We‘ve seen the steady introduction of various e-invoicing regulations focused on taxpayer turnover over the last six months. Several notices have been released, instructing taxpayers on how to comply with the e-invoicing criteria. Such taxpayers have been using the IRP to generate IRNs and QR codes, as well as sending tax invoices to beneficiaries for their outward supplies.
In the Indian indirect tax setting, the idea of e-invoicing at this scale is fresh, and its effect on daily business activities has only recently begun to emerge. Certain factors can have a significant indirect effect that will only become apparent in the coming days.
We’ve looked at the regulatory rules regulating e-invoicing, the GST reporting process, and the current inconsistent market practices that might lead to problems in the future.
- An invoice is known as an invoice or tax invoice issued in accordance with Section 31 of the GST legislation. Furthermore, the said section states that a tax invoice must be provided before or at the time of removal/delivery of goods in the case of goods, and an invoice must be issued before or after the availability of service in the case of services, but within 30 days of the date of service supply in the case of services.
- By uploading the invoice’s basic information (in FORM GST INV-01) to the Invoice Registration Portal, registered persons may obtain an Invoice Reference Number (IRN) and QR code (IRP).
- On the tax invoice, an IRN embedded QR code is a required function.
- Any tax invoice given without the generation of the IRN is not considered an invoice, according to the GST Registration.
What is the Interpretation of GST E-invoicing and Time of Supply Provisions?
- An invoice must be provided on or before such occasions, such as the sale of goods or the procurement of services. An IRN embedded QR code is required on the invoice, and an invoice’s identity as a tax invoice is determined solely by the generation of the IRN. An invoice will be invalid unless the IRN has been created.
- Now that we’ve identified the date of issue and the invoice’s validity, it’s vital to comprehend the significance of a tax invoice in terms of tax payment. The ‘Time of Supply’ is related to the liability to pay GST, according to the legislature. The date on which goods/services are delivered is consequently compared to the date on which the retailer issues an invoice.
- In layman’s terms, GST obligation is tied to the date of issue of the tax invoice or supply, whichever comes first. Only when the IRN is produced does an invoice become a legal tax invoice. The details of invoices for which an IRN is produced are then auto-populated in the GSTR-1 for the month in which those invoices are sent.
- For example, suppose an invoice is created in the ERP on March 31st, and the e-invoicing is completed the following month. If the GSTR 1 for March is already filed before the e-invoicing, the situation becomes even worse.
- Given the above, the question that has arisen is: “What will be called the invoice date where the IRN is generated after the invoice date, and accordingly the period for tax payment and return reporting?”
- The tax invoice would only become legitimate or attain validity in the above scenario if the IRN was produced. In legal terms, responsibility for GST should be activated only when the IRN is produced, assuming no supply has been made. In the current case, however, the GST obligation is calculated from the date on which the ERP generates the tax invoice, regardless of the date on which the IRN is generated (Acknowledgement date).
- We assume that in the aforementioned scenario, there will be no delay in the collection of the tax obligation because taxpayers record such invoices and pay taxes in GST returns depending on the tax invoice generation date; however, the issue of whether such reporting is right must be answered. For any taxpayer, GST is a significant source of income. As a consequence of the aforementioned procedure, tax is paid one month in advance.
- Furthermore, another series of reconciliation will be needed between tax invoices produced in the ERP, tax invoices for which IRN is generated and not generated, and tax invoices for which e-way bill is generated and not generated.
- The government should consider these issues to determine if the invoice date or the IRN date should be taken into account. Around the same time, taxpayers should be aware of this reality and monitor their compliances and tax payments accordingly to prevent any enforcement issues.