Implementing a suitable e-Invoicing System for E-commerce Operators

The e-invoicing system applies to businesses with a total turnover exceeding Rs. 100 crore in any previous years from FY 2017-18, starting from 1st January 2021. The 1st phase that began from 1st October 2020 covering companies with turnover of more than Rs.500 crore is already a success. More than six crore e-invoices were created in December 2020 alone. One has to note that apart from sellers, this system subsumes the e-commerce operators such as Flipkart, Amazon, Snapdeal, to name a few. 

If an E-Commerce Operator (ECO) is raising any Business-to-business (B2B) invoices on behalf of the supplier, then the e-invoicing system applies to it as well. The applicability depends upon the annual aggregate turnover of the supplier and not the e-commerce operator. 

The Invoice Registration Portal (IRP) has facilitated the e-commerce operator to report such B2B invoices and credit or debit notes issued on behalf of the supplier. Once the signed Invoice Reference Number (IRN) and QR code are generated, it can be shared with the e-tailers and their customers. 

It means an ECO can report his own invoice and invoice raised on behalf of his sellers. Invoices generated by ECO for itself can be with respect to either sale of its own goods or services online or the invoices raised on the e-tailers for commission charges. It should be noted that online sellers who are raising invoices themselves will not make the ECO liable for e-invoicing. 

The eligible e-commerce companies are identified based on the type of taxpayer, ‘TCS’ chosen at GST registration. As per an advisory released by the National Informatics Centre (NIC), eligible e-commerce operators must report their GSTIN in the “EcmGstin” attribute in the e-invoice schema, apart from the seller’s GSTIN.

Several important Application Programming Interfaces (API) are available for e-commerce operators to interact with the government portal while uploading the e-invoice payload as follows:

• ‘Generate IRN’ API while reporting invoices for self or on suppliers’ behalf.
• ‘Cancel IRN’ API available against IRNs generated by the e-commerce operator.
• ‘Generate E-Waybill’ API.
• ‘Cancel E-waybill’ API available against IRNs generated by the e-commerce operator.
• ‘Get IRN’ API available against IRNs generated by the e-commerce operator.

It must be noted that the ECO cannot access the IRNs that are generated by the supplier. Likewise, the IRNs cancelled by the supplier also cannot be accessed by the e-commerce operator. However, the e-way bills generated via IRP by suppliers are still accessible by the e-commerce operator.

Also Read: Auto-population of e-Invoice Details into GSTR-1 for December 2020

In the early phase of e-Invoicing, the government was contemplating this initiative. Back then, sellers had to authorise the e-commerce operators to generate IRNs specifically. But with this facility introduced since 1st October 2020, it is a significant relaxation given to the ECO to ensure that business does not get halted. However, specific issues need to be looked into by the government.

Firstly, the e-commerce operator must have a mechanism of identifying online sellers who are subject to the e-invoicing. Although the NIC has made a public list of ‘GSTINs generating IRN’, the online retail is an ever-expanding network. With the e-invoicing system to be extended to smaller businesses in the coming months, the challenge of identifying the notified businesses will rise.

Secondly, the quantum of B2B sales returns for e-commerce operators may not be as high as for B2C but is still reasonable. Frequent issue of credit notes which also requires an IRN generation will only increase the compliance. Moreover, any correction in the generated e-invoice requires it to be cancelled within 24 hours and the creation of a new invoice with IRN. These are added action items for e-commerce operators.

Thirdly, ECO must segregate the transactions into various buckets such as invoice raised by seller, invoice raised on behalf of the seller, and invoices raised for supplies made by its own. Of the three, the second and third ones require IRN generation.

Incorrect reporting of an invoice may lead to an additional burden. A prominent example is the reporting of transactions as B2B, while it was B2C in nature. Time-to-time reconciliation of B2B invoices reported to the IRP and auto-populated into GSTR-1.

Fourthly, the real-time generation and handling of e-invoices for own B2B supplies and on sellers’ behalf may become a challenge if necessary systems are not in place. Hence, the government must make special provisions for e-commerce operators as the e-Invoicing system’s scope expands in the coming months.

For any clarifications/feedback on the topic, please contact the writer at annapoorna.m@cleartax.in