In my previous article, I tried summarize advantages, need and limitations for E-invoicing. Now in this article I will discuss the basic concepts of E-Invoicing modes of generation and flow of information for E-Invoicing.
Concept of E-Invoicing:
E-invoicing means generation of documents related to supply electronically. It is NOT a preparation of documents on Government portal but it is way of intimating the government portal that invoice has been issued to the buyer, by registering that invoice on the government portal. Ultimately electronic invoicing is nothing but generating Invoice Reference Number.
It is a system where, the tax payer will upload their invoice details and register supply transaction on the Government’s Invoice Registration Portal (IRP) and get the Invoice Reference Number (IRN) generated by the IRP system. Here, the tax payer will first prepare and generate his invoice using his ERP/accounting system or manual system and then upload these invoice details to IRP and get the unique reference number, known as IRN.
Registration of e-invoice of generation of IRN is the responsibility of the supplier, who will be required to report the invoice details to e-invoice system, which in turn will generate a unique IRN.
What types of documents are to be reported to GST System?
E-Invoice, it not only covers Tax Invoice but also covers other documents which will be required to be reported to e-invoice system by the creator of the document:
Initially only B2B invoicing will be recorded through E-Invoicing portal. It may be noted that the Business to Consumer (B2C) invoices are not allowed for e-invoice/ IRN generation.
The common portal for generation of e-invoice is https://einvoice1.gst.gov.in
Modes of registering Invoice with IRP:
Multiple modes have been proposed for registering the invoice on the IRP:
1. Web-based: The details of invoices can be entered into the website of the IRP for the purpose of registration/validation of the same.
2. API based: This mode will allow big taxpayers and accounting software providers to interact with the Invoice Registration Portal through their own software. The IRN can be generated validated for invoices either one at a time or in bulk, similar to the E-Way Bill system.
3. SMS based: This mode aims at allowing invoice details to be entered in a specific format and sent to the Invoice Registration Portal via SMS for processing.
4. Mobile App based: IRP provides a mobile app which carries out some functions of the IRP as discussed above.
5. Offline tool based: The details of invoices can be entered into the website of the Invoice Registration Portal for the purpose of registration/validation of the same.
6. GSP based: Taxpayers can also utilize the services of the GST Suvidha Provider (GSP) to carry out their e-invoice related compliances.
Currently existing users of E-Way Bill system can use their credentials to login to https://einvoice1-trial.nic.in which is currently available for testing. New users can register through the registration link on the portal.
Taxpayers with turnover of Rs. 500 CR & above in the previous financial year are able to login in this portal. Taxpayers with turnover of 100 – 500 CR are enabled for e-invoicing System only on Sandbox or Testing, but not on Production.
Flow of information for generation of IRN:
1. Seller – Generation of HASH. HASH is basically Invoice Reference Number(IRN). Seller needs to upload JSON file of E-invoice based on scheme/API released by GSTIN, to IRP portal, through Accounting software/ERP or Offline Tools.
2. IRP – HASH generated by seller will be pushed to Invoice Registration Portal(IRP) also known as E-Invoice Registrar. IRP will perform a de-duplication check with Central Registry to ensure that the IRN generated is unique for each invoice. It will send the registered invoice to the seller as well as buyer through e-mail. (No concrete information is available on this system as Concept paper and FAQ has given contradictory information about the same.). IRP will return the signed JSON to generator and authenticated payload to GSTN and E-way Bill portal. IRP will also return a QR (Quick response) code with digital signatures (Private key) of the IRP to Seller.
3. GST Network: It will perform de-duplication check and based on HASH ANX-01 and ANX-02 will be populated.
4. Buyer: Buyer will receive registered invoice from IRP. Buyer can verify the details of invoice by QR code on real time. Buyer can also verify details in FORM ANX-02 on GST portal.
5. Seller (Again): Here seller can print and distribute the invoice using QR code. Seller can view the invoice liability in ANX-01.
1. 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 characters Invoice Reference Number (IRN) shall be generated which is based on the computation of hash of GSTIN of supplier of document (invoice or credit note etc.), Year and Document type and Document number like invoice number. This shall be unique to each invoice and hence be the unique identity for each invoice for the entire financial year in the entire GST System for a taxpayer.
2. E-Invoice Registrar/ Invoice Registration Portal(IRP): The Invoice Registration Portals (presently only one is functional but additional entities will start for speedy generation of IRN) are entities that act as Registrars and operate through a website for assigning IRN to each invoice/credit note/debit note.
CGST Notification 69/2019- Central Tax dated 13th December 2019 notifies an e-invoicing portal that will accept e-Invoices, verify the invoice and generate a unique Invoice Reference Number.
The list of websites of this e invoice portal(IRP) are:
The first IRP authorized by the Government of India is National Informatics Centre (NIC).
3. HASH: HASH is nothing but Invoice Reference Number (IRN). HASH in not ‘encryption’ i.e. it cannot be decrypted back to the original text.
4. SHA-256: SHA (Secure Hash Algorithm)-256 is one of the successor hash functions to SHA-1 (member of SHA-2 / collectively referred to as SHA-2), and is one of the strongest hash functions available. SHA-256 is not much more complex to code than SHA-1, and has not yet been compromised in any way.