Electronic Invoicing is a medium where in the supplier & buyer of goods or services transact electronically. The tax department of the country plays a central role in this electronic process. Hundreds of countries around the world have recognized the benefits it offers and successfully legalized & implemented e-Invoicing. e-Invoicing has reduced paper wastage, led to process efficiencies and more importantly helped governments successfully plug tax leakages and improve tax collections.
At a time when India is challenged to meet its fiscal deficit objectives a strong electronic invoicing solution is certainly the need of the hour. It goes without saying that e-invoicing is one of the most important pillars that supports a strong DIGITAL INDIA.
Indian government is on drive to implement various tax reforms using tax technology and analytical solutions like various countries across the globe. Recently government of India and GST council has mandated introduction of e-invoicing. Various e-invoicing related development, policies announcement and software solutions. We should build an ecosystem of software solutions providers, thought leaders in the areas of taxation and various businesses in this DIGITAL INDIA plan.
The end objective is to educate the industry in implementing various compliance solutions with respect to the GST, Tax and e-invoicing system and how they can transform their current accounting and ERP systems like Microsoft Dynamics 365 Business Central, D365 F&O and SAP Business One systems to comply with these new ongoing regulations. Microsoft Dynamics 365 Business Central and D365 F&O that brings together solutions and it addresses any concerns or issue with E-Invoicing, E-wayBill and GSTR automation.
In this blog, we will take a detailed look at the features of e-invoicing and why are they important for defining the uniqueness of each reported e-invoice.
Invoice Reference Number (IRN)
Under the new e-invoicing system, the IRN can be defined as a unique number generated for invoices by the Invoice Registration Portal (IRP), and it is computed using a hash algorithm. This step ensures that the supplier does not submit the same document more than once within the financial year.
A hash algorithm is a function that converts a data string with alphanumeric characters into a string of numbers so that the original message remains encrypted.
The GSTN uses the following input parameters to generate the hash, which ultimately becomes the IRN.
These parameters are:
Type of document (Invoice, credit note, debit note)
Generating the IRN
The IRP will generate the hash for a document using the input parameters submitted by the supplier. The IRP will send this information to the Central Registry of the GST system to check for duplicates. The hash value computed by the IRP will become the IRN for the document.
Digital Signature (DSC)
A digital signature is a method of electronically signing a document to authenticate that it has been submitted by the respective supplier. DSC should be created following the reference guidelines mentioned in the IT Act, 2000.
Before the new e-invoicing system was put into place, the GST rules required all invoices (including credit notes and debit notes) to be physically signed by the authorised individual issuing the document. Alternatively, they could also affix their digital signature provided that they fulfilled the required provisions under the IT Act, 2000.
DSC necessity in e-invoicing:
In the e-invoicing system, the invoice is submitted to the IRP has mandatory and optional parameters, and digital signature is one of the optional parameters. The JSON paymoad of the invoice will be validated and signed by the IRP using an IRP digital certificate. The signed e-invoice can be used by the seller as proof of their business transactions. The seller, while sharing the printed copy of the e-invoice, will have to separately share the QR code and the digital signature to the recipient.
Attaching DSC to an invoice:
For this, you must have accounting software that generates the JSON data of the invoice. Your software should also have the capability to read a DSC, and you should also have the “emSigner” tool from GST up and running in your system.
Once the JSON payload of the invoice is generated using your accounting system, it will then be uploaded to IRP. When you click on the ‘Verify using DSC’ button, you will get a series of options to choose from the various digital signatures that are available. You can choose an appropriate and authorised signature and click ‘Sign’.
Quick Response Code (QR code)
A QR code can be defined as a two-dimensional code applied on items to allow machine readability. This is helpful for tax officers to check invoices using an offline application. QR codes will be created using the following parameters as inputs:
GSTIN of supplier
GSTIN of the recipient
Invoice number given by the supplier
Date of the invoice generation
Number of line items
HSN code of the main item
The e-invoice schema declared by the GST Council demands that businesses print the QR code. Hence, all B2B taxpayers generating invoices will need to have QR code.
Businesses that meet certain criteria will be able to generate compliant invoices using their own accounting software. They will then go through the e-invoicing system where they will be assigned an IRN, DSC and QR code. The system will auto-populate certain fields on the return forms to avoid data entry errors. Taxpayers can match the unique IRN with the reported invoices to track them. Since the system allows the real-time upload of documents, there will be fewer fake invoices, and easier record-keeping and tracking. This will reduce instances of tax evasion.