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E-Invoicing System Concept

Overview

‘e-invoicing’ means reporting details of specified GST documents to a Government-notified portal and obtaining a reference number. (It doesn’t mean generation of invoice by a Government portal.)

Even in the e-invoicing scenario, taxpayers will continue to create their GST invoices on their own Accounting/Billing/ERP Systems.

These invoices will now be reported to ‘Invoice Registration Portal (IRP)’ in a standard format (called ‘schema’ & notified as Form GST INV-1

Starting 1st April 2020, the GST Council started phased introduction of E-invoicing or Electronic Invoicing to report Business to Business (B2B) invoices to GST System.

Since there was never a standard for e-invoice, a standard for the same was finalized after consulting with trade/industry bodies as well as ICAI after keeping the draft in a public place. Having a standard is a must to ensure complete operability of e-Invoices across the entire GST eco-system so that e-Invoices generated by one software can be read by any other software, thereby eliminating the need for fresh data entry. Machine readability and uniform interpretation is the key objective of this initiation. This is also important for reporting the details to GST System as part of the Return. Apart from the GST System, the adoption of a standard will also ensure that an e-Invoice a seller shares with any agent in the whole business eco-system can be read by all machines and eliminate data entry errors.

E-Invoicing system

  • Taxpayers will create e-Invoice on their own accounting/billing/ERP System
  • The e-Invoice, as prepared, will be reported on Invoice Reference Portals (IRP)
  • e-Invoicing portal will generate unique Invoice Reference Number (IRN) which will be attached on the e-Invoice and system will digitally sign the same and return to the taxpayer (supplier) as well as the recipient.
  • The e-Invoicing portal will also generate a QR code containing the unique IRN along with some important parameters of the invoice like GSTIN of supplier and buyer, invoice number, date, invoice value, total tax amount, and HSN code of the major item.
  • QR code will enable Offline verification using Mobile App.
  • Multiple Invoice Reference Number Portals (IRP) to ensure uninterrupted availability. To start with, NIC will be the first Registrar. Based on the experience of the trial more registrars will be added.

E-invoice – Salient Features

a. Unique Invoice Reference Number (IRN):The unique IRN will be based on the computation of hash of GSTIN of generator of document (invoice or credit note or debit note), Financial Year, Document Type and Document number like invoice number. This hash will be as published in the e-invoice standard and unique for this combination. This way hash will always be the same irrespective of the registrar who processes it.
To ensure de-duplication, the registrar will be required to send the hash to Central Registry of GST System to confirm whether the same has been reported already. In case, it has been reported by another registrar (as and when more registrars/IRPs are added) and the Central Registry already has the same IRN, then the registrar will reject the registration and inform the sender by sending appropriate error code. Only unique invoices from a taxpayer will be accepted and registered by the registrar.
b. Digital Signing of e-Invoice by Invoice Registration Portal (IRP): After the invoice data will be uploaded on the IRP (Invoice Registration Portal), the IRP will generate the hash (as the IRN) and then digitally sign it with the private key of the IRP. The IRP will sign the complete e-invoice JSON payload (that includes the IRN/hash). Thereafter, this e-invoice signed by the IRP will be a valid e-invoice for the seller and can be used by the seller for his business transactions.
c. QR Code with key particulars: The IRP will also generate a QR code containing the unique IRN (hash) along with some important parameters of invoice and digital signature so that it can be verified on the central portal as well as by a mobile App. This will be helpful for tax officers to verify the authenticity of invoice during road checks when Internet connectivity may not be available all the time.
The QR code will consist of the following key particulars of e-invoice:
a. GSTIN of Supplier
b. GSTIN of Recipient
c. Invoice number, as given by Supplier
d. Date of generation of invoice
e. Invoice value (taxable value and gross tax)
f. Number of line items
g. HSN Code of main item (line item having highest taxable value)
h. Unique IRN (Invoice Reference Number/hash)
i. Date of generation of IRN
Note: It is the signed QR code which will be easily verifiable by taxpayers as well as Tax Officers to validate whether the e-invoice has been reported to the IRP and accepted by it, as it will contain both the IRN as well as the Digital Signature of IRP as proof of having received and registered the e-invoice. If the signed JSON is tampered then e-invoice will become invalid and the digital signature will fail.

E-Invoice Sample

e-invoicing sample

Advantages

E-invoice has many advantages for businesses such as standardisation, inter-operability, auto-population of invoice details into GST return and other forms (like e-way bill), reduction in processing costs, reduction in disputes, improvement in payment cycles and thereby improving overall business efficiency. Huge advancements in technology sophistication, increased penetration of internet along with availability of computer systems at reasonable cost has made ‘e-invoice’, a popular choice worldwide.