E-Invoicing Under GST: Applicability, Limits & Rules

A term we regularly hear nowadays is e-invoicing. But what does it actually mean, and what does it entail for your business? E-invoicing under the GST (or the Goods and Services Tax) regime has revolutionized the way businesses now manage their invoicing. The E-invoicing section under GST is a significant step taken by regulatory bodies in the country to streamline GST compliance in the country. 

GST invoice compliance has now been made mandatory for taxpayers with a turnover of over 5 crores in any year starting from 2017-18, making it crucial for businesses to understand the ins and outs of the new system. This article is a complete guide to navigating the E-invoicing section under GST, including the e-invoicing process, B2B invoicing rules, best practices for businesses, challenges, and more! 

• “E-invoicing” or “electronic-invoicing” refers to a system where the GSTN digitally authenticates B2B invoices and other documents via a common GST portal. It is primarily aimed at large, medium, and small enterprises, as well as specific individuals. 

• GST E-invoicing involves reporting details of certain GST documents to the Invoice Registration Portal (IRP). The system then issues an identification number (an Invoice Reference Number, or IRN) against every invoice on the IRP, which is managed by the GST Network (or GSTN). 

• The purpose of the e-invoicing system is to reduce GST evasion, streamline the filing process, reduce credit verification challenges, and more. It also improves reconciliation, a process crucial for all businesses to grow and scale. 

Although it sounds complicated, electronic invoicing, or E-invoicing, is simply the system by which the GSTN reporting system electronically authenticates B2B invoices and other necessary documents. They can then be further used on the common GST portal. 

The GST Council decided to implement the invoicing system in its 35th meeting. While it  initially covered only particular persons and large entities, over time, it has expanded to include mid-sized and small businesses as well. Under this system, all invoices are issued a unique identification number known as an Invoice Reference Number (IRN) by the IRP. 

The GST E-invoicing system in India can be easily operated by following a few simple steps. These include:

Reporting documents

The details of specified GST documents must be reported to the Government-notified portal. It’s important to note that businesses or taxpayers will continue creating their own GST invoices on their Accounting/ERP/Billing systems. 

Validating data

Once reported to the IRP, the data will be validated against specific predefined criteria. The IRP will also assign a unique identification number (or an IRN). 

Transmission and automatic processing

The data will then be transmitted to the relevant Goods and Services Tax portals and other systems, like the e-way bill portal. The e-invoices with the IRN can be automatically processed by these systems, which ultimately leads to faster payments and more efficient reconciliation. In short, the E-invoicing system improves accuracy, transparency, and efficiency for businesses and government bodies alike. 

E-invoicing applies to the following documents and transactions:

Documents:

• Tax invoices
• Credit and debit notes

Transactions:

• Taxable B2B sales of goods and/or services
• Business-to-government sales of goods and/or services
• Exports
• Supplies to SEZs
• Stock transfers 
• Supplies of service to distinct persons 
• SEZ developers
• Supplies under the reverse charge are covered by Section 9(3) of the CGST Act. 

The E-invoicing system doesn’t only streamline tax compliance in the country, it also brings multiple benefits for businesses. These include reduced reconciliation challenges, fewer errors, and fewer instances of duplicate reporting, among others. 

Let’s take a closer look below:

Real-time invoice tracking: E-invoicing enables the tracking of invoices in real time, resulting in quicker availability of ITC (input tax credit). 

One-time reporting: Taxpayers and businesses now only have to report invoices once and get them authenticated by the Invoice Registration Portal. After authentication, these details are then auto-populated to the GSTR-1 returns, reducing the need for manual registration.

E-way bill creation: The E-invoice system facilitates the easy generation of E-way bills. The details in Part A are auto-populated from the authentication process from the GST portal. 

Fraud prevention: Since data is now available to tax authorities in real time, detecting and preventing fraud becomes easier. This also reduces tax evasion. 

Data entry error prevention: The e-invoicing system facilitates multipurpose reporting, and auto-population eliminates the need for repeated manual data entry when filing for GST returns. This reduces manual error. 

QR codes: QR codes on invoices enable assessees to generate multiple copies of the same invoice in PDF format, which is helpful in situations where multiple copies are needed. 

E-invoicing is playing a major role in curbing tax evasion, and here’s how:

Providing real-time visibility 

Since e-invoices have to be generated using the GST system, tax authorities now have real-time access to any transactions as and when they occur. 

Making false invoices easier to detect and prevent

Invoices are generally created before the transaction is completed, making invoice manipulation less likely. 

Making it easier to cross-check data

The GST Network can detect fraudulent tax claims with greater accuracy since input credits can be easily compared with output tax information.

Reducing under-reporting of sales data 

Transactions are now recorded in real-time, with a time limit on when invoices can be generated. This makes it nearly impossible for businesses to underreport transactions and sales. 

Reducing fake invoices

Because each invoice has to be authenticated and receive a unique registration number, fake invoices become more difficult to create. 

The process of getting an e-invoice is quick and easy to follow. Here is a step-by-step guide on how to generate a GST E-invoice:

1. Creating an invoice

The invoice is first created using accounting or billing software with the correct format. Businesses and taxpayers can use their software for invoice generation as long as it follows the given E-invoicing format. 

2. Generating an Invoice Registration Number (IRN)

Businesses can then generate an IRN using a hash-generation system. In case the taxpayer does not generate an IRN, the government IRP system will generate it. 

3. Uploading on Invoice Registration Portal (IRP)

The B2B invoice, IRN (if generated), and JSON file are then uploaded to the IRP. 

4. Validating details 

Once uploaded, the IRP then validates the details and authenticates the files against the central GST registry to identify and prevent duplication. 

5. Generating a digital signature and QR code

Once verified, the invoice is updated with a digital signature from the IRP. A QR code is also added to the JSON file. 

6. Transmitting data to the E-Way bill portal and GST system

Data uploaded to the IRP is then shared with the GST and E-way bill systems, used to auto-populate GST annexures. 

7. Returning the E-Invoice receipt to the business’s ERP

The portal will return the digitally signed JSON along with the IRN and QR code. The invoice is also sent to the buyer at their registered email address.

According to the E-invoice schema notified in January 2020, there are 50 mandatory fields for an E-invoice. These include: 

• IRN
• Invoice Type Code
• Invoice Number 
• Invoice Date
• Invoice Period Start Date 
• Invoice Period End Date 
• Preceding Invoice Reference
• Preceding Invoice Date 
• Supplier’s Legal Name and GSTIN 
• Supplier’s address, state, and pincode
• Billing name, GSTIN, and POS
• Billing address, state, and pincode
• Payee name
• Payer’s financial account
• Mode of payment 
• Financial institution branch 
• Dispatch from details 
• List (items)
• Tax total 
• Paid amount
• Amount due for payment 
• Tax scheme 
• Shipping to name, GSTIN, address, pincode, and state
• Subsupply type
• Transaction mode 
• Company name, address, state, and pincode
• SLNO
• Quantity 
• Rate
• Assessable Value
• GST rate 
• IAMT 
• CAMT
• SAMT
• Total invoice value 
• Batch name 

Almost all types of businesses use the E-invoice system, considering that it's a crucial part of the tax system in India. Some important use cases include:

1. Exporters

If a business’s export sales and domestic sales add up to more than Rs. 5 crore, e-invoicing is mandatory. 

2. E-commerce operators

For e-commerce operators, the e-invoicing system is slightly different. They must generate Invoice Registration Numbers (IRNs) on behalf of their suppliers, and register under GST as e-commerce businesses. 

3. MSMEs

For MSMEs, e-invoicing can automate and simplify GST filings through the GST e-invoice portal. They can reduce manual errors and ensure accurate reporting, improve cash flow management, and more. The system also helps small and medium businesses to scale easily. 

Starting from April 1, 2025, it was mandated that all businesses with an Annual Aggregate Turnover (or AATO) of more than Rs. 10 crores must upload their e-invoices to the IRP within 30 days. This rule initially only applied to companies with an AATO of more than Rs. 100 crores. 

Additionally, Rule 48(4) of the CGST Rules mandates that notified classes of registered persons must prepare their invoices by uploading the required particulars of an invoice on the IRP to obtain an IRN. 

While e-invoicing is necessary for businesses and persons with an AATO of over Rs. 10 crore, certain entities are exempt regardless of turnover. These include:

1. Financial institutions, insurance companies, banks, and NBFCs

2. Goods Transport Agencies

3. Suppliers of Services by way of admission to film exhibition 

4. Special Economic Zone Units (not including SEZ developers)

5. Passenger Transport Services

As technology advances and the business world accelerates, traditional invoicing has become obsolete. Here is how e-invoicing and traditional invoicing differ:

Here are some of the key features of a GST-compliant e-invoice: 

1.  Invoice reference number (IRN)

The IRN is a unique number generated for an invoice. It is computed using a hash algorithm, to prevent duplicate orders. 

2. Digital signature (DSC)

A DSC is a method used to sign and authenticate a document digitally. DSCs must follow the reference guidelines outlined in the IT Act of 2000. 

3. Quick response code (QR code)

QR codes are applied to items to allow for machine readability. These two-dimensional codes help tax officials check invoices using offline applications. 

4. GSTR auto-population

The e-invoicing system also reduces time and assists taxpayers by auto-populating GSTR information. 

While the e-invoicing system has countless advantages and has changed the way businesses conduct, report, and record transactions, it does come with certain downsides. These include:

1. Technical problems 

Businesses are required to upgrade and integrate their ERP systems to meet IRP requirements, which can lead to compatibility issues. Investing in the necessary software and systems for e-invoicing, along with the required training, can be extremely expensive, making it challenging for MSMEs. 

Since the system also depends on a stable internet connection, setups in rural areas and those facing technical outages may face hindered operations. 

2. Data entry issues

Any errors in data entry, PAN/GSTIN, or invoice details lead to the IRP rejecting the invoice. This causes undue delays and compliance problems. 

3. Cybersecurity risks

Cyberattacks have been on the rise in recent years. The e-invoice system involves sensitive data being uploaded to a centralized system, adding to the risk of data breaches. 

4. Inflexible 

The stringent requirement for real-time validation can be overwhelming for smaller businesses that do not have the capital, technology, or infrastructure to adhere to these requirements. 

5. Exclusion of B2C transactions

The E-invoicing system primarily focuses on B2B transactions. This leaves out a large portion of transactions that fall under GST, limiting tax compliance and visibility. 

Here are some of the best practices an organization can follow to ensure seamless E-invoicing:

1. Be clear on your requirements  

Assess your organization’s invoicing landscape, the number of invoices processed every month, and how efficient your existing systems are. Then, assess what your integration needs are for accounting tools and ERP systems, compliance requirements, and operational workflows. 

2. Select an e-invoicing solution

Different e-invoicing platforms offer various features. It is crucial to identify your company’s needs and conduct exhaustive research to find a platform that aligns with them. It is critical to prioritise platforms that offer automatic compliance updates, scalability, robust security features, and seamless integration capabilities with ERP systems. 

3. Invest in training 

Changing to e-invoicing involves more than just deploying new software. It is equally crucial to ensure that different teams are updated on how to use it effectively, are aware of new compliance requirements, and have other relevant information. 

4. Leverage automation and AI

Many modern E-invoicing systems offer advanced AI and automation features. These help streamline operations by flagging discrepancies, reducing errors with manual data entry, freeing up financial teams, and ensuring compliance and enhanced accuracy. 

5. Monitor performance

Once your selected system is live, it is essential to monitor its performance regularly. This allows you to identify bottlenecks, inefficiencies, and gather feedback, which can then be used to further improve operations. 

Keeping up with the ever-changing requirements of the tax system can seem overwhelming, especially when dealing with your regular business processes. Integrated payment processing software, like Xflow, allows organizations to directly accept payment from customers using their existing account software or ERP. This makes the reconciliation and e-invoicing process smoother and more efficient, reduces time, is less tedious, and ensures accuracy.  

Here’s how integration of E-invoicing with accounting and payment platforms can help:

1. Xflow 

Dealing with multiple transactions daily can be overwhelming, and becomes more complicated when dealing with international trade. Invoicing can become difficult, and payment solutions are restrictive, slow, and expensive to implement. 

This is where Xflow comes in. Xflow allows businesses to smoothly receive payments from over 140+ countries, supporting settlements of more than $10,000 in a single invoice. It supports lightning-fast cross-border settlements, all while complying with foreign and domestic GST rules. Xflow’s invoicing solutions also allow bank transfer instructions to be added to the invoice, simplifying workflows. 

2. Tally 

Tally offers instant automatic e-invoice generation, as well as printing IRN and QR codes without manual intervention. Bulk invoices can also be sent to the IRP for e-invoicing. Tally also leverages the integration of the IRP with the GSTN and e-way bill system, generating e-way bills along with e-invoices. 

3. Zoho Books 

Zoho Books also allows businesses to start generating e-invoices, connecting with the IRP, and seamlessly pushing invoices to the portal. 

4. ERP Solutions 

ERP Solutions is a platform that offers integration solutions for ERP software across various industries. This reduces the compliance risks involved with e-invoicing, ensures consistent formats, real-time reporting, and provides traceable audit trails. 

According to market research, global e-invoicing is expected to reach $60.9 billion by 2032–an unprecedented growth rate of 17.7% CAGR. Governments continue to strive to introduce regulations to ensure compliance, transparency, and security. At the same time, businesses are increasingly adopting e-invoicing technologies while pushing for greater efficiency. 

The future of e-invoicing is predicted to be heavily tied to automation and AI, blockchain technology, sustainability, and accessibility. Below are some trends we can expect to see in the future: 

1. Automation and AI

Artificial intelligence seems to be the future for many industries, and e-invoicing is no exception. Tax automation tools and AI can be game-changers in invoice matching and fraud detection, utilizing machine learning for real-time validation and error reduction, and detecting and preventing inconsistencies and duplication. 

2. Blockchain

Blockchain is predicted to play a crucial role in enhancing the transparency and security of e-invoicing. Smart contracts allow automated payments, reducing processing time. Businesses will be able to enforce payment terms using blockchain-based contracts, ensuring timely payments. Immutable ledgers also enhance compliance and security since they cannot be altered, manipulated, or tampered with. 

3. Real-time reporting and compliance

Governments across the world are adopting real-time reporting and compliance regulations to reduce tax fraud and improve transparency. In India, for example, the GST network required mandatory real-time invoice submission through the IRP. Each invoice is assigned an IRN, helping to prevent duplication, invoice manipulation, and GST evasion. 

4. Mobile e-invoicing

The availability of mobile e-invoicing is a significant asset for SMEs and smaller freelancers. It allows the generation and sending of invoices using their mobile devices and smartphones, eliminates delays, improves operational flexibility, and streamlines cash flow. 

5. Sustainability 

The adoption of digital invoicing is also a significant step towards sustainability. It reduces paper waste, cuts down on deforestation, lowers energy consumption, and leads to overall lower carbon footprints. 

If your organization is managing numerous international vendor payouts or inbound collections, having a platform that supports your operations by recording transactions and generating invoices is critical. Luckily, Xflow is just what you are looking for! 

Xflow enables your organization to stay compliant with Form 10F and DTAA rules, centralizes tax documentation, and tracks outstanding invoices. Our platform’s invoicing solution provides complete transparency of your invoices, enables you to send regular reminders to customers directly from the Xflow dashboard, and offers additional features. 

Research also shows that invoices that match your brand improve upon and build trust with customers–we’ve got your back there, too. With Xflow, you can create invoices that reflect your brand and style, thanks to its multiple elegant templates that can be customized with your logos, fonts, and brand colors.  

With our enterprise-grade infrastructure, SOC 2, and ISO 27001 certifications, and built-in security measures, Xflow guarantees that your cross-border payments and e-invoicing remain traceable, instant, and smooth, all while remaining compliant with the necessary regulations. 

Related reading

1. E-Invoice Limit: Rules & Exemptions

2. What Is a Proforma Invoice? Guide for Indian Exporters

3. Export Invoice: Types, Usage and Format