Invoicing is crucial for any business, whether small or large. They must create it with great care because every transaction is recorded in the books of accounts in this manner. Businesses with GST registration must generate GST invoices.

In this guide we discuss everything about GST invoicing. After reading this guide, the reader will be able to understand the following easily:

• GST invoice formatting
• Types of GST invoices
• Time limits for issuing GST invoices
• Gst invoice requirements
• e-invoicing
• how to avoid GST invoicing mistakes

What is GST invoice?

A GST (Goods and Services Tax) invoice is a document that lists the goods or services provided, along with the payment due date. It includes details such as the description of goods or services, quantity, value, tax rate, and amount charged for the supply.

Importance of GST invoicing

The GST invoice is considered a legal document that confirms the sale of goods and services. It helps maintain transparency between the seller and buyer, enabling the claiming of input tax credits. Additionally, GST return filing is a mandatory requirements for some businesses.

Statistics on non-compliance penalties to establish urgency:

The non-issuance of GST invoices can result in high penalties.

Non-issuance of invoice: If a business fails to generate an invoice, they are required to pay 100% tax or 10,000 INR, whichever is higher, for every invoice.

Incorrect Invoice: If a business generates incorrect invoices, they are required to pay a penalty of 25,000 INR per invoice.

Unauthorized invoice: If a business generates an unauthorized invoice, their goods can be detent, leading to further penalties.

Difference between bills receipts and GST invoices

Bill, receipts, and GST invoices are different things. A bill is a document issued by the seller that specifies the amount the buyer must pay for goods or services. In a B2C setting, such as a restaurant or hotel, customers need to pay bills immediately. In contrast, for a B2B business type, bills can be paid within a specified timeframe set by the seller. The primary difference between the bill and the invoice lies in how they are perceived. E.g., when a seller sends an invoice requesting payment, it is perceived as a bill. On the other hand, a receipt is issued by the seller to acknowledge the payment received from the customer. Invoices help keep track of sales and inventory, bills serve as proof of purchase between the seller and buyer, while receipts help sellers file taxes and claim tax deductions for business expenses. Moreover, an invoice helps track sales and predict future revenues, while a receipt facilitates the return or exchange of a purchased product.

GST Invoice Format: Essential Components

The GST invoice must contain the following 15 components:

1. Supplier Information: The supplier’s name, address, and GSTIN must be written on the invoice.
2. Tax invoice number: The tax invoice number must be included on the invoice and should be up to 16 characters in length. Each invoice must have a unique invoice number.
3. Date of issue: The date of invoice issuance must be included.
4. Information of the buyer: If the buyer is already registered, their name, address, and GSTIN must be included on the invoice.
5. Unregistered customers: If the buyer isn’t already registered and purchases an item worth more than 5000 INR, the invoice must include their name, address, delivery address, state name, and code.
6. Service accounting code or HSN code: The HSN code or service accounting code for the service must also be included. A business with a turnover of more than ₹ 5 crores must use a six-digit HSN code for all invoices.
7. Description of Goods: The description of the goods being purchased must also be included on the invoice.
8. Quantity: the quantity of the product must also be mentioned. The quantity must be written in numeric values, e.g., in meters, kgs, etc.
9. Price: The final price, after applying discounts and exemptions to the product or service, must be clearly stated.
10. Tax applicable: the applicable tax rate must be written.
11. Tax price: In addition to the tax rate, the amount of tax the buyer must pay must also be specified.
12. Sales under the same state: destination and supply place name: the place from which the supplier is delivering the good, and the destination place (seller) name must also be written on the invoice if the sales are happening under the same state.
13. Sales under different states: The address of the intended place (customer) where the product is to be delivered must also be specified if the place of supply differs.
14. Signature: The supplier’s signature must also be included on the invoice.

Types of invoices

There are different types of invoices, including:

Bill of supply:

A Bill of Supply is similar to a GST invoice; however, one key difference between a GST invoice and a Bill of Supply is that a Bill of Supply does not contain any tax amount, as the seller can’t charge GST to the buyer. It is applied in cases where the tax can’t be charged, e.g., if the registered person is selling exempted goods and services or has opted for a composition scheme, they can’t charge any tax.

Invoice-cum-bill of supply:

Invoice-cum-bill of supply is issued when a business sells both taxable and exempt goods or services. If a registered person supplies both taxable and exempt goods or services to an unregistered person, they can issue a single “invoice-cum-bill of supply” for all such supplies.

Aggregate invoice:

An aggregate invoice is a single invoice that is created from multiple smaller transactions. For example, if the buyer is unregistered and the value of various invoices is less than 200 INR, they can issue an aggregate invoice.

Reverse charge invoice:

If the buyer is responsible for paying GST instead of the seller, a reverse charge invoice is issued. Moreover, if the goods or services are being purchased from an unregistered seller, this invoice is used.

Debit and buyer note:

A debit note is issued by the seller when the amount payable by the buyer to the seller increases. This occurs when the seller initially charges the buyer less for their product and later realizes the mistake; they then raise a debit note for the extra amount.

Credit note:

A credit note is the opposite of a debit note. If the seller needs to reduce the amount paid by the buyer, they raise a credit note.

This occurs when the buyer returns some products, which consequently reduces the buyer’s payable amount.

E-invoicing requirements and procedures

The E-invoice generation procedure includes:

Procedure:

Following are the steps to generate an e-invoice:

Submission of e-invoices: The creation of an invoice in the taxpayer’s ERP system containing all mandatory fields, including the supplier and buyer’s GSTIN, invoice number, date of issuance, HSN code of goods and services, invoice total, GST details, and value, is mandatory. After that, they have to submit it to the Invoice Registration Portal (IRP). Taxpayers may either connect to one of the IRPs directly or through a third-party service provider, referred to as GST Suvidha Providers (GSPs).

Format of invoice and QR generation: Taxpayers must submit their e-invoices to one of the IRPs in a predefined JSON format. Once the IRP validates the e-invoices (including credit and debit notes), it assigns an Invoice Reference Number (IRN), signs the JSON, generates QR code data to be displayed on the PDF, creates an acknowledgment number, and records the date.

Fiscal Control: Invoices must include a unique code, known as the Invoice Reference Number (IRN), which is generated and signed by the IRP portal. The IRP also includes a QR code, enabling the offline validation of invoices.

Downloading the E-invoice: After the IRN is generated, the e-invoice can be downloaded and shared with the buyer in either printed or digital form.

Print format: Printed invoices must include the QR code provided by the IRP. After the JSON has been signed and all other data returned, the taxpayer is permitted to generate a PDF or paper invoice, which includes the IRN, QR code, acknowledgment number and date.

Storage of e-invoices: According to GST rules, e-invoices must be stored for a minimum of 6 years.

Time limit for Issuing GST Invoices

The GST Model Law has defined the time limits for issuing tax invoices, revised bills, debit notes, and credit notes. There could be 2 cases:

• Normal case
• Continuous supply of services

Normal case: In normal cases, the registered taxable person supplying taxable goods must issue a tax invoice that displays the description, quantity, and value of the goods.

If the supply involves the movement of goods, then invoices will be issued either before or on the date of dispatch. On the other hand, if the supply doesn’t involve any movement of goods, the invoice must be issued once the goods arrive at the buyers.

Continuous case: In the case of a constant supply of goods, the invoice must be issued before or at the time the statement is issued.

The time limit for issuance of credit notes and debit notes:

The time limit for issuing credit and debit notes is until the 30^th of November of every financial year. Filing the GSTR-9 after the 30^th of November in the previous year doesn’t extend the time limit for issuing credit and debit notes.

Consequences of delayed invoice issuance

In case of a delayed invoice, individuals have to face many consequences. Individuals are required to pay 1,000 INR per invoice or 100% of the applicable tax. Moreover, another problem with issuing late invoices is that an interest rate of 18% per year is charged on the tax amount from the due date of payment. Moreover, if the invoices are delayed, the GSTR-1 and GSTR-3B are delayed, resulting in a penalty of 50 INR per day for normal payers.

Reverse charge invoice:

If the buyer is responsible for paying GST instead of the seller, a reverse charge invoice is issued. Moreover, if the goods or services are being purchased from an unregistered seller, it is used. This is done to cover the unorganized sectors and reduce the compliance burden, as small business suppliers sometimes struggle to deal with GST filing.

SEZ supplies and exports:

In the case of products being sent to special economic zones (SEZ), the supplier is not charged with any taxes.

E-commerce transactions and banking services:

E-commerce platforms must collect Tax Collected at Source (TCS) at a rate of 1% from the seller, while banks and insurance companies must charge an 18% GST on the service fee.

GST Invoice Requirements by Transaction Value

Transactions below 50,000 INR

Requirement: The buyer’s details, such as name and address, are not required if the product or service is sold to an unregistered buyer and the amount is below 50000 INR. Only the invoice number, description of the products purchased by the buyer, quantity, unit of process, delivery address, and taxable value must be included on the invoice.

Transactions between 50,000 INR and 2,50,000 INR

The buyer’s details, like name and address, must be included along with the delivery address, HSN code, and tax value.

High-value transactions above 2,50,000

In high-value transactions exceeding 250,000 INR, an E-way bill must be generated, if applicable. Moreover, the buyer’s details, such as name, address, and PIN code, must be included on the invoice.

E-invoicing under GST

Invoice reference number (IRN) generation

For IRN generation, the following steps must be followed:

Ensure eligibility for e-invoicing: The taxpayer must meet the eligibility criteria before generating the IRN. For this, they must register their business under GST and maintain financial statement records that comply with the rules and regulations.

Register on the GST portal: The taxpayer must have an active GST registration and login credentials.

Choosing compatible invoicing software: The taxpayers must use invoicing software that is compatible and doesn’t create any hurdles or problems.

Creating an e-invoice: The taxpayer must carefully prepare an e-invoice and provide accurate details to avoid any delays. After creating the invoice, they must upload the JSON-formatted file to the GST portal.

Generation of IRN: After validating the data, a unique IRN number is generated using a hash-generation algorithm.

QR code requirements: To generate code, specific requirements must be fulfilled, including the GSTIN of the supplier and recipient, the invoice number provided by the supplier, the date of invoice issuance, the HSN code, and the invoice Reference number, among others.

Common errors while generating e-Invoices under GST

There are some common errors that most of the taxpayer usually face:

Duplicate invoice Reference number: Sometimes taxpayers submit the IRN that has already been registered

Invalid HSN codes: Taxpayers enter incorrect HSN codes on the invoice.

Invalid total invoice value: Sometimes, the taxpayer enters an invalid total invoice value that doesn’t match the total of the individual line items.

Invalid GSTIN: Sometimes, the entered GSTIN is not active.

Invalid reference data: Occasionally, taxpayers enter incorrect invoice data, such as the date or invoice number.

Input Tax Credits and Invoices

An input tax credit refers to the reduction of tax already paid on inputs when paying tax on outputs.

Requirements to claim Input Tax credit:

To claim the input tax invoice, the taxpayer must have:

• A tax invoice
• Debit note

Industry-specific GST invoice guidelines

SEZ supplies and exports:

If the products are destined for Special Economic Zones (SEZs), the supplier is exempt from paying any taxes.

E-commerce transactions and banking services:

E-commerce platforms must collect Tax Collected at Source (TCS) at a rate of 1% from the seller, while banks and insurance companies must charge an 18% GST on the service fee.

Transport and logistics:

GST rates vary for different types of transport. For example, for air travel, the GST ranges from 5% to 12%. For railway traveling, the GST is 5% on AC class, and the business class doesn’t charge any GST. When traveling by bus, no tax is charged.

Invoice compliance checklist

Invoices must meet all the necessary standards. Otherwise, they might be rejected or sent back for corrections. Sometimes, individuals also have to face high penalties if their invoices don’t comply with the rules.

To comply with regulations, companies must upload data in a structured format. The invoice must have:

Invoice Requirements Checklist:

• Header information
  • Invoice title
  • Invoice number
  • Issuance date
  • Due date
• Seller’s information
  • Name
  • Address
  • Contact information
  • Tax ID
• Product/service details
  • Description
  • Quantity
  • Unit price
  • Total amount
• Financial summary
  • Subtotal before discounts
  • Subtotal after discounts
  • Shipping costs
  • Total amount due
• Payment details
  • Payment method
  • Bank information
  • Payment terms (including duration)

FAQs About GST Invoices

Q: What are the most common errors while generating e-invoices under GST?

Ans: There are some common errors that most taxpayers usually face

• Such as Duplicate invoice Reference number
• Invalid HSN codes
• Invalid total invoice value GSTIN
• Sometimes, the entered GSTIN is not active.
• Invalid reference data

Q: What are the types of GST invoices?

Ans: There are different types of invoices, including:

• Bill of supply
• Invoice-cum-bill of supply
• Aggregate invoice
• Reverse charge invoice
• Debit and buyer note
• Credit note

Q: What are the requirements that must be fulfilled to generate a QR code?

Ans: QR code requirements:

To generate code, specific requirements must be fulfilled, including the GSTIN of the supplier and recipient, the invoice number provided by the supplier, the date of invoice issuance, the HSN code, and the invoice Reference number.

Q: What are the GST rates for different Transport travel?

Ans: GST rates vary for different types of transport travel. For example, for air travel, the GST ranges from 5% to 12%. For railway traveling, the GST is 5% on AC class, and the business class doesn’t charge any GST. When traveling by bus, no tax is charged.

Conclusion

Invoicing is crucial for any business, whether small or large. They must create it with great care because every transaction is recorded in the books of accounts in this manner. The GST invoice is considered a legal document that confirms the sale of goods and services. It helps maintain transparency between the seller and buyer, enabling the claiming of input tax credits. Invoices must be created by relevant rules and regulations to ensure compliance with all applicable laws, as non-compliance can lead to delays or rejection of the invoice. Moreover, the GST invoices must also be issued on time to avoid high penalties.