India: New Rules for E-Invoicing in 2021

April 2, 2021

Starting from January 1, 2021, e-invoicing became mandatory for businesses in India whose turnover exceeds Rs 100 crore per year, which is roughly the equivalent of 13,7 million USD. Companies need to be able to adapt to the new rules in order to make sure they can meet their tax and legal obligations. 

In October 2020, Ajay Bhushan Pandey, the Finance Secretary of India, revealed the government’s plans to make e-invoicing mandatory for Indian companies which have a turnover above this threshold. On November 10, 2020, the announcement became an official requirement, which has been implemented since (on January 1, 2021), for companies with a turnover of more than Rs 100 crore. In April 2021, the same rule will apply to all B2B companies, regardless of their turnover. 

Prior to January 1, 2021, the same rule applied for companies whose annual turnover exceeded Rs 500 crore. Nevertheless, these rules didn’t apply to insurance companies, telecom service providers, flight companies, banks, and armed forces were not subject to these rules, and weren’t required to issue e-invoices. 

What Changed after April 1, 2021?

As of April 1, 2021, e-invoicing became obligatory for all B2B transactions, regardless of the company’s annual turnover. This means that all firms selling to businesses needed to register on India’s GST Invoice Registration Portal (IRP) and must use it to issue their invoices. The GST portal is where Indian companies file their tax returns, declare sales taxes and request tax refunds. 

How Are E-Invoices Submitted?

In order to comply with the new rules, companies need to submit e-invoices to the IRP in a new format, JSON. The invoices may include an electronic signature, but for the moment it isn’t mandatory. Once the IRP receives the invoice, they check it and validate it based on the following criteria: 

  • The completion of all required fields
  • The issuing company’s Goods and Services Tax Identification Number (GSTIN)
  • The buyer’s GSTIN
  • The invoice’s number and year
  • Whether the invoice is not a duplicate of an already existing invoice

Once the validity of those criteria is verified, the IRP informs the company that they have accepted the invoice. The invoice is then assigned a unique IRP number and signed electronically by the tax office, and a QR code is issued. The QR code’s purpose is for both the issuing and the receiving company to be able to double-check the invoice and make sure it’s registered via the GST portal. Both companies can then view the invoice online. 

If any of the criteria isn’t met, the IRP issues a rejection to the issuing company, containing further information on what they need to correct before submitting the e-invoice a second time.

How Are E-Invoices Distributed? 

Once the IRP has confirmed the invoice’s validity, the issuing company needs to send the invoice to the buyer. The sending method is currently not regulated, so both parties are free to choose how to send and receive invoices. The company who’s issuing the invoice might send the JSON file to the buyer, or issue a PDF or a paper invoice. 

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If your business is affected by these regulations in India, reach out to us, and we will help you automate the invoice reporting process in India.