The Indian government has been shifting to the e-invoicing model to prevent tax evasion and improve the transparency of the taxation system. In the latest implementation of the same policy, The Finance Ministry has issued a notification dated May 10, 2023, stating that all GST-registered entities with a turnover of ₹5 crore or more will be required to adopt e-invoicing for all B2B transactions from August 1, whereas the current threshold stands at ₹10 crores. Societies that fail to comply with the regulations after August 1, 2023, will be penalized with 100% of the tax due or 10,000 Indian rupee, whichever is higher.
Does your society qualify for E-invoicing?
Any society registered under the GST regime and having turnover of more than Rs. 5 Crore in any financial year from 2017-18 will be required to comply with the e-invoice provisions with effect from 01st August 2023 i.e., they will be required to generate IRN/e-invoice against followings: –
- Each tax invoice, debit note & credit note is issued to the registered person.
- Export Transactions
Kindly note that for any society, all maintenance services are offered by the seller which in your case could either be an RWA, a builder, or an FM company with the possibility of their annual turnover being 5 Crores.
What is B2B E-invoicing?
E-invoicing is a system of electronically capturing and validating the invoice details between the seller and the buyer. The objective of E-invoicing is to streamline the invoicing process, reduce errors, enhance transparency, and facilitate the seamless flow of information among societies and tax authorities. It helps prevent tax evasion, as the invoice data is directly reported to the GST portal, enabling real-time monitoring and validation.
It aims to improve the efficiency and transparency of the tax administration as well as reduce errors and fraud. Hence, a B2B Invoice, in your context, is a document for proof of sales that a GST-registered society shares with a GST-registered house/debtor in exchange for the services or products provided.
How does invoice reporting work?
As with many other countries adopting the system, adherence to the laws and correctly formatting the invoice is essential. Understanding how the electronic invoicing system works is the first step to avoiding common mistakes during the e-invoicing process.
Invoice Generation: The seller generates the invoice using any accounting or billing software that is integrated with the GST portal. The invoice is assigned a unique Invoice Reference Number (IRN) and a QR code.
Validation and Authentication: The generated invoice details are sent to the Invoice Registration Portal (IRP) for validation. The IRP validates the invoice and provides a digitally signed QR code, also known as the Quick Response (QR) code.
Invoice Sharing: The seller shares the e-invoice with the buyer, either by providing a copy or by uploading it to the buyer’s accounting system.
Reporting to the GST Portal: The details of the e-invoice are reported to the GST portal, which enables the automatic generation of the buyer’s tax return and allows reconciliation of the input tax credit.
How is E-invoicing distinct from normal invoices?
So far societies have been generating invoices or credit notes for all houses and declaring their income to GST authorities the next month with the R1 fling. The same process has to continue for the GST-unregistered houses.
However, for the GST-registered ones, the income declaration must happen along with or preferably within two days of the invoice generation. In response to this, the GST authorities will provide a Unique Invoice Reference Number (IRN) for each bill or a credit note against a bill. The IRN along with its associated QR code MUST be printed on the invoice/credit note PDF for it to be qualified as an e-Invoice document.
Benefits of having an E-invoicing system
Generating an e-invoice is usually the responsibility of a taxpayer who reports to the IRP in GST. Next, the IRP will generate a unique IRN and an OR code (optional). The taxpayer will be able to scan this GR code, extract the IRN, and fetch invoice deals.
Here are some benefits of e-invoicing for societies:
- E-invoicing helps you with data reconciliation and accuracy
- during manual data entry.
- It allows interoperability across societies.
- Real-Time E-invoice Tracking
- The e-invoice details will be auto-populated on tax return forms
- and e-way bills, making the tax return process easy.
- All transaction details will be available online at all times. This.
- would eliminate the need for frequent audits and surveys.
- Differences in data can be caught by comparing input credit and
- output tax.
- This initiative will also build efficiency within the tax administration by
- helping to identify fake invoices.
How will e-invoice help in controlling tax fraud?
The e-invoicing system will curb tax fraud in the following ways:
- With the implementation of e-invoicing, tax authorities will have access to all their transactions as they have to be uploaded on the GST portal.
- Manipulating invoices will not be easy as they will have to be generated before the transaction takes place. The system will allow you to spot fake invoices easily by matching the input tax credit with the output tax details on the GSTN portal.