily interact with the invoice registration portal (IRP) for the generation of invoice reference numbers. However, this setup is quite expensive.
Benefits
Even before the emergence of the GST era, the government is trying to fight the issue of tax leakage and fraud using fake invoices. The government gave the idea of E-invoicing in India so that the it can successfully put an end to it. They did it by mandating the authorization and authentication of every invoice that has been generated by the government portal. The implementation of e-invoicing under GST is beneficial for taxpayers as well besides plugging the tax leakage. Some of its major benefits are as follows:
- Easy and clear ITC claim.
- One-time reporting of all the invoicing details for the taxpayers’ GST filling.
- Provides automated return filling process as the obligatory details should be auto-populated for different returns and even the EWB.
- A reduction in invoice mismatches during the reconciliation process.
- Gives real-time tracking of the invoices that suppliers prepare.
- The standard system for invoicing means interoperability between numerous software.