A comprehensive guide to E-Invoicing and Its benefits
The digital invoice for goods and services provided by the business firm is known as ‘E-invoicing’ or ‘electronic invoicing’. In this system, B2B invoices are authenticated and generated electronically on the GSTN portal. The Invoice Registration Portal (IRP), managed by the GST Network (GSTN), will issue an identification number for each invoice under the electronic invoicing system.
The purpose of e-Invoices is to remove data mismatch between sellers and buyers within the system of GST Input Tax credit. E-Invoices helps in reducing the number of mismatch errors by allowing interoperability and consistency in the system. E-invoices created on one software can easily be read by another software. It also helps in eliminating false GST invoices.
The platform provides a comprehensive solution by digitizing all invoice information. Digitization automates the entire invoice process, removing the need for paper when creating, transferring, processing, and receiving invoices. It also makes it easier to preserve and retrieve these critical financial documents over time. This system is not only widely adopted in India but also in several countries around the world, including various European nations, South Korea, and multiple countries in Latin America.
How E-invoice is generated
Taxpayers or sellers engaged in business transactions will continue to follow their usual process of creating a B2B invoice but with the difference that the reporting aspect will now be carried out electronically.
The B2B invoice that is created needs to have specific details transaction details such as their supplier type and tax scheme. It should also include information about the document, like the type, number, and date it was issued. Additionally, the invoice should have important data about both the Seller and the Buyer, including their names, GST numbers, state codes, addresses, and pin codes. Furthermore, the document must include details about the dispatch and shipping addresses, as well as detailed information about each item, such as the name of the goods, their corresponding HSN codes, applicable tax rates, and the total amount for each item.
The field mentioned earlier needs to be clearly shown on B2B invoices. Moreover, businesses can choose to add other optional fields on their invoice documents according to their specific needs and preferences.
IRN generation
Each invoice that is created will be synchronized with the Invoice Registration Portal (IRP). In the portal, we are required to generate a unique 64-digit number called the IRN for each invoice. This IRN serves as a representation of the specific invoice and allows the invoice to be accessed on the GSTN website. During the generation of the IRN, the IRP portal verifies the GST system for duplicates, validates the E-invoice data, adds a digital signature, and includes a QR code. If there are any issues with the invoice, an error will be displayed, and the retailer must rectify the problem before generating the IRN.
Update the invoice for the GST and e-way bill systems
The seller sends the digitally signed JSON with the IRN. The GST and e-Way Bill system receive the uploaded invoice data. The GSTR-1 for the seller and GSTR-2A for the buyer are updated by the GST system, helping to determine liability and ITC. The GST e-invoice schema includes details like ‘Transporter ID’ or ‘Vehicle number’ for generating an e-Way Bill. The government’s tax portal is not responsible for generating the e-invoice. It is created using the seller’s accounting/billing software and ERP systems. The IRP validates and digitally signs the invoices uploaded by the seller.
Benefits of E-invoice system
Saves tons of time
This is major benefit of E-invoice system to your business. e-Invoicing is a highly efficient and paperless method that streamlines the invoicing process by converting it into a fully digital format, enabling businesses to swiftly create and send e-invoices within a matter of minutes.
Real time tracking
Implementing E-Invoicing system enables businesses to have a streamlined process for tracking invoices generated by suppliers in real-time. Consequently, this enhancement leads to quicker availability of input tax credit(ITC).
Inexpensive
By streamlining the process, the system eliminates a significant amount of paperwork, thereby cutting down on expenses related to paper, printing, labor, and postage. This efficiency results in a substantial decrease in invoicing costs, making it a more cost-effective.
Aids the buyer
Upon successfully submitting the e-Invoice on the GST portal for validation purposes, the system will automatically initiate the transmission of the document to the designated email address of the purchaser as indicated on the e-invoice. This pivotal step underscores the importance of granting the buyer the opportunity to meticulously review the contents of the e-invoice against their respective purchase order.
Easy accessibility
Access to all transaction details will be conveniently provided through online platforms 24/7, ensuring continuous supervision and clarity. This digital transformation optimizes procedures, significantly decreasing the need for repetitive audits and evaluations. Any discrepancies in data can be efficiently detected by cross-referencing input credits with output taxes, facilitating prompt and accurate resolution of any inconsistencies.
Besides the benefits stated earlier, the E-Invoice system further provides advantages such as the elimination of fraud, mitigation of human errors, and reduction of human effort, among other benefits.