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

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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

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.