E-invoice – best practices

What is the best time to generate an e-invoice for supply of goods?

The obvious answer would be “Before dispatch of goods”.

If this needs to be further qualified or linked to an event/trigger, these again depend on the business processes involved. So, what are the options?

• Option A: As soon as the Tax Invoice is created in ERP
• Option B: Latest before the end of the next calendar day of the Invoice date
• Option C: When the invoice is released to Accounting (“posted”) in ERP
• Option D: Any other?

In case of  supply of services, Rule 47 of CGST Rules 2017, Part A – Chapter VI is self-explanatory. In case of goods, however, there is a physical goods movement where the tax officials can do the scrutiny of the document/supply. With the revised Rule 48 (Manner of issuing invoice), the supply would be deemed to be invalid if e-invoicing is applicable but not yet done.

Coming back to the original question, there was indeed a stipulation earlier that Option B above was mandatory for e-invoice generation. This did cause concerns in the business community because there were genuine business scenarios that caused a difference between the date of invoice and the date of goods movement. Two such scenarios are listed below

• Back-dated invoicing & supplies (e.g.: month-end). Here, the physical dispatch happens a few days after the Invoice date
• Advance invoicing & Back-dated supplies
  • Tentative Invoicing subject to customer approvals prior to Dispatch (e.g.: Exports documents submitted for approvals prior to dispatch)
  • Physical Dispatch happens typically a few days after the Invoice date. There is a chance of the invoice getting cancelled or revised before the dispatch happens – based on approvals/rejections. But the original invoice number and date should not be changed once approved by the customer (effectively supplies are back-dated)

So, what is the best time to generate an e-invoice for supply of goods?

While the answer would vary based on business process, there is a consensus that e-invoice should be generated latest before the printing of the corresponding invoice.

If e-invoice is not generated, the corresponding print should not be allowed. Here again, there could be exceptions that the user may want to do the print of a cancelled document (for records purpose and not for dispatch) without e-invoicing done.

There are automated API-based e-invoice generation options available in the market. However, the decision to trigger the API calls for e-invoicing can still be based on a user action or can be automated.

In the initial days of e-invoicing, it is best triggered by the user for the selected documents after verifying the data for correctness and completeness. Ideally, this should have been done for Sep invoices before Oct 1.

In the steady state, the trigger should be automated, latest before the printing of invoice.

Note: E-invoice does not have any provision for amendment (or regeneration with the same invoice number). Also, there is a restriction that e-invoice cannot be cancelled beyond 24 hours of the e-invoice generation. Hence it is risky to prepare the e-invoice in advance (or in automated mode) for deferred supplies (dispatch done on a subsequent day).

Best practices for e-invoice generation:

• For business scenarios having invoices that do not undergo changes or cancellation between the time of invoice generation and physical dispatch, e-invoice generation can be triggered automatically as soon as the tax invoice is created
• For business scenarios having invoices that can undergo changes or cancellation before physical dispatch, e-invoice generation can be triggered just before printing of the invoice.

Recommended Customization in ERP / tool:

Suitable customization, automation and validation should be done to eliminate manual errors/omissions.
Read more about the cancellation of E-invoices