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Step by Step process to create an e-invoice and IRN

Updated on

An e-invoice is an invoice reported as per the electronic standard for reporting of invoices. This article will take you through the process of generation of an e-invoice and also its workflow.

The workflow (including generation) of the e-invoice will be divided into the following parts:

  1. Steps to create an e-invoice
  2. Back-end processing of a valid e-invoice

Latest Update as on 30th July 2020

  1. A new refined format of e-invoice has been notified by CBIC adding 20 new fields and removing 13 fields. Certain fields have undergone changes in character length as well.
  2. e-Invoicing system shall apply to those taxpayers with annual turnover exceeding Rs 500 crore instead of Rs 100 crore.
  3. Special Economic Zones (SEZ) units shall also be exempted from issuing e-invoices.

Update as on 23rd March 2020

The implementation of e-invoicing and the QR code has been deferred to 1st October 2020.

Exemption from e-Invoicing and QR code has been granted to sectors such as the insurance, banking, financial institutions, NBFCs, GTA, and passenger transportation service, etc.

1. Steps to create an e-invoice

Step 1 – Generation of e-invoice:

The taxpayer will continue to generate invoices in the normal course of business. However, the reporting of these invoices electronically has criteria. It needs to be done as per the e-invoice schema along with mandatory parameters. The mandatory fields of an invoice for the supply of goods are listed below:

  • Invoice type
  • Code for invoice type
  • Invoice Number
  • Invoice Date
  • Supplier details like Name, GSTIN of Supplier, Supplier address (including place, pin code, state)
  • Details of the buyer such as name, GSTIN, state code, address, place, pin code, payee name, account number, payment mode and IFSC code
  • Dispatch details
  • Invoice item being dispatched
  • Total tax amount, paid amount and payment due
  • Tax scheme (whether GST, Excise Custom, VAT)
  • ‘Shipping To’ details like Name, GSTIN, address, pin code, state, supply type, transaction mode (whether regular, ‘bill to’ or ‘ship to’)
  • Details of goods like Sl. no., quantity, rate, assessable value, GST rate, amount of CGST/SGST/IGST, total invoice value, batch number/name

The seller has to ensure that his accounting/billing software is capable of generating a JSON of the final invoice. The seller can create a JSON following the e-invoice schema and mandatory parameters by using the following modes:

  1. Accounting and billing system that offers this service
  2. Utility to interact with either accounting/billing system, ERP, excel/word document or a mobile app
  3. Offline Tool to generate e-invoice by keying-in invoice data

Step 2 – Generation of unique IRN:

The supplier has the option to generate ‘hash’ based on specific parameters usually three of them such as Supplier’s GSTIN, Supplier’s invoice number, Financial Year (YYYY-YY). The prescribed algorithm, such as SHA256 must be used for the hash generation. If the hash is validated, it would later become the Invoice Reference Number (IRN) of the e-invoice.

Step 3 – Uploading the JSON:

The following modes may be used to upload the JSON of the final invoice:

  1. Directly on the IRP
  2. Through GST Suvidha Provider (GSP)
  3. Third-party provided apps (including through API)

The supplier can also upload the hash along with the JSON onto the IRP, if generated by him.

Step 4 – Hash generation/validation:

Hash will have to be generated by the IRP in respect of the invoices uploaded without the hash. In such a case, the hash generated by the IRP would become the IRN. Where the supplier has also uploaded hash, a de-duplication check will be performed. It is done by validating the hash/IRN against the Central Registry of GST System to ensure that the IRN is unique. Once validated, the hash/IRN is stored in the Central Registry. IRP will then generate a QR Code and digitally sign the invoice and make it available to the supplier. The IRP also sends the e-invoice via e-mail mentioned on the invoice to the buyer and seller.

 

2. Back-end processing of a valid e-invoice

The signed e-invoice data will be sent to the GST system where ANX-1 of the supplier and ANX-2 of the buyer will be updated based on the details entered in the invoice. Thus the invoices can be viewed on the respective ANX-1 and ANX-2 after a successful upload.

Wherever applicable, details of invoices will be used to update ‘Part A’ of the E-Way Bill. As a result, only vehicle number needs to be entered in ‘Part B’ of the E-Way Bill system to create an E-Way bill.