GST e-Invoice / IRN System – Electronic Invoicing in India

The GST e-invoice / IRN System is India's e-Invoicing system launched on a mandatory basis on October 1, 2020. 

The introduction of e-invoicing is another step toward the completion of the GST System project initiated by the government in 2017. It represents the most sweeping change made to the economy in the history of the Republic of India.The objective is to integrate India into one common marketplace through the harmonization of the tax system.

India E-invoicing System

In December 2019, the Indian tax authority, the Goods and Services Tax Council (GSTC), approved the phased implementation of B2B electronic invoicing through the Goods and Services Tax (GST) System.

Following the voluntary adoption period, which began in January 2020, implementation of the mandatory use of electronic invoices will begin in October 2020. Companies will be required to adopt the system gradually according to their annual turnover. The first businesses required to adapt to the GST system are those with an annual turnover of rs500 crores or more. Exceptions include Special Economic Zones (SEZ), insurance companies, banks, overland transport agencies, passenger transport companies, and cinemas.

Under the new GST fiscal model, India has gone from having a convoluted tax regime with numerous tax types (local, state, and central) to a homogenized system based on information technology.

To carry out this project, the government instituted the Goods and Services Tax Council (GSTC), responsible for making legislative decisions, and the Goods and Services Tax Network (GSTN), which provides the infrastructure and IT services to the central government and the 36 Indian states. The GSTN is charged with developing the electronic invoicing and e-way bill platforms.

Three years after the implementation of the GST system, the government now wants to focus on combatting tax evasion, increasing collections, and improving tax compliance.

By standardizing the invoicing process, the government hopes to achieve interoperability of the entire GST System, reduce fraud, and encourage tax compliance by all Indian businesses.

The documents included in the GST e-invoice system are B2B invoices, export invoices, credit notes, and debit notes.

Mandatory e-Invoicing Deadline Schedule

• October 2020: Taxpayers with a turnover of more than Rs 500 Cr. in the last financial year.
• January 2021: Taxpayers with a turnover of more than Rs 100 Cr. in the last financial year.
• April 2021: Taxpayers with a turnover of more than Rs 50 Cr. in the last financial year.
• April 2022: Taxpayers with a turnover of more than RS 20 Cr. in the last financial year.
• October 2022: Taxpayers with a turnover of more than RS 10 crores in the last financial year.
• August 2023: Taxpayers with a turnover of more than RS 5 crores in the last financial year.

How Does the GST e-Invoice System Work?

The GST e-Invoice System requires issuers to report e-invoices to the government for validation before they are delivered to the customer. For that purpose, the government has developed a series of Invoice Registration Portals (IRP). E-invoice issuers must report their invoices to the IRP. The IRP electronically signs the invoice and applies a unique code called an Invoice Reference Number (IRN), as well as a unique QR code. Only invoices with an IRN are valid.

Requirements to be an Electronic Invoice Issuer

Issuers must be registered in the GST portal and either the electronic invoicing or e-way bill portal. They must also have a valid GSTIN code. Finally, issuers must adapt their systems to be able to communicate with the government platform and to send and receive e-invoices in line with the tax authority specifications.

Characteristics of the Indian GST Invoice

In India, electronic invoices are called GST Invoices.

GST Invoices must be generated in JSON format following the GST INV – 1 schema. The schema is based on the PEPPOL/Universal Business Language and is adapted to the Indian market.

The same format is used for all invoices, by all companies and sectors throughout the country.

Valid GST invoices will contain an IRN code, applied by the IRP.

Invoice Reference Number (IRN)

The IRN (or hash) is a numeric, 64-digit code generated by the IRP for each electronic invoice. Only invoices containing the IRN are considered valid. The Indian invoicing system is also called the IRN System since it validates electronic documents by calculating and assigning the IRN.

The IRN code should not be confused with the invoice number. The invoice number is assigned by the issuer and is an internal data point.

IRN example: 35054cc24d97033afc24f49ec4444dbab81f542c555f9d30359dc75794e06bbe

Quick Response (QR) Code

When the IRP validates the invoice, it applies a QR code in string format which the issuer’s e-invoicing system must transform into an image. The QR code allows for the validation of and access to invoices in the GST system by a mobile device. The print format of the electronic invoice must include the QR code.

Information included in the QR code:

• GSTIN ID of supplier
• GSTIN ID of the recipient
• Invoice number, provided by the issuer
• Date of invoice creation
• Invoice value
• Number of product lines
• HSN code of the main product (the product line with the highest value)
• IRN code

EDICOM GST Invoice Solution for India

The EDICOM Global E-Invoicing Platform is prepared to generate electronic invoices in the GST INV – 1 format and send them to the IRP for validation. It also allows for their automatic return integration into the management system.

Workflow for issuing and receiving electronic invoices

Issuing GST Invoices

• The issuer exports a file containing all the data necessary to create an invoice.
• The EDICOM Global E-Invoicing Platform transforms the document into the JSON format required by the GSTC and sends it to the Invoice Registration Portal (IRP).
• The IRP validates the electronic invoice, signs it, and applies the IRN code as well as the QR code.
• EDICOM sends the validated e-invoice to the recipient through the agreed-upon channel.
• If necessary, the e-way bill can be generated through the same process.

Reception of GST Invoices

• The IRP receives an e-invoice addressed to an EDICOM client and validates it. EDICOM receives the validated invoice.
• The EDICOM Global E-Invoicing Platform transforms the invoice into the previously agreed-upon format for integration into the client ERP. The invoice is integrated directly into the management system.

Benefits of the GST e-Invoice / IRN System

• Guarantees the digitalization, standardization, interoperability, and paperless management of invoice processes.
• Eliminates reconciliation errors and the need for data re-entry.
• Improves payment cycle timelines.
• Reduces processing costs.
• Automates the reporting of financial documents.
• Reduces tax evasion.
• Avoids fiscal fraud.
• Improves business efficiency.
• Simplifies the exchange of documents between suppliers and their customers.
• Facilitates tax compliance.