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E-Invoice System: What is E-invoice in GST? Features Benefits, QR Code, and IRN

If an invoice is generated by software on the computer or a machine then does it become an e-invoice?

Is e-invoice a system where taxpayers can generate the invoices centrally? Many such questions are raised when e-invoice gets discussed.

E-invoice does not mean the generation of invoices from a central portal of the tax department, as any such centralization will bring unnecessary restrictions on the way trade is conducted.

In fact, taxpayers have different requirements and expectations, which can’t be met from one software generating e-invoices from a portal for the whole country. Invoice generated by every software may look more or less the same; however, they can’t be understood by another computer system even though business users understand them fully.

There are hundreds of accounting/billing software that generate invoices but they all use their own formats to store information electronically and data on such invoices can’t be understood by the GST System if reported in the respective formats.

Bajaj

Hence a need was felt to standardize the format in which electronic data of an Invoice will be shared with others to ensure there is interoperability of the data.

The adoption of standards will in no way impact the way users would see the physical (printed) invoice or electronic (ex pdf version) invoice. All this software would adopt the new e-Invoice standard wherein they would re-align their data access and retrieval in the standard format.

However, users of the software would not find any change since they would continue to see the physical or electronic (PDF/Excel) output of the invoices in the same manner as it existed before the incorporation of the e-Invoice standard in the software.

Thus, the taxpayer would continue to use his accounting system/ERP or excel based tools or any such tool for creating the electronic invoice as she is using today.

Taxpayers can enter the invoice details in the bulk generation tool available on the e-invoice portal which in turn will create a JSON file for uploading on the e-invoice system.

Invoice Reference Number (IRN)

 

The Invoice Reference Number (IRN) is a unique number (also known as hash) generated by the e-invoice system using a hash generation algorithm.

For every document such as an invoice or debit or credit note to be submitted on the e-invoice system, a unique 64 character invoice reference number shall be generated.

The unique IRN will be based on the computation of hash of GSTIN of the generator of the document (invoice or credit note etc.), Year, and Document number like an invoice number.

Recomended Read: Sandbox Testing for E-invoicing in GST

The hash could also be generated by the taxpayers based on the above algorithm. This shall be unique to each invoice and hence be the unique identifier for each invoice for the entire financial year in the entire GST System for a taxpayer.

QR Code

QR TaxClue

The E-invoice system will generate a unique 64 character length Invoice Reference Number (IRN) and digitally sign the e-invoice and the QR code (Quick Response Code). The QR code will enable quick view, validation, and access of the invoices from the GST system from handheld devices.

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

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

The digitally signed QR code will have a unique IRN (hash) which can be verified on the central portal as well as by an Offline App by the officer. This will be helpful for tax officers checking the invoice on the roadside where the Internet may not be available all the time. 

E-invoicing System under GST

E-invoicing

The move will help in curbing Goods and Services Tax (GST) evasion through the issue of fake invoices. Besides, it would make the returns filing process simpler for businesses as invoice data would already be captured by a centralized portal.

The proposed ‘e-invoice’ is part of the exercise to check GST evasion. Almost two years into GST implementation, the government is now focussing on anti-evasion measures to shore up revenue and increase compliance.

There are over 1.21 crore registered businesses under the GST, of which 20 lakh are under the composition scheme. In order to ensure no duplication, the e-invoice system will be closely connected to the GST system, which will be the central repository for all IRN generated.

Given that the GST system already has IRN data, populating ANX 1 for the supplier will be possible.

Benefits of E-invoice System

The major benefits of the e-invoice system are as follows:

  • Standardization: One-time reporting on B2B, SEZ, and export invoice data in the form it is generated to reduce reporting in multiple formats.
  • Seamless Reconciliation: Reconciliation and data verification between suppliers and recipients will be seamless and thus provide better control over input tax credit computation and claim.
  • Lesser Compliance: Reduction in overall compliance burden. Substantial reduction in input credit verification issues as same data will get reported to tax department as well to buyer in his inward supply (purchase) register.
  • Automation: Auto-generation of Sales and Purchase Registers (ANX-1 and ANX-2).To generate sales and purchase register (ANX-1 and ANX-2) from this data to keep the Return (RET-1 etc.) ready for filing under New Return.
  • Elimination of fake invoices: Reduction of tax evasion, System-level matching of input credit and output tax.
  • Information Availability: Near real-time availability of information to all the relevant participants in the supply chain.
  • On receipt of info thru the GST System as a buyer can do reconciliation with his Purchase Order and accept/reject in time under New Return
  • Environment friendly: The need for the paper form of the multiple copies of the e-waybill is eliminated. Hence, tons of paper are saved per day.
  • Officials saved monotonous work collecting and matching the manual work with the returns of the taxpayers.

How E-invoice will be beneficial to taxpayers:

  • Save time: With e-invoicing, many unnecessary steps are cut out of the invoicing process. Both you and your customer will be saving time using the e-invoicing system.
  • Reduce costs: With paperless invoicing, you do not have to pay for paper or for postal fees. Further, by saving time with e-invoicing instead of using templates and emailing PDFs, you save working time. Concentrate on other value-adding tasks instead. We all know time is money!
  • Reduce mistakes: By minimizing manual input and increasing automation, mistakes and typos are reduced.
  • Offer better customer service: It is more convenient for customers to get an e-invoice to their desired platform receiving an e-invoice instead of a paper invoice saves up to 90% on processing costs.
  • Easier to keep track of invoices: Know when an invoice has been sent, viewed, and paid when using an e-invoicing system. You will know for sure that the invoice is sent and received.
  • A higher degree of control and insight into the invoicing process: If you use online invoicing software, everything is saved on one platform which is accessible from anywhere on any device.

 

Features of the E-invoice system

  • User-friendly System: The system is user-friendly with lots of easy-to-use operations by the users.
  • Easy and quick generation of methods: There are a number of methods are provided using which the users can easily and quickly generate the e-invoices.
  • Multiple modes for e-invoice generation: This system supports different modes of e-invoice generation. The user can register the mode of e-invoice generation and use them for invoice generation.
  • Creating own masters: The user has a provision to create his own masters like customers, suppliers, products, and transporters. The system facilitates to use of them while generating the e-invoice.
  • Managing sub-users: The taxpayer or registered person can create, modify and freeze the sub-users for the generation of the e-invoice and assign them to his employees or branches as per need. This system also facilitates him to assign the roles/activities to be played by the sub-user on the system.
  • Monitoring the IRN generated: The system facilitates the registered person to know the number of INR, generated by them on a specific date
  • Generating the GSTR-1 from the e-invoices: Based on the e-invoice generated, the system pulls the GSTR-1 related information and pushes it to the taxpayer’s GSTR-1 returns. This avoids the taxpayers from uploading these transaction details.
  • QR bar code on the e-invoice: The QR code on the e-invoice helps for easier and faster verification of the e-invoices.
 

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