E-invoicing refers to an innovative reform that involves the creation of invoices using an electronic format. The GST Council created electronic invoicing to facilitate electronic invoicing. It added ease to B2B invoice processing for businesses having an annual turnover of at least ₹100 crores or more. This system can make it easier to standardise our format to report invoices. Its goal is to ensure that machines can read and have consistent interpretation, allowing interoperability across the GST ecosystem.
The specific invoice reference number (IRN) now identifies invoices issued following verification through the invoice registration portal (IRP). After you validate the invoice, IRP marks the e-invoice and will create a QR code and then send it to the vendor. These functions will enhance the unique identity of the invoice. By using this information, tax officials can identify these invoices, even if they are offline, by using the application offline. In the context of the bigger perspective, this e-invoicing program became a part of the Indian tax system to reduce tax fraud. This article will go over the e-invoicing features and their importance in creating the distinctiveness of every electronic invoice.
Did you know?
It's very easy for card companies to track comprehensive information regarding a transaction with the help of its reference number. Using this number, the company easily recognises the seller or merchant, terminal owner, and card terminal where the transaction took place. So, the chances of fraud are minimal.
What Is an Invoice Reference Number (IRN)?
Let's start with understanding ‘what is IRN?’ with invoice reference number examples. In the new system of e-invoicing, IRNs can be identified as unique numbers created in invoices through IRP (invoice registration portal) and are calculated by a hash algorithm. Also, the process will ensure that the vendor doesn't provide the same invoice multiple times during the year. Rule 138 (2) in the CGST guidelines permits creating the invoice number for a reference through the GST portal by applying - GST INV-01. Also, the reference number for invoices (also known as IRN) is a method to digitise invoices made under GST digitally. It allows taxpayers to create an IRN through the portal for electronic waybills, and it's possible to use it for 30 days.
The IRN could replace the original physical invoice copy. It can lessen your burden to carry a paper invoice for transporters if they often carry huge amounts of goods and values, and it also removes the stress of keeping physical copies. It aids in better monitoring of the goods being moved to tax officials, decreases the amount of time waiting at checkpoints and lowers the possibility of loss.
IRN generation needs the upload of GST INV-01 to the portal. It requires information about the person who will receive the item and the consignee's details like address, name and state, state's code and GSTIN. Other necessary information includes a description of the item, including HSN, discount, quantity, tax amount and tax-deductible value.
In the brand new electronic invoicing model, the government will create the IRN for each invoice you produce through the portal to authenticate the invoice produced. Also, this IRN will be necessary for invoices and any other transaction that requires the invoice's reference. The generation of the IRN will be done across various platforms.
The Integration of ERP can ensure that the burden of various data entries does not afflict a tax payee. The current e-way bill system could eventually replace the generation of electronic bills as IRNs. The businesses can also move items according to IRN because the e-invoices would assist in eliminating the requirement to keep physical invoices.
We can use tax as an alternative to electronic bills in case of transporting the cargo or goods. Besides that, it'll allow authorities to monitor the items being transported and their value, along with other information contained in the e-invoice. This information is then incorporated into the IRN.
Benefits of GST IRN and E-Invoice System
- The electronification, standardisation, interoperability and paperless management of invoice processing.
- Eliminates errors in reconciliation and the requirement for data entry re-entry.
- Improves payment cycle timelines.
- Reduces processing costs.
- Automates the financial document reporting.
- Reduces tax evasion.
- It is a way to avoid financial fraud.
- Enhances efficiency of the business.
- It simplifies the transfer of documents between suppliers and customers.
- Aids in tax compliance.
What Was the Reason for E-invoice Creation?
- Tax authorities will be able to have access to transactions when they happen in real-time. We need to generate the e-invoice in compliance with the e-invoice portal.
- There is less room for the manipulation of invoices. We create it before making a payment.
- It reduces the risk of counterfeit GST invoices and ensures that only authentic input tax credit is claimed. Because the input credit can be matched with tax data for output, It makes it more straightforward for GSTN to identify fake credits for tax.
- It will aid in the overall decrease in tax fraud.
Also Read: How to modify or correct an e-invoice?
How to Generate an Invoice Reference Number (IRN)?
A taxpayer subject to the e-invoicing obligation must create an electronic invoice using IRN and a QR code. It is easy to create an IRN in the new e-invoicing technology, and there are two ways for the same:
- Through an online e-invoicing platform.
- Connecting e-invoicing software to existing ERPs like Oracle, Microsoft Navision, SAP and others, including internal ERPs.
After registering an invoice to IRP and issuing an invoice reference number (IRN) and a signature QR code, by using these items, buyers or recipients can verify an electronic invoice regardless of whether it's associated with the IRP. However, to verify the legitimacy of the invoice issued to the user, they must download the mobile application with a QR code.
IRN helps to stop tax evasion, fraud and fraudulent ITC claims. If we talk about E-invoicing, it's mostly designed to stop tax evasion within the system. Also, it will ensure that all transactions related to sales that occur in business are entered into GSTN. The system of GSTN in real-time. This ensures that no fraudulent transactions occur and that fraudulent ITC claims that arise from inflated sales are hard to decipher.
The generation of the IRN associated with the e-invoices will ensure that the real IRN doesn't secure invoices that are not considered ITC claims, thereby reducing fraudulent invoices. Additionally, the IRN generation integration with ERP systems can ensure that it is generated quickly, and if the systems aren't automated enough, there will be offline utilities accessible.
The government has established several committees that will handle the complexities of electronic invoicing systems, including the legal facts and the technical aspect of the system's operation.
The introduction of an electronic invoice system will result in greater efficiency in the GST process. This is not an actual invoice that we download or print via the GST Portal.
It's a method of validating all B2B invoices electronically via the GSTN. The standard format is necessary, which requires all accounting software to adhere to the same format. It's possible to transfer it to the GST portal to verify and authenticate. In the end, e-invoice is a common method or schema to facilitate data exchange among different GST billing software from various manufacturers. For more details, you can visit https://einvoice1.gst.gov.in/.
National Informatics Centre (NIC) has developed the e-invoice system as per the most recent electronic invoice (IRN) schema. It is available on the GSTN website.
Do you have issues with payment management and GST? Install the Khatabook App, a friend-in-need and one-stop solution for all issues related to income-tax or GST filing, employee management and more. Try it today!