The new system of e-invoicing is around the corner, and it is high time that various accounting/billing/ERP software implement the necessary support for the same. The following is a list of the possible changes and some recommendations for ERP software providers as well as the taxpayers to incorporate in light of the new e-invoicing system:
1. Separate treatment for B2B and B2C invoices
With effect from 1st April 2020, taxpayers with an aggregate turnover of Rs. 100 crores or more in the previous financial year will have to generate Invoice Reference Number (IRN) on the Invoice Registration Portal (IRP) for all B2B transactions. Hence the ERP will have to generate the JSON file and upload the same on the IRP separately. Further, the IRP would generate a QR code which needs to be printed on the invoice.
Further, taxpayers with an aggregate turnover of more than Rs.500 crore in the previous financial year will have to also provide for the QR code in their B2C invoices.
2. 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)
- 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.
3. 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 n umber parameter will be ignored for hash generation.
4. QR code
Taxpayers are with an aggregate turnover of over Rs.100 crore in the previous financial year will have to print the QR code on their B2B invoices. 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.
5. 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.
6. 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:
- Generate IRN
- Cancel IRN
- Get e-invoice by IRN
- Get GSTIN details
- Health Check API
Only those taxpayers with an aggregate turnover of more than Rs. 500 crore will get initial access to the API credentials. The rest of the taxpayers will have to use the services of GST Suvidha Provider (GSPs). Some best practices relating to the use of API have been prescribed:
- The e-invoicing system needs to be fully understood by the developers of the company
- 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.
- ERP software should contain means to validate the data to ensure that it is as per the e-invoice schema
- A hard coding SSL certificate with the API interface should be avoided.
- The ERP software should wait for a response from the system, check and respond accordingly.
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.
8. 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.
9. 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.
10. 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.
11. 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.