List of ERP changes to be ready for e-Invoicing

E-invoicing system requires modifications to the accounting/billing/ERP software as a one-time action at the time of implementation. It will help in the smooth functioning of the business. The following are possible changes and some recommendations for ERP software providers as well as the taxpayers to adopt and implement the e-invoicing system:

The list of ERP changes for smooth e-invoicing implementation are explained below.

Latest Updates
10th May 2023
The CBIC notified the 6th phase of e-invoicing, applicable to businesses with a turnover exceeding Rs.5 crore in any financial year from 2017-18 w.e.f. 1st August 2023.

6th May 2023
The GST department has deferred the time limit of 7 days to report the old e-invoices on the IRP portals by three months. Further, the department is yet to announce the new implementation date.

13th April 2023
As per the GST Network's advisories dated 12th April 2023 and 13th April 2023, taxpayers with annual turnover equal to or more than Rs.100 crore must report tax invoices and credit-debit notes to IRP within 7 days of invoice date from 1st May 2023.

Adhering to the time limit for e-invoice reporting

From 1st May 2023, as per a GST Network update, taxpayers with annual turnover of Rs.100 crore or more must report invoices and Credit-Debit Notes (CDN) within seven days from the date of invoice or CDN*. Hence, the ERP must be reconfigured to ensure smooth generation of Invoice Reference Number (IRN) and signed QR codes on the documents within the given timelines for applicable taxpayers.

*However, on 6th May 2023, the department has deferred the time limit of seven days to report the old e-invoices on the IRP portals by three months.

Mandatory Fields as per e-Invoice Schema

In order for the invoices to be easily validated before being submitted to the IRP portal, ERP system should have integrated all the necessary fields as per the schema notified by the CBIC. In other words, the invoice issued by the billing/ERP software must cover all the mandatory fields stipulated by the GST law.

Separate treatment for B2B and B2C invoices

With effect from 1st October 2020, taxpayers with an aggregate turnover of more than Rs.500 crores in any preceding financial year (from 2017-18) must generate Invoice Reference Numbers (IRNs) on the Invoice Registration Portal (IRP) for all B2B transactions. At present, the e-invoicing system applies to businesses with more than Rs.10 crore annual turnover, and will get extended to to businesses with more than Rs.5 crore annual turnover from 1st August 2023. 

Hence, the ERP will have to generate the JSON file and upload the same on the IRP separately. The IRP would also generate a QR code that will be printed on the e-invoice. 

Further, from 1st December 2020, taxpayers with an aggregate turnover of more than Rs.500 crore in any of the previous financial years (starting from 2017-18) are providing the dynamic QR code in their B2C invoices.

Identifying Type of transaction

The ERP software will have to classify a particular transaction into the following categories:

• Business-to-Business (B2B)
• Business-to-Government (B2G)
• Exports
• Supply through e-commerce operator
• Supply liable to reverse charge

Details required as per Part A of the e-way bill will need to be entered only once.

Invoice Reference Number

The IRP will use a hash generation algorithm (SHA256) to generate an IRN for each invoice. The parameters for the hash generation would be:

• GSTIN of supplier
• Financial year
• Document type (whether invoice, credit note or debit note)
• Document number (assigned by the taxpayer)

Once the IRN for a particular invoice is successfully generated, the same should be printed on the hard copy of the invoice. Note: All the zeroes prefixed to the document number parameter will be ignored for hash generation.

Supports QR Code feature

Taxpayers with an aggregate turnover of over Rs.10 crore in any previous financial years from 2017-18 (or Rs.5 crore w.e.f. 1st August 2023) must get the QR code printed on their B2B invoices, as issued by the IRP.

Further, in case their aggregate turnover in the previous financial year is Rs.500 crore or more, the same needs to be followed for B2C invoices too. Necessary changes must be incorporated into the IT systems.

Supports Digital Signature

While it is not compulsory for the taxpayer to digitally sign the JSON being uploaded into the IRP, the IRP will digitally sign JSON and send it back to the taxpayer.

Various APIs

In order to fully integrate with the e-invoicing system, the ERP software should provide for data exchange with the use of the following APIs:

• Authentication
• Generate IRN
• Cancel IRN
• Get e-invoice by IRN
• Get GSTIN details 
• Health Check API
• Get IRN By Doc Details

Some best practices relating to the use of API have been prescribed:

1. The e-invoicing system needs to be fully understood by the developers of the company
2. Upon successful authentication, a token and a session encryption key (SEK) is obtained. This token is valid for six hours and hence need not be generated every time the ERP tries to connect to the system. It is advised to regenerate the new token within 10 minutes of expiry of the earlier token. The token and SEK should be used till its expiry time.
3. ERP software should contain means to validate the data to ensure that it is as per the e-invoice schema
4. A hard coding SSL certificate with the API interface should be avoided.
5. The ERP software should wait for a response from the system, check and respond accordingly.

Authentication

In order to use any of the abovementioned APIs, it is necessary to get authenticated. Authentication is done by entering client ID and password. The password would be encrypted using an e-invoice public key. All taxpayers covered under one PAN would be given a single client ID and password. 

Inbuilt Tool to reconcile GSTR-1 with Sales Register

The e-Invoicing system has allowed the sales invoice details to be auto-populated from the IRP onto the GSTR-1 on the GST portal. One must note that not all details will be auto-populated as B2C supplies are out of scope. Hence, it necessitates the need to reconcile auto-populated GSTR-1 or the IFF with the sales register and identify any gaps, so that no document is missed out before filing GSTR-1 for a month or quarter.

Linking to accounts payable and accounts receivable

The ERP software should provide a way to link the invoices generated to the accounts payable and accounts receivable module to ensure good debtors management and timely settlement of invoices. Further, ITC could be denied if payment is not made within 180 days of the date of invoice. Hence, ERP software can also incorporate payment reminders in this regard.

Tracking of cancelled invoices and cancelled e-way bills

The ERP software needs to, first of all, ensure that a unique document number is being assigned to every invoice. Further, even in case of a cancelled invoice, the same document number used by the cancelled invoice should not be used elsewhere. Hence there should be a system for tracking of cancelled invoices and cancelled e-way bills generated based on invoices. Invoices may only be available for cancellation on the IRP for 24 hours. Beyond 24 hours, the ERP software has to redirect the taxpayer to the GST portal to cancel the invoices.

Tracking of amendments

Amendments either can be made by cancelling old invoices and uploading JSON of new invoices and generating a fresh IRN or by issuing necessary credit notes/debit notes. There should be a way to link such credit notes/debit notes to the original invoices that needed amendment.

Storage of invoices

The IRP will not store invoices. The ERP software will have to provide for storage of invoices for easy reference at a future date. Further, much older invoices will need to be archived into a separate backup medium. 

Sending and Receiving e-Invoices

The ERP program should be able to auto-share such an invoice with the receiver after creating the IRN and signing the QR code for the generated invoice. This will assist the parties involved in the claim for the precise input tax credit (ITC) and the GST return file. Likewise, there must be feature to identify, record and store the e-invoices received from the respective suppliers.