GST: Submission requesting for clarity on specific queries relating to implementation of e-invoicing
Blog: NASSCOM Official Blog
Pursuant to NASSCOM’s webinar on e-invoicing organised on August 21, 2020, we have made a submission to GST Policy Wing and GSTN requesting for clarity on following queries relating to implementation of e-invoicing:
A) Industry concern on specific validation that the document date can only be yesterday or today’s date – As per the validations in e-invoicing system, document date can be of yesterday or today. As a result, the following issues may arise:
– Invoices raised in advance and kept on hold for sending to recipient would end up being rejected.
– There may be instances where companies raise invoices for a month with a time lag due to book closure. For example, an invoice for the month of July 2020 is allowed to be raised from ERPs till August 5. In such cases, the invoice cannot be sent to IRP due to the above limitation.
– There are various corporations which have the division responsible for raising invoices based out of a country other than India. Due to difference in time zone between India and such other country, there would be a very small window for generation of e-invoice, especially in cases where such divisions are based in a country such as USA. In such cases, the company would only have a brief window of 30 minutes or 1.5 hours for raising e-invoice if the validation of yesterday or today’s date remains.
It is important to note that in above cases, companies report such invoices in the respective tax periods itself and there is no loss of revenue for the exchequer. It is merely a business requirement. However, this validation would end up making the taxpayer as non-compliant, resulting in unwarranted interest and penal provisions.
Recommendation #1: Government should remove this onerous validation and increase the period for raising e-invoices for up to 7 days.
B) Clarity required on “Bill-to Ship-to” transactions – As per API version 1.02 validations, if ‘shipping party’ is mentioned in e-invoicing schema, then the transaction is considered as ‘Bill to-Ship to’. It further provides that in case of B2B transaction, if “ship to” details are given, ship to state code should be equal to place of supply.
The statutory provisions to determine place of supply of goods are provided under section 10 and 11 of Integrated Goods and Services Tax Act, 2017 (IGST Act). Place of supply is determined based on the nature of activity or transaction and is not always considered as ‘ship to’ state. As per section 10(1)(a) of IGST Act, place of supply of goods is location of delivery of goods (ship to) whereas under section 10(1)(b) of IGST Act, place of supply of goods is location of third party on whose behalf goods are delivered to the recipient (Bill to).
It is also provided in the validations that in case of goods, state code of the seller GSTIN and state code of the buyer GSTIN will decide whether the supply type is interstate or intrastate. If the state code of seller and buyer is the same, then it is intra-state, otherwise it is inter-state. This is not in line with provision of IGST Act as type of supply need to be determined based on supplier state and place of state.
Recommendation #2: The onus of determination of place of supply is on the registered person. Thus, we have recommended that determination of place of supply should not be decided based on the validation in e-invoicing schema but an option should be provided to registered person to mention the place of supply directly.
C) Clarification on exemption from e-invoicing for NBFCs, banks etc – In our recent interactions, we were informed that the exemption prescribed under Notification No 13/ 2020 – Central Tax dated 21 March 2020 is qua the business and not qua the entity. For instance, if a bank has income from financing activity as well from non-banking activity, the exemption would be available only to banking activity. Such an interpretation would defeat the purpose of the exemption.
Recommendation #3: The exemption from e-invoicing should apply qua the taxpayer/ entity and not the type of supply.
D) Clarity on Harmonized System of Nomenclature (HSN) code – GST law requires suppliers to mention HSN code in invoices and the number of digits in the code is prescribed based on turnover of the supplier. Further, one of the data fields to be embedded in QR code generated by the IRP is HSN code.
The statutory requirement is to mention 0, 2 or 4 digits based on turnover of the supplier. The minimum number of digits in HSN code to 4 digits is also aligned as per JSON schema/ API specs released (1 of the validation checks proposed to be carried out by the IRP is existence of at least 4 digit HSN).
However, the proposed format requires 6-digit HSN for services and 8-digit for goods, which is not aligned with existing statutory requirement. Changing the HSN disclosure (number of digits) would require a major change in ERP systems (including realignment at purchase order level) as well as detailed classification studies, which will create a lot of hardship for suppliers as well as buyers.
Recommendation #4: E-invoice and proposed return format should be aligned to the existing statutory guidelines and should not create any additional compliance for the taxpayers.
E) Clarification on document number validations – In API version 1.01 released on 6 March 2020, one of the validation criteria provides that “Document number should not be starting with 0,/and -. Further, alphabets in document number should not have alphabets in lower cases. If so, then request is rejected”.
In this regard, rule 46 of CGST Rules, 2017 provides for content of tax invoice issued by a registered person. The said rule does not restrict use of “0”, “/” or “–“ in invoice number. Further, Form GST INV-01 also does not contain any specific restriction.
Recommendation #5: These conditional validations will hamper implementation of e-invoicing system as taxpayers would need to change existing invoicing pattern and implement new series of invoicing without use of “0”, “/”, “–“ and alphabets in lower case. Therefore, we have suggested to remove these validations from e-invoicing system.
F) Applicability of e-invoicing for B2G supplies – Initially, it was clarified that e-invoicing would be applicable for B2G supplies. However, subsequently, in the Schema revisions, B2G category has been excluded from type of supply.
Where a Government body is registered with GSTIN, it is clear that the same would be a B2B supply and accordingly e-invoicing will apply. However, where a Government customer does not have a GSTIN, ideally there should be no need for e-invoice.
Recommendation #6: Clarity is required on applicability of e-invoicing for non-registered B2G customers.
G) Clarity required with regard to TCS Transactions – CBIC, vide Circular no. 76/50/2018-GST dated December 31, 2018 read with corrigendum, had clarified that Tax Collection at Source (TCS) under Income Tax provisions would not be included in taxable value for the purpose of GST.
E-invoicing schema does not provide specific field to capture details of TCS under Income tax provisions. However, the schema does provide for a field name ‘other charges’ under sl. No A.1.2.25 (value captured in ‘other charges’ need not be considered for the purpose of taxable value).
While it is mandatory to disclose TCS on invoice, capturing details of TCS under the filed ‘other charges’ would not be appropriate as the same needs to be called out specifically in invoice.
Recommendation #7: There should be an optional field incorporated in schema to capture TCS amount in total document value. Alternatively, a separate editable sub-column should be provided under the heading other charges (Sl. No. A.1.2.25) to specifically mention the nature of charges in the invoice.
H) Generation of e-invoice by e-Commerce Operator on seller behalf – Currently, majority of e-commerce operators provide invoicing support via separate ERP system (other than its own ERP) to sellers to ensure a seamless experience for the sellers and buyers alike as well as to ensure there are no delays/ irregularities in delivery and invoicing. Further, e-commerce operators also support sellers in generating invoice on their behalf for their offline supplies such as interstate stock transfers, warehouse removals etc.
Considering the growth of e-commerce industry, a facility should be made available for integration of e-commerce operator’s ERP for seller invoicing with APIs to support the sellers on e-commerce platform to generate e-invoices. Moreover, CGST Rules as well as the online system allow generation of e-way bill by transporter as well as the e-commerce operator. Given that e-invoicing process is proposed to be built in similar manner, we believe for sellers selling through e-commerce operators in India, generation of e-invoice by the e-commerce operators should be allowed.
Being a technology driven requirement, sellers can authorize generation of e-invoices from e-commerce operator’s system and a complete trail can be established for invoices and supplies. Coupled with existing TCS reporting requirement for e-commerce operators, this will aid the Government and bring in more transparency to the entire system.
Recommendation #8: Amendment should be introduced in GST law to allow generation of e-invoice by e-Commerce operator on seller’s behalf.
I) Generation of e-invoice in case of reverse charge mechanism – For transactions under reverse charge mechanism, the supplier does not charge tax and tax is required to be paid by the recipient. The recipient is also required to issue a self-invoice which enables the recipient to take input tax credit.
As per our interactions during the webinar conducted by GSTN on 14 August 2020, it was explained that self-invoice generated by recipients will not require e-invoicing. It was also explained that if the supplier providing services, liable to reverse charge, exceeds the threshold of Rs. 500 crores, it will be required to comply with e-invoicing on their B2B invoices.
In such a situation, it may so happen that B2B invoices issued by suppliers will require e-invoicing in spite of them not having any tax liability.
Recommendation #9: An appropriate clarification be issued to clarify applicability of e-invoicing on both legs of the transaction involving reverse charge mechanism.
J) Testing / sandbox for entities having gross turnover below Rs. 500 cr. – There are companies below the current threshold limit of Rs. 500 Crores who have already started configuration on e-invoicing and are in the testing phase (based on the earlier threshold of Rs. 100 Cr). However, they are unable to do the testing since IRP restricts generation of e-invoicing by such companies.
Recommendation #10: Entities below the threshold of Rs. 500 cr. should be allowed to carry out e-invoicing testing on the portal so that trade & industry (specifically smaller entities) will get sufficient time to prepare prior to implementation in phase 2.
K) E-invoicing and e-waybills for multiple consignments under a single invoice – At times, a taxpayer may raise a single invoice for supply of goods, but the goods are supplied in different consignments. For movement of each such consignment, companies currently issue separate delivery challans and e-waybill, accompanied by copy of sale invoice. The original copy of sale invoice is sent only with last consignment (along with delivery challan and e-way bill). Delivery challan and e-waybills are issued as per the value of each consignment.
Post implementation of e-invoicing, once IRN is generated for such sale invoice, it will also lead to automatic generation of Part-A of e-waybill which will be equivalent to the value of sale invoice. In such case, guidance is required as to how e-waybills will be issued to ensure that value of e-waybill is equivalent to value of delivery challans issued for each of the consignment.
Recommendation #11: Clarification should be issued to provide guidance on compliance with e-waybill and e-invoicing requirements for transactions involving multiple consignments.
L) Guidance on specific transactions – We also request for your guidance on e-invoicing in the following situations:
– Where sale value of goods supplied is higher than taxable value (for instance, sale of second hand vehicles where a special valuation mechanism applies and taxable value is arrived at by deducting WDV value from the sale value).
– Sale of capital goods where sale value is lower than taxable value.
– Where amortization value is added back for the purpose of taxable value but invoice value is basic + tax only. As per the schema, these invoices will be rejected as taxable value + tax is greater than the invoice value.
– Freight and insurance – Under which field of the schema do they need to be reported
– Requirement of e-invoicing for free of cost supplies
– Applicability of QR code in B2C transactions – Clarity is required on applicability for taxpayer and mechanism to generate dynamic QR code on tax invoice issued for B2C supplies?
– Clarity required w.r.t. the information required to be printed on the invoice – Whether IRN and QR Code or any other information communicated by IRP (like acknowledgement number & date) is required to be mandatorily printed on the invoice copy to be shared with client?
– Rounding off logic – There is no clarity on rounding off validations which are implemented on IRP portal. Further, rounding off validation at IRP portal is not in line with GST Act. For example, if tax amount is INR 1500.347, then we consider it as INR 1500.35. However, NIC portal will consider it as INR 1500.34.
– Clarity on state code for zero rated supplies in case place of supply is located in SEZ or outside India:
– State code for supplies to SEZ customer under GST Returns is considered as actual state code whereas for e-invoicing, the defined state code for SEZ supplies is 96.
– State code for supplies to customer outside India (exports) under GST Returns is considered as 97 whereas for e-invoicing, the defined state code for exports is 96.
– Requirement of e-invoice for following self-supply by a customer whose turnover is above INR 500 Crores.:
a) Self-supply invoice generated against procurement of services from vendor outside India
b) Self-supply invoice generated against procurement of listed services (under reverse charge) from unregistered vendor in India
c) Self-supply invoice generated against procurement of listed services (under reverse charge) from registered vendor in India having turnover below INR 500 crores
d) Self-supply invoice generated against procurement of listed services (under reverse charge) from registered vendor in India having turnover above INR 500 Crores
Addressing the above issues will help in providing much needed clarity to the industry.
We look forward to engaging with government to get clarity on the above aspects for effective implementation of e-invoicing. We will keep you posted on further developments in this regard/