E-invoicing is a system where all business-to-business (B2B) invoices are checked and approved electronically by the GST Network (GSTN). Each invoice that is uploaded to the Invoice Registration Portal (IRP) is given a unique number.
The details of these invoices are then instantly sent from the IRP to both the GST portal and the e-way bill portal. While e-invoicing is specifically for B2B transactions, the law also requires certain businesses to create and print a dynamic QR code for business-to-consumer (B2C) invoices.
E-invoicing and B2C transactions
All transactions where goods or services are sold directly to consumers who are not registered under GST are called B2C transactions. For these sales, B2C invoices are issued, and these invoices do not allow the consumer to claim a GST credit. Currently, B2C invoices do not require e-invoicing.
However, according to GST rules (Notification No. 14/2020-Central Tax and its amendment in Notification No. 71/2020-Central Tax), businesses with an annual turnover over Rs.500 crore must include a dynamic QR code on B2C invoices. This requirement helps facilitate digital payments and has been mandatory since December 1, 2020, after being initially scheduled for October 1, 2020, but delayed by the amendment.
Additionally, a grace period was given until March 31, 2021, where no penalties were charged for not following this rule, as per CGST Notification No. 89/2020 dated November 29, 2020. Starting from April 1, 2021, any business failing to comply with the QR code requirement on B2C invoices faces a penalty of Rs.25,000 under Section 125 of the CGST Act for incorrect invoicing.
QR code for B2C invoices
A QR code, or Quick Response code, is a type of two-dimensional barcode that contains information that can be read quickly by a mobile device. It’s used to store details about an e-invoice. Unlike the standard QR codes, a dynamic QR code used in B2C (business-to-consumer) transactions can be updated even after it’s created.
This type of QR code can include features like tracking the number of scans, adding password protection, and redirecting based on the scanning device. It also creates a less crowded QR image, making it easier and more reliable to scan.
For B2C invoices, businesses need to generate their own QR codes, and these invoices do not require an Invoice Reference Number (IRN) from the Invoice Registration Portal (IRP). If a B2C invoice is mistakenly sent to the IRP, it will be rejected. Repeated mistakes can even lead to a block on IRN generation for that taxpayer. The main purpose of adding QR codes to B2C e-invoices is to encourage digital payments, such as through UPI (Unified Payments Interface).
On B2C billing, who doesn’t need to generate a dynamic QR code?
Exempted suppliers, who don’t need to generate dynamic QR codes for their invoices, include insurance companies, banks, financial institutions, non-banking financial companies, goods transport agencies, businesses selling passenger tickets, multiplexes selling movie tickets, and non-residents who provide Online Information Database Access and Retrieval services.
When it comes to exporting goods or services to unregistered persons, a dynamic QR code is not necessary. These transactions are treated like business-to-business (B2B) deals, where e-invoicing rules apply instead.
How may the contents of a B2C invoice be encoded into a QR code?
For B2B (business-to-business) invoices, the QR codes are automatically generated by the Invoice Registration Portal (IRP) and not by the taxpayer. However, for B2C (business-to-consumer) invoices, the taxpayer needs to create the QR codes themselves using their own equipment and software.
A typical B2B QR code includes several key details:
- GSTIN of the supplier
- Supplier’s UPI ID
- Invoice number provided by the supplier
- Date the invoice was generated
- Bank account details of the payee and their IFSC code
- Taxes such as CGST, SGST, IGST, and any applicable Cess
These details should also appear in B2C QR codes, with a couple of differences:
- Instead of the GSTIN of the recipient (since they are unregistered), the recipient’s name is used.
- The QR code should include a payment reference link to facilitate immediate digital payments.
When customers scan the dynamic QR code on a B2C invoice, they can make digital payments directly. The process simplifies payments by auto-filling the payment amount, so the customer only needs to enter their UPI PIN. This setup not only secures the government’s tracking of B2C transactions but also promotes the digitalization of payments, making transactions quick and easy.
Conclusion
E-invoicing is revolutionizing the way businesses handle transactions. While it primarily targets B2B operations by standardizing and automating invoice processes, the requirements for B2C invoices, particularly the inclusion of dynamic QR codes, are enhancing consumer transactions too.
These QR codes simplify and secure digital payments, promoting transparency and efficiency. With these changes, businesses can ensure compliance, streamline operations, and support the government’s push toward a digital economy. As e-invoicing evolves, it’s becoming an essential tool for modern business practices, benefiting both companies and their customers.