Dynamic QR Code in GST – Another Game Changer?


Indian GST law is a technology-driven law.  GST law has witnessed the successful implementation of technology-based anti-evasion tools like E-way bills and E-Invoicing. Results of the successful implementation of such tools are visible in the form of consistent increase in revenue collections and large-scale detection of hawala and other malpractices.  The latest to join this bandwagon is QR (Quick Response) Code, which shall be implemented from 1st July 2021. Realizing the significance of this innovative change and to clarify various queries of stakeholders Central Board of Indirect Taxes & Customs (CBIC) has till now issued two(2) 1Circulars in addition to various Notifications. In this article, we would be analyzing in detail relevant notifications and circulars and practical insights on compliance.

Legal Provisions

Sixth2 Proviso to Rule 46 of the CGST Rules empowers the Government to notify a class of taxpayers who shall issue their tax invoice with a QR code. Similar powers have been granted to the government for notifying the class of taxpayers who shall issue their bill of supply with a QR code.

Brief understanding of QR Code

A QR code contains machine-readable information about an invoice/underlying document. While QR codes are similar to linear barcodes, they can store a larger amount of information. It is a two-dimensional version of a barcode and can be scanned from any mobile camera.  A Japanese company named Denso Wave in the 1990s invented the QR Code.  There are 2 types of QR codes viz. a) Static and b) Dynamic QR Code.

A QR code that cannot change and is mostly printed on paper is referred to as a static QR code. It contains information about the payee, and the consumer must enter the amount after scanning. On the other hand, a dynamic QR code is generated by the software and can include additional fields such as the amount, etc. Dynamic QR codes allow for additional features like scan analytics, password protection, device-based redirection, and access management. Dynamic QR codes also result in a less dense QR code image that is more reliable to scan. GST law envisages the adoption of a Dynamic QR Code.

Why thrust on QR Code?

Reasoning for such thrust was well explained in Report of the Committee on the analysis of QR (Quick Response) Code constituted by Reserve Bank of India (RBI) and extracted as under:

  • With the growing penetration of smartphones in India, QR code-based payments present the most cost-effective way of expanding the digital footprint.
  • India still incurs a large expenditure in printing and transportation of currency notes. Digital payments provide an opportunity to reduce these costs.
  • As compared to other modes of payments, QR codes present a viable and cost-effective option.

Class of taxpayers to whom Dynamic QR Code provisions are applicable  

As of now, QR Code provisions are applicable only to those suppliers having an annual turnover exceeding Rs. 500 crores3 in 4 any preceding financial year from 2017-18 onward. Further, dynamic QR is to be generated and affixed only on B2C5 Invoices.

To summarise, the requirement of Dynamic QR Code is applicable to tax invoices issued to an unregistered person by a registered person whose annual aggregate turnover exceeds Rs 500 Crore in any of the financial years from 2017-18 onward.  Please note as now a requirement of a dynamic QR code is not extended to the bill of supply.

Non Applicability of QR Code provisions

6QR code requirements are not applicable to the following class of registered suppliers even if their annual turnover exceeds  Rs. 500 crores in any preceding financial year from 2017-18 onward:

  • Banking company or a financial institution, including a non-banking financial company
  • Goods transport agency supplying services in relation to transportation of goods by road in a goods carriage
  • Supplier supplying passenger transportation service
  • Supplier supplying services by way of admission to the exhibition of cinematograph films in multiplex screen
  • OIDAR supplies made by any registered person, who has obtained registration under section 14 of the IGST Act 2017

Further dynamic QR requirement is not applicable to the following class of invoices:

  • Invoice issued to a recipient located outside India for supply of services, for which the place of supply is in India, and the payment is received by the supplier in foreign currency, through RBI approved mediums.
  • B2B Invoices, Export invoices and any other invoice that are required to be issued as E-invoice.

Conditional extension for Dynamic QR Code compliance

7Penalty has been waived for non-compliance of the provisions of Dynamic QR Code for the period from 1st December 2020 to 30th June 2021, subject to the condition that the registered person to whom QR Code provisions are applicable complies with the same by 1st July 2021.

Date of implementation of Dynamic QR Code

Considering conditional waiver of penalty for non-compliance it can be safely stated that QR Code provision shall take off only from 1st July 2021 for the notified class of registered supplier and that too only for issuance of B2C invoices.

Penalty for non-compliance with Dynamic QR Code mandate

In terms of section 122(3)(e) of the CGST Act, failure to issue an invoice in accordance with the provisions of the CGST Act or the rules made thereunder shall be liable to a penalty which may extend to twenty-five thousand rupees. Further, an equivalent penalty shall be imposed even under the respective state GST Act.

E-Invoicing QR Code vs Dynamic QR Code

To alleviate common misunderstanding, it is highlighted that e-invoicing also contains QR code and such code is generated by the Invoice Registration Portal (IRP), however such E-Invoicing QR codes are different for dynamic QR codes. This can be well explained with the help of details captured in both such QR Code, as under:

Details captured in Dynamic (QR) Code

Dynamic QR code is required, inter-alia, to contain the following information: –

  • Supplier GSTIN number
  • Supplier UPI ID. Further in cases where the payment is collected by some other person, authorized by the supplier on his/ her behalf, the UPI ID of such person may be provided in the Dynamic QR Code, instead of Unified Payments Interface (UPI) ID of the supplier.
  • Bank A/C number and Indian Financial System Code (IFSC) of the payee/ person collecting money. However, if UPI ID is linked to a specific bank account of the payee/person collecting money then separate details of the bank account and IFSC may not be provided in the Dynamic QR Code.
  • Invoice number or unique order ID/unique sales reference number (where invoice number is not presently available) & its date
  • Total Invoice Value and
  • GST amount along with breakup i.e. CGST, SGST, IGST, CESS, etc.

Further, Dynamic QR Code should be such that it can be scanned to make a digital payment.

Details captured in the E-Invoicing QR code

The E-Invoicing QR code consist of the following e-invoice parameters:

  • GSTIN of supplier
  • GSTIN of Recipient (if applicable)
  • Invoice number as given by supplier
  • Date of generation of invoice o Invoice value (taxable value and gross tax)
  • Number of line items.
  • HSN Code of the main item (the line item having the highest taxable value)
  • Unique Invoice Reference Number (hash)

It is to be noted that E-invoicing is not applicable to B2C transactions, whereas Dynamic QR code is applicable only to B2C transactions. Hence both these requirements are mutually exclusive.

Deemed Compliance

To handhold stakeholders, certain procedural relaxation has been given in Dynamic QR Code compliance. In the following situations, it is deemed that suppliers have complied with Dynamic QR Code requirements:

  • If the supplier has issued an invoice having Dynamic QR Code for payment
  • Where the supplier, has digitally displayed the Dynamic QR Code and the customer pays for the invoice using any mode like UPI, credit/ debit card or online banking or cash or a combination of various modes of payment, with or without using Dynamic QR Code, and the supplier provides a cross-reference of the payment (transaction id along with date, time and amount of payment, mode of payment like UPI, Credit card, Debit card, online banking etc.) on the invoice
  • Where the supplier, has digitally displayed the Dynamic QR Code and the customer pays for the invoice in cash, without using Dynamic QR Code and the supplier provides a cross-reference of the amount paid in cash, along with date of such payment on the invoice;

 Prepaid Supply and applicability of Dynamic QR Code

In trade, it is quite common to receive payment before issuance of the invoice. Such transactions are popularly called ‘Prepaid (Paid in Advance) Supply’. In such prepaid supply, if cross-reference of the payment received either through electronic mode or through cash or combination thereof is made on the invoice, then the invoice would be deemed to have complied with the requirement of Dynamic QR Code. However, in all other cases i.e. where payment is made after generation/issuance of the invoice, the supplier shall provide Dynamic QR Code on the invoice.

Applicability of Dynamic QR Code on E-commerce transactions

Compliance with Dynamic QR Code requirements by E-commerce operator (ECO) or the online application shall not exonerate the supplier from said compliance, if applicable. If Dynamic QR code compliance is applicable to supplier then irrespective of compliance carried out ECO or online application, supplier making supply through the e-commerce portal or application shall provide cross-references of the payment received in respect of the said supply on the invoice.

 Requirement of Dynamic QR code where electronic mode of payment is made available

If the supplier makes available to customers an electronic mode of payment like UPI Collect, UPI Intent, or similar other modes of payment, through mobile applications or computer-based applications, where though Dynamic QR Code is not displayed, but the details of the merchant as well as the transactions are displayed/captured and if supplier provides the cross-reference of these electronic payments then such invoice even if issued without dynamic QR code shall be deemed to comply with the requirement of Dynamic QR Code.

Applicability of Dynamic QR Code on supply made to UIN holders

In terms of Section 25(9) of the CGST Act, any specialized agency of the United Nations Organisation or any Multilateral Financial Institution and Organisation notified under the United Nations (Privileges and Immunities) Act, 1947, Consulate or Embassy of foreign countries etc. are granted Unique Identification Number (UIN) instead of Goods and Service Tax Identification Number (GSTIN). It has been clarified that any invoice, issued to UIN holders, shall be considered as an invoice issued for a B2C supply and shall be required to comply with the requirement of Dynamic QR Code.

Applicability of Dynamic QR Code in over the counter  sales

There is a typical issue in the case of retail sales over the counter, where payment from the customer is received on the payment counter by displaying dynamic QR code on digital display, whereas the invoice, along with invoice number, is generated on the processing system being used by supplier/ merchant only after receiving the payment. In such a situation invoice number is not available at the time of digital display of Dynamic QR Code as invoice number and invoices are generated only after receipt of payment. To clarify apprehension of trade it has been clarified that the unique order ID/unique sales reference number, which is uniquely linked to the invoice issued for the said transaction, may be provided in the Dynamic QR Code for digital display. As long as the details of such unique order ID/ sales reference number linkage with the invoice are available on the processing system of the merchant/ supplier and the cross-reference of such payment along with unique order ID/ sales reference number are also provided on the invoice it will be treated as deemed compliance of Dynamic QR Code requirement.

Clarification on adjustments made by way of discount coupons, vouchers etc.

When part-payment has already been received by the merchant/supplier, either in advance or by adjustment (e.g. using a voucher, discount coupon, etc.) before the Dynamic QR Code is generated then such QR code may provide only the remaining amount payable by the customer/recipient against ‘invoice value’. The details of the total invoice value, along with details/cross-reference of the part payment/ advance/ adjustment done, and the remaining amount to be paid, should be provided on the invoice.

Specifications for Dynamic QR Code

In the case of e-invoicing, a schema for e-invoicing was released by the department and suppliers are also required to adhere to such schema. Further to facilitate compliance e-invoicing API was also released. However, in the case of Dynamic QR Code, no such specifications are issued. Therefore, it can be inferred that the Dynamic QR code shall be self-generated by the supplier. Such QR Codes shall be in compliance with the report of the committee on the analysis of the QR (Quick Response) Code constituted by the Reserve Bank of India (RBI). Most of the suppliers are choosing either UPI or Bharat QR codes as these are inter-operable and standard QR codes.  At the cost of repetition, it is highlighted that i.e. where payment is made after generation/issuance of the invoice, the supplier shall provide Dynamic QR Code on the invoice. Further, the thrust of QR Code compliance is on cross-referencing of payment and the system employed by the supplier should be capable of providing such cross-reference. Popular Accounting and Invoicing software is either QR code compliant or provides a necessary add-on for QR code compliance

Similar provisions in Income Tax Act

Section 269SU of the Income Tax Act provides that every person having sales, turnover or gross receipts from the business of more than Rs 50 Crore during the immediately preceding previous year shall mandatorily provide facilities for accepting payments through prescribed electronic modes. The payer may or may not pay through the prescribed modes.

In terms of Rule 119AA of Income Tax Rules, the prescribed electronic modes of payment are as follows:

  • Debit Card powered by RuPay
  • Unified Payments Interface (UPI) (BHIM-UPI)
  • Unified Payments Interface Quick Response Code (UPI QR Code) (BHIM-UPI QR Code

Parting remarks

Dynamic QR Code in B2C invoices is likely to further increase ‘scan and pay’ culture and transform the Indian economy into a less-cash8 economy. E-way bills, E-invoicing and Dynamic QR code are an example of how technology can help in reducing tax evasion and making tax compliance simple. Such technology offers a win-win situation for revenue collectors and honest taxpayers viz better detection of tax crime, higher revenue recovery, and synergies that can make tax compliance easier for business and tax administrations.

“Technology offers critical solutions to prevent, identify and tackle tax evasion and tax fraud” – OECD9


The views expressed herein are strictly personal to the author and should not be construed as advice/ legal opinion. The contents of this article are based on the interpretation of the facts, relevant legislation, rules, notifications, circulars, judgments/rulings, etc. on the date of publishing of this article.  One should not act upon the information in this article without obtaining specific professional advice. Author of this blog is not responsible or liable for any loss or damage caused to anyone due to any interpretation, error, omission pertaining to this article. Further, the said article is only for information and guidance purposes and should not be construed as any kind of advertisement or solicitation of work.

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  1. Circular No. 146/2/2021-GST, dated 23.02.2021  and Circular no. 156/12/2021-GST dated 21.06.2021.
  2. Inserted vide Notification No. 31/2019 – Central Tax dated 28.06.2019.
  3. INR 5000 million.
  4. Notification No 71/2020-Central Tax dated 30th Sep 2020.
  5. Business (Registered person)  to Consumer (Unregistered Persons) supply.
  6. Notification No. 14/2020– Central Tax dated 21st March 2020 as amended.
  7. Notification No. 89/2020- Central Tax, dated 29th November 2020 as amended by Notification No. 06/2021 – Central Tax dated 30th March 2021.
  8. If not cash less economy.
  9. The Organisation for Economic Co-operation and Development.


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