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Steps to be taken before implementation of 'E-invoicing and new GST return'

CA Nilesh Mahajan 
on 19 February 2020


Followed by our presentation on 'New GST return and E-invoicing' held on 07 Feb 2020, we would also like to highlight a few points regarding the e-invoicing and new GST return system which will help in taking appropriate steps for being ready on 1 April 2020

Unlike real time generation of e-way bill before movement of goods, taxpayers interact with Government portal only on need basis like filing of monthly/quarterly GST returns, refund application etc. However, with the introduction of e-invoicing every specified taxpayer is required to generate the Invoice Reference Number ('IRP') and Quick Response ('QR') code on real time basis on Government notified portal i.e. Invoice Registration Portal ('IRP'). Further, based on the data uploaded on IRP, most of the fields related to outward supply will be auto-populated on real time basis in the monthly ANX – 1 of supplier and same will also be reflected in ANX – 2 of recipient for taking appropriate actions.

 

Accordingly, it is critical for every organisation to ensure the readiness of their system to provide desired output for generation of IRN & QR code from IRP and proper compliance under new return system. In this regard, business entities with the help of domain experts need to update their invoice template which takes care of their specific requirements in the invoice, captures even the unique transactions and addresses any loopholes/error/limitation of system/software. It will help them in smooth transition to both i.e. e-invoicing and new returns. It will result for the businesses in avoiding any possible hiccups in day to day business operations.

Further, we believe that the services of GST Suvidha Provider (GSP) or Application Suvidha Provider ('ASP') alone may not serve the purpose for the reason that the said service providers can act as an intermediary and assist only in pushing the data to IRP and may not cater to the individual needs of the business entities. Appropriate Compliances can be ensured only if the templates and accounting software of the entities are properly updated/modified.

In the above background, we are highlighting below critical concepts of e-invoicing and new GST return followed by the appropriate steps to be taken in this regard.

E-invoicing:

Government intends to implement the e-invoicing in phased manner from 01 April 2020. Generation of IRN and QR code will be mandatory in respect of for Business to Business ('B2B') transactions, for the taxpayers having aggregate turnover more than INR 100 Crs Further, the taxpayers having turnover more than INR.500 Crs are required to generate the dynamic QR code for Business to Customer ('B2C') transactions. CGST Act defines Aggregate turnover as value of all taxable supplies, exempt supplies, export to be computed on all PAN India basis but excludes taxes under GST.

Primarily there are three ways of generating the IRN & QR code in e-invoicing mechanism as explained below:

A. Web based (Online mode):

Process is similar to generation of e-way bill on the NIC portal. In the case of e-invoicing, Government has provided IRP to generate the IRN and QR code online on real time basis. Currently, Government has notified the websites on which e-invoice can be generated, however the same is not yet operational.

B. Offline tool based (Offline mode):

In this mode, Government will provide an offline tool which is similar to filing of various GST returns (GSTR – 1/GSTR – 3B/GSTR – 9) on the GST portal and generation of e-way bill on NIC portal. Taxpayers need to fill required details as per the standard templates provided in excel to generate and upload the JSON file on web portal to generate the IRN and QR code. Further, the offline tool will be used to download/view the IRN and QR code generated by IRP or to view errors in the uploaded file. The offline tool is yet to be made available by the Government.

C. API based:

API stands for Application Programming Interface and the same is in the nature of a software intermediary that allows two different software applications to interact with each other. Data generated in one software is converted into a readable format for the other software application to understand. Presently in the e-invoicing mechanism there are two types of API namely, Sandbox API and Production API. Sandbox API is a copy of production API which is used for initial testing and development purpose only. Production API will follow Sandbox API and will be used when the actual software is made functional/operational.

 

Currently, Government has published sandbox API on https://einv-apisandbox.nic.in/ for taxpayers having turnover more than Rs.500 Crs to test their system interaction with IRP. There are two options for taxpayers to communicate with IRP i.e. directly to IRP portal using their own Software system if the same provides such option or via data transmission using the services of GSP or ASP

Presently GSP/ASP are already connected to IRP using the sandbox API on a test basis. Taxpayers can test their e-invoicing preparedness by connecting/integrating the GSP/ASP with their accounting software to pull the required data in excel/JSON format to push to IRP for generation of IRN and QR code and returning same back to taxpayers accounting software

In this regard, we have engaged a delivery partner who has capabilities in almost all ERPs to ensure proper channelling of the invoices of respective clients with the IRP to optimise proper compliance of the e-invoicing system. We will be happy to do hand holding wherever it is required. We can coordinate a demo at a mutually convenient time.

New GST returns:

The new return system divides taxpayers into two categories based on their aggregate turnover [Turnover upto Rs.5 Crs ('Small taxpayers') and Turnover more than Rs.5 Crs ('Large Taxpayers')] in order to specify the separate compliance mechanism. Small taxpayers are further categorised based on the type of supply made and optional forms are also prescribed to cater to specific needs of such taxpayers.

Following is the comparison table for applicability of different forms based on type of supply made and their frequency:

 

S No

Quarterly Form Sahaj (RET - 02)

Quarterly Form Sugam (RET – 03)

Quarterly Form Normal (RET - 01)

Monthly Form Normal (RET – 01)

A

Eligibility criteria based on Turnover:

Turnover upto Rs. 5Cr

Turnover upto Rs. 5Cr

Turnover upto Rs. 5Cr

Turnover upto Rs. 5Cr

B

Allowed outward supplies:

  • B2C excluding supplies through ECO
  • Inward supplies attracting reverse charge
  • B2C & B2B excluding supplies through ECO
  • Inward supplies attracting reverse charge

All type of supplies including

  • B2C & B2B
  • Exports
  • SEZ supplies
  • Deemed supplies
  • Inward supplies attracting reverse charge

All type of supplies including

  • B2C & B2B
  • Exports
  • SEZ supplies
  • Deemed supplies

Inward supplies attracting reverse charge

C

Allowed inward supplies:

  • Inward supplies from B2B
  • Facility to claim provisional ITC is not available on missing invoices
  • Inward supplies from B2B
  • Facility to claim provisional ITC is not available on missing invoices

All supplies including:

  • Inward supplies from B2B
  • Import of goods from SEZ & overseas
  • Import of services
  • Facility to claim provisional ITC is available on missing invoices

All supplies including:

  • Inward supplies from B2B
  • Import of goods from SEZ & overseas
  • Import of services
  • Facility to claim provisional ITC is available on missing invoices

D

Payment frequency & mechanism

Monthly through PMT – 08

Monthly through PMT – 08

Monthly through PMT – 08

Monthly through RET – 01

E

HSN requirement

Optional: 4 digits

Optional: 4 digits

Optional:

  • Domestic: 4 digits
  • Export/import/SEZ: 6 digits

Mandatory:

  • Domestic: 4 digits
  • Export/import/SEZ: 6 digits
 

Except for the difference mentioned above, all the details under new GST return are more or less the same. Further filing of ANX – 1 to declare outward supply & ANX – 2 to take action of accept/reject/keep pending on details declared in ANX – 1 remains the same for all taxpayers. Major change in new GST return pertains to manner of declaration of details in respect of inward supply such as details of import of goods, services and inward supply covered under reverse charge mechanism etc. Currently, consolidated details are required to be mentioned in GSTR – 3B by the supplier but under new GST return document wise details are required to be mentioned in ANX – 1 by the supplier himself.

Accordingly, it is important to align the taxpayers accounting software with the requirement of the new GST returns so as to ensure the desired output from the taxpayer's system to ensure proper compliance under new return. Therefore, every organisation should thoroughly analyse the flow of data and its implications under GST and possibility of bringing out required changes in their accounting software to capture such needs.

In fact, the present template used by Optitax's since April 2019 was developed considering the transition to the new return filling System only. To enable Our clients to smoothly transition to the new return filling system, they only need to continue to provide Us the data in the same templates only. Data provided in the said templates will ensure proper alignment of the same with the new return system.

We are always thankful for your continued cooperation in roller coaster journey of GST.

DISCLAIMER: The views expressed are strictly of the Optitax's Consulting LLP. The contents of this mail are solely for informational purpose. It does not constitute professional advice/recommendation of firm. Firm & its affiliates does not accept any liabilities for any loss/damage of any kind arising out of any information in this presentation nor for any actions taken in reliance thereon


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