Taxation is one of the most important source of revenue for the government of
any Country. Tax System in India can trace its origin since the ancient times in
prehistoric texts such as Manusmriti and Arthshastra. Tax structure in India is
a three tier structure made up by Central, State and Local Taxes.
There are mainly two classification of taxation � Direct Taxation and Indirect
Taxation. Direct Taxes are collected on income and profits and paid directly to
the government, whereas, indirect taxes are collected on any goods purchased or
any service availed and are paid to the revenue authority through an
intermediary on behalf of the end-consumer.
Prior to July, 2017, there were multiple state and central laws governing
Indirect Taxation in India for different kinds of levy like- Sales Tax, Service
Tax, Excise Duty, etc. Owing to the multiplicity and complexity of the taxes and
their cumbersome compliance at both government and consumer end, the GST Law was
enforced on July 01, 2017.
GST Law is hailed to be the Biggest Tax Reform in India since Independence. The
aim while enforcing GST Law was to introduce a consumption-based tax, to unify
all the existing central and state indirect taxes, to remove the cascading
effect of tax as a whole, reduce the tax burden on the taxpayers and make the
collection and process more transparent and reduction in tax evasion.
Need for introducing E-invoicing
It has been nearly four years since the implementation of GST Law. The new
system has completely revolutionized the indirect taxation system of the nation
and has achieved many of its target objectives. However, the tax collection has
not been up to mark as was hoped while introducing the law. This slump may have
been due to various factors, one of the major reason being tax evasion and
Therefore, the 37th GST Council Meeting in 2019 approved a standard E-invoice
and issued a notification which paved a legal road map for E-invoice in India.
Mandatory E- invoicing under GST was implemented on October 01, 2020, in a
phased manner. E-invoicing is one of the biggest reforms under GST. It helps in
ease of doing business and compliance.
What is E-invoicing?
E-invoicing or Electronic Invoicing is a standard digital invoice for goods and
service provided by business firm generated at the government GST portal.[ii]
Under the mechanism, all the B-2-B (Business to Business) and Export invoices
generated by a business need to be registered with the Government system i.e.
the Invoice Registration Portal (IRP) and obtain a unique identification number
for every invoice called Invoice Reference Number (IRN). Along with IRN, the IRP
will also create a digitally signed QR code with select details from invoice and
digitally sign the uploaded invoice data. Once an IRN is generated and invoice
has been authenticated, its details shall be made available on the GST portal
and EWB (E-way Bill) portal in real-time.[iii]
Who needs to generate E-invoice?
It is mandatory for taxpayers having aggregate turnover above INR 500 Crore in
the financial year 2019-2020 to upload invoice details on the government portal,
from October 01, 2020, while taxpayers having aggregate turnover above INR 100
Crore and taxpayers having aggregate turnover above INR 50 Crore have to upload
invoice details on the government portal, from January 01, 2021 and April 01,
2021, respectively. [iv]
However, Insurance Companies, Banking Companies and NBFC, Goods Transport
Agencies, Supplier of passenger transportation services, supplier of services by
way of admission to the exhibition of cinematograph films in multiplex screens,
SEZs, are excluded from issuing e-invoice till now.
Benefits and Challenges of E-Invoicing
The most important benefit of e-invoicing is that it shall help curb tax evasion
and fraud. E-invoicing gives real-time access to data thereby limiting the
manipulation as the invoices shall be generated before the transaction hence
reducing fake invoices so one can claim only the correct input tax credit.
E-invoicing provided real-time tracking the invoices which are prepared by the
supplier, allowing faster accessibility to input tax credit. It also facilitates
generation of E-way bill, the taxpayers just have to upload details of the
vehicle as the Part- A of the e-way bill is auto-filled.
E-invoicing assists in reduction in data entry as the invoice shall be uploaded
on the common portal and the auto-filled details shall eliminate need for manual
data-entry during GST-returns. Since, the details shall be auto-filled to the
GSTR-1 return, there shall be no need to manually report B-2-B invoices twice.
The E-invoice uploaded shall be shared with the buyer thereby helping him
reconcile his purchase orders and accept or reject the invoice. In case a person
misplaces an invoice, the QR code shall help the person generate invoice in pdf
format, any time he wants.
However, one has to keep in mind that the main purpose of introducing the
e-invoicing system was to reduce tax evasion but presently only B-2-B (Business
to Business) transactions are under the purview of e-invoicing and not B-2-C
(Business to Consumer) transaction. The majority frauds happen in B-2-C
(Business to Consumer) transaction as input tax credit is not involved.
Also, cancellation of an e-invoice on IRP is allowed only up to 24 hours, and
any amendment, howsoever small is not possible without cancelling the whole
invoice, thereby increasing the compliance and technicalities. The IRP stores
the e-invoice only up to 24 hours, so an alternate storage space has to be
Impact of E-invoicing on the Economy
Introduction of E-invoicing has been a major push towards digital economy in
India. The major benefit of e-invoicing is that it strives to create
transparency in the taxation system and which boosts automated GST return filing
Until now, GSTR filings involved manual work and calculations which made them
imminent to human error thereby leading to mismatch in the input tax credit
value, ultimately resulting in the loss of millions
annually. With the introduction of the e-invoicing the burden of GST return
filing has been reduced, and hence the errors can be considerably reduced and
mismatch in ITC value shall be curtailed. This shall lead to greater revenue
With the implementation of e-invoicing in GST, real-time tracking of invoices
can be done by the government and the vendors, this has ultimately result in
reduction of frauds and fake GST invoices which is of major concern in today�s
time. The prevalent practice amongst small business owners to produce �kaccha
bill� and later under-reporting of turnover has also be curtailed by
introduction of e-invoicing as it has become difficult to under-value the retail
sales as the wholesale purchases have already been reported.
E-invoicing, when it shall be fully implemented, help not only in boosting GST
compliance, but shall also help in Income-Tax, as under-reporting of the sales
by small businesses shall become tougher. This shall thereby drive the
formalization of the economy.
As per the reports, the E-invoicing under GST had reported 17% growth GST
collection in the month of November, 2020, two months after its implementation
for businesses having aggregate turnover above INR 500 Crore. Since November
2020, GST collections have been on the rise and crossed the INR 1 lakh Crore
benchmark.[v] This shows that E-invoicing is a step in the right direction and
once fully implemented it can help boost economy of the country to a large
The implementation of E-invoicing amongst all businesses transactions shall make
GST in India an advanced information technology-enabled indirect tax system.
However, its true success shall depend on the technological facilities and
advancement in India. The concerned revenue authority and the government should
ensure that minimum technical glitches should occur during the E-invoicing
process. India in general has a lack of infrastructure, especially in remote
areas where connectivity is poor and filing of e-invoice can be a hassle.
Micro and Small enterprises, usually do not spend much on infrastructure and
technology, e-invoicing shall become an extra expenditure for them. This can
have a negative effect on the economy, as the enterprises shall elevate the
prices of the end-product to compensate the extra burden.
Care should also be taken that the tax administration should not become too
stringent with the advent of e-invoicing, and a healthy business friendly
environment should prevail so that foreign investors are attracted to invest
money in Indian economy which shall ultimately help in wealth and job creation.
E-invoicing under GST comes with its fair share of challenges which need to be
addressed to make the process smoother. Since the main aim of e-invoicing is to
curb tax fraud and evasion, the system should be extended to the B-2-C (Business
to Consumer) Transactions as majority tax frauds are made during these. The
technology aspect of e-invoicing should be made more robust to curtail
Provision for amendment and storage of the invoices for more than 24 hours
should be made.
Adequate training should be provided to the taxpayers and GST officers for
proper implementation and usage of the e-invoicing system.
Implementation of E-invoicing under GST law is a welcomed step for the growth of
the overall economy of the country. E-invoicing has been one of the major
reforms under GST law. It has reduced the manual GST Return filing burden as
well as the issue of tax fraud. The checks created by the system have a great
potential to restrict and curtail the fake-invoice and under-valuation of sales
and availment of higher input tax credit.
However, e-invoicing has increased the cost burden and work load of the
businesses as they have to now follow additional steps of uploading and
generating e-invoices. The government should make provisions to ease the pain of
Nevertheless, E-invoicing system under GST Law has the potential to propel
collection of GST leading to growth of the economy.
- All about GST E-invoice Generation Sysytem on portal. Available at
saginfotech.com by Atul Mital published on April 07, 2021
- All You need to Know About E-invoice under GST, What is E-invoicing?
Available at irisgst.com by Shilpa Dhobale published on January 02, 2021.
- GST Notification 88/2020-Central Tax, dt.10-11-2020, GST notification
89/2020-Central Tax,dt. 29-11-2020 GST Notification 05/2021-Central Tax, dt.
- E-invoicing under GST pick up speed, posts 17% growth in November, Authored
by Dilasha Seth, published by Business Standard News on December 07, 2020
- VI Semester LLB Student from
ILS Law College