E-Invoicing Basics

Government of India announced the adoption of electronic invoicing (E-invoicing) from 1st Jan 2020. The benefits expected from E-invoicing system include reduced payment cycles, quicker input tax credits, better compliance, lesser errors etc.. It is important for companies to adopt E-invoicing, prepare accounting/ERP systems ready for this very important compliance

The new e-invoicing system proposed by the government mandates that an invoice file with parameters (Json File) with an Invoice Reference Number (IRN) shall be submitted to the Invoice Registration Portal (IRP) or it can be created at the portal. To generate the IRN, GSTIN of the company, the financial year and invoice number are the base parameters.

  • Business needs to authenticate and generate unique number from government portals.
  • 'E-invoicing' or 'electronic invoicing' is a system in which B2B invoices are authenticated electronically
    by GSTN/IRP portal of Government of India.
  • Issuing/validating an identification number (IRN) and QR code against every invoice for further use
    by various Government portal like GSTN or EWay Bill portal.
  • This will eventually eliminate the need for manual data entry while filing ANX-1/GST returns
    as well as generation of part-A of the e-way bills
  • Resulting in compliance process simpler, automated, reduce data errors and will
    allow interoperability & readability with other systems and most importantly quick settlement of input tax credit.

GST council of India had proposed E-Invoicing as invoice reconciliation between companies became a big issue and many fraudulent activities were reported in the past, also that many companies faces problems in getting proper input credit. To avoid these, the council suggested to have a system which enables interoperability between the systems used by companies and report the invoices in a unified format to the government through a dedicated portal. This will solve problems exists in getting GST credits due to mismatches in data, delay in filing etc.

What is the impact on current system of generating invoices?

  • Currently invoices are created using accounting /ERP software or manual process.
  • Submitted as GSTR1 return thro ASP software like OptiGST.
  • The submitted invoices further gets reflected in GSTR-2A for the view of recipients.
  • Consignor generates e-way bill from NIC portal by another software like OptiEWay bill along with delivery challans
  • Invoices will be treated legal only once IRN number is generated & authenticated by the government portal.
  • Need to change or integrated with suitable software like OptiE-invoice
  • The signing of the invoice (manually or digitally by OptiSign) by the companies may still continue in addition to reference of IRN number and QR code on invoice document.

The major benefit is the easier compliance achieved to GST taxation system. Since the invoice is available to the buyer instantly, reconciliation is not required or it is become very easy. Further, because only an invoice registered on the IRP is a legally valid invoice, the instances of fake invoices will go down. This streamlines the GST input credit saving money and huge effort for this. The entire process become paperless and easier to manage. This can help companies to raise working capital or to facilitate bill discounting etc as the banks and financial institutions can take it as a proof for the sales transaction. In future E-invoicing will help to reduce the burden of compliance significantly, mainly while interstate transportations are happening. The e-way bills can be generated using the E-invoices. Since the data is available to tax authorities, there audits and surveys will come down drastically.
Quicker GST input credit as it is instant matching of invoices and acceptance by the buyer.

How will E-invoicing help government?

Controlling, monitoring and curbing tax evasion in the following ways:

  1. All transactions happens real-time for the E-invoices hence the chances of fake invoices, manipulations will be less.
  2. Govt. can allow genuine claims on input tax credits
  3. This will improve global rating of india on "Ease of doing business"
GSTN had released E-invoice format in an excel template having some compulsory and optional fields

Important Elements are:

  1. Schema: Technical field name, description, mandatory or optional with sample values
  2. Masters: Predefined set of inputs for certain fields like UQC, State Code, invoice type, supply type, etc.
  3. E-invoice template: As per the GST rules

How to implement an E-invoicing system?

Process involved in creating an E-invoice:-
  • Assess, evaluate and configure your current system to cater to all the mandatory and optional fields requirement as per E-invoice schema (standards).
  • Generating JSON format , IRN and QR code by using software
  • Authenticate and validate by the GSTN portal
  • The recipient of the supply to receive E-invoice
  • The seller can also send the E-invoice to recipient in JSON / printed paper / pdf / email with the logo, IRN, QR code along with various payment terms & conditions
E-Inoicing India Powered by AWS