The Indian government has mandated that going forward business needs to authenticate and generate unique number from government portals.
However, the implementation of the same will be voluntary from 1st January 2020 and mandatory for some size of business from 1st April 2020.
‘E-invoicing’ or ‘electronic invoicing’ is a system in which B2B invoices are authenticated electronically by GSTN/IRP portal of Government of India. This is done by issuing/validating an identification number (IRN) and QR code against every invoice for further use by various Government portal like GSTN or EWay Bill portal.
This will eventually eliminate the need for manual data entry while filing ANX-1/GST returns as well as generation of part-A of the e-way bills and will ease and make compliance process simpler, automated, reduce data errors and will allow interoperability & readability with other systems and most importantly quick settlement of input tax credit.

What is the impact of current system of generating invoices?

All businesses big or small creates invoices through various accounting /ERP software or even thro manual process. These in turn are transmitted as GSTR 1 return thro ASP software like OptiGST. The submitted invoices further gets reflected in GSTR-2A for the view of recipients.
Along with the delivery challans, the consignor or transporters also has to generate e-way bill from NIC portal by another software like OptiEWay bill.
All the companies will keep generating the same invoice thro the system however it will be treated legal only once IRN number is generated & authenticated by the government portal.
Hence the current accounting or ERP system need to be changed or integrated with suitable software like OptiE-invoice which prescribes with the prescribed government schema.
The signing of the invoice (manually or digitally by OptiSign) by the companies may still continue in addition to reference of IRN number and QR code on invoice document.

3. What are important elements of e-invoicing?

GSTN had released the draft version of e-invoice format in an excel template giving the various informations/field requirements . Some of these fields are compulsory and some ore optionals. Largely the draft format covers requirements of different industries and businesses also closely follows the international and various industry standards.
The GSTN’s e-invoice will contain the following parts:

1. E-invoice schema: It consists of the technical field name, description of each field, whether it is mandatory or not, and has a few sample values along with explanatory notes.
2. Masters: Masters will specify the set of inputs for certain fields, that are pre-defined by GSTN itself. It includes fields like UQC, State Code, invoice type, supply type, etc.
3. E-invoice template: The template is as per the GST rules and enables the reader to correlate the terms used in other sheets. The mandatory fields are marked in green and optional fields are marked in yellow.

How to implement an e-invoicing system?

Let’s understand the various steps involved in creating an e-invoice.

1. Assess and evaluate and configure your current system to cater to all the mandatory and optional fields requirement as per e-invoice schema (standards).

2. The current functionality of generating an invoice should pass on necessary information and seamlessly integrate with OptiE-invoice software for generating JSON format , IRN and QR code

3. OptiE-invoice will get the invoice authenticated and validated by the GSTN portal thro online API process and get newly generated or authenticated IRN and QR code
4. The IRN code is essentially generated by combination of seller’s GSTIN id, invoice number, Financial year (YYYY-YY) . There is also ongoing discussion possibility of getting additional field of document type in future for IRN generation
5. The recipient of the supply will also get intimated of the e-invoice generation through email (if provided in the invoice).
6. The seller can also send the e-invoice to recipient in JSON format or printed paper or pdf or email with the logo, IRN, QR code along with various payment terms & conditions The seller in addition can manually sign or digitally sign this e-invoice for sending to recipient

5. How will E-invoicing help government?

It will help in controlling, monitoring and curbing tax evasion in the following ways:

1. Since all the business transactions happens real-time compulsorily for the e-invoice , the chances of fake invoices, manipulations will be less.
2. Government can allow claims on genuine input tax
3. This will improve global rating of india on “Ease of doing business”

6. How does the e-invoice look like?

The e-invoice format is released by GSTN in consultation with the ICAI is as follows:

E-invoice would bring in a practice which would benefit various stakeholders in the long run. Some of the key stake holders other than government in this new direction are Suppliers, Customers, Business, Employees, Financial institutions. Any Business Transaction has touch points with one or several of the above stakeholders. With multiple business transactions performed in a single day these touch points are visited several times in a day. Employees of any organization would be benefitted most by the introduction of E Invoicing. Just imagine the hours saved on data Entry, account reconciliation, e-filling, reporting etc.

There are numerous benefits to be gained by shifting away from paper and manual based invoice processing to more digitised approaches. Proper electronic invoicing is considered by most to be the transmission of a structured EDI or XML document from the supplier into the buyer’s Accounts Payable (AP) system. Depending upon the location of the buyer or supplier, regulations also may require a government issued identification number, qualified electronic signatures, specific content fields and long-term archival of the invoice.

1. Digital Invoice Capture— Data re-entry is the most problematic of the processes as it is time-consuming and error-prone. E-invoicing fully automates the invoice capture process with data being routed straight from the supplier into the buyer’s AP system.
2. Automated Invoice Validation Most AP organizations perform validations of line items on the invoice before routing the invoice to Line of Business managers for approval. In addition to capturing the data electronically, most e-invoicing solutions will also perform field-level validations of the content as well.
3. Automated Matching – One of the more complex validations performed is the matching between an invoice and the related documents in the procure to-pay lifecycle. However, the costs, accuracy and time required for the validations can be significantly reduced through automation. A key component of an e-invoicing solution should be matching process between the contracts, PO, invoice and goods receipt notice.
4. Vendor Self-Service A key element of e-invoicing program is that it will offer vendors the ability to check the status of the invoice submission and acceptance by Customers. This is also going to help MSME business for working capital.
5. Enhanced Cash Management – Paper or e-mail based invoices take longer to become visible in AP systems. Paper and e-mail based documents also have a higher probability of being lost in the approval process. Without visibility to invoices in the approval process, cash managers lack the comprehensive data necessary for forecasting. A large invoice, which is not discovered by the treasury organization until shortly before payment, could result in a significant cash deficit relative to forecast. As a result, a business may need to borrow funds at the last minute at a relatively expensive premium. By processing invoices electronically, all upcoming payments become visible to the treasury organization in the accounting system improving forecast accuracy.
6. Enhanced Account Reconciliation – To simplify GST account reconciliation for suppliers and customers since the Invoice details provide is automatically passed to GSTN for returns. The issues of ICD , Debit / credit note matching , Reverse charge etc will be much simplified.
7. Lower Carbon Footprint – Proponents of e-invoicing also promote the lower carbon footprint of electronic transactions. In theory no paper is consumed. Nor is there any transportation of the paper from supplier to the buyer. Although the digitization of a single invoice does not lower greenhouse gas emissions significantly, the cumulative effect of removing millions of paper invoices from the financial supply chain is impactful. The impact of removing tens of billions of paper invoices from the financial supply chain would be significant.
8. Global Acceptance – There are several International E-Invoicing Framework’s / platforms like PEPPOL which facilitate seamless connectivity between global buyers and sellers. Most of this platform will open up Trade Promotion for business.