New E-invoice System Under GST- Benefits & Workflow

New E-invoice System Under GST- Benefits, Workflow & Template

E-invoicing has been in discussions for a while. Several approaches were proposed by the GST council for feedback from the industry and tax professionals. Finally, in their 37th Meeting on 20th September 2019, they announced a mechanism for e-invoicing which will be applicable for all taxpayers starting from January 1st, 2020 on a voluntary basis.

What is E-invoicing?  

Before getting into E-invoicing, lets first understand why it was proposed by the GST council. In the current scenario, the problem of invoice reconciliation was a big one for the industry. Further, few persons also tried to claim undue tax credits by using fake invoices. Therefore, the GST council decided to have a mechanism where invoicing was more streamlined for ease of reconciliation and also prevent such fraudulent activities.

Typically, every company generates an invoice in its own format and every ERP system would store data in their own unique way. Therefore, the invoice generated from one system would not be read by another system. Therefore, one of the objectives of the GST council was to create interoperability between the invoices generated by different systems. After invoice generation, they must be also reported correctly to the govt portal.

The Proposed E-Invoicing System

In the proposed new e-invoice system, business systems are supposed to either generate an e-invoice (a JSON file) along with the Invoice Reference Number (IRN) or send the parameters to the IRP (Invoice Registration Portal) to generate the IRN. To generate the IRN, you need the GSTIN of the company, the financial year and the invoice number. These 3 components are fed into a hashing algorithm which creates a hash from the given inputs. That hash is the IRN.

If the business system produces the hash (IRN), it sends it along with the invoice JSON to the IRP. Alternatively, the IRP can generate the hash from the given inputs. The job of the IRP is to check whether any duplicate exists in the central repository and then also to register that invoice into the registry, sign the invoice digitally and send it back to the company.

All uploaded invoices/documents will be stored in IRP for 24 hours only. These uploaded invoices will be shared with GSTN within 24 hours and the system will automatically register transactions on the GST network. In case the registration fails for any reason, the invoices will come back to IRP and the user will be notified to upload the invoice data again to the system.

Once the invoice is registered on the IRP, it is available for the buyer to see it. The IRP will also provide a QR code along with the signed invoice. This QR code can be used to check the authenticity of the invoice. Once an e-invoice is registered on the IRP, it cannot be changed or modified.

This mechanism achieves the objectives of the GST system. Because the invoice is now available to the buyer almost instantly, there is no need for reconciliation. Further, because only an invoice registered on the IRP is a legally valid invoice, the instances of fake invoices will go down. Companies are free to use their own formats also thereby preventing any radical changes to the way they have been doing business.

What are the Steps Involved in e-Invoicing? 

The flow of the e-invoice generation, registration, and receipt of confirmation can be logically divided into two major parts.   

From Supplier to IRP (Invoice Registration Portal) 

  • The first part being the interaction between the business (supplier in case of invoice) and the Invoice Registration Portal (IRP).  
From Supplier to IRP (Invoice Registration Portal)
The image above will give a detail of the flow in Step 1

From IRP to GST System & Buyer 

  • The second part is the interaction between the IRP and the GST/E-Way Bill Systems and the Buyer.  
Registrar (IRP) GST System Flow of Activities
 The image above will give a detail of the flow in Step 2 

Benefits of a new system for the businesses 

The new system standardizes the invoice format ensuring the interoperability of the data, abolishes fake invoices, provides you with a complete trail of the B2B transactions and enables system-level matching of ITC and output tax.  

  • E-invoice sorts out and bridges the gap in data reconciliation under GST to reduce mismatch errors. 
  • E-invoices created on any one software can be read by the other, allowing interoperability and helps reducing data entry errors. 
  • E-invoice allows real-time tracking of invoices prepared by the supplier. 
  • With e-invoicing backward integration and automation of the tax return filing process is possible. All the relevant details of the invoices will be auto-populated in various returns, especially creating one for the part-A of e-way bills. 
  • Quicker availability of genuine input tax credit
  • Reduced likelihood of audits/surveys by the tax authorities since the information they require is available at the transaction level. 

Where Cygnet GSP can help? 

As a GSP Cygnet has the capabilities for helping you in many ways to ease the GST process for you. 

Managing the Entire Chain of e-invoicing

We help to manage the entire chain of e-invoicing starting from extracting the invoice data to eventually providing the digitally signed copy with IRN and QR code to the taxpayer. We can offer a tool to generate the invoice number hash from the source parameters.

Continuous Reconciliation Process

Previously, reconciliations used to be carried out only at the end of a tax period, be it monthly or yearly. But now, the reconciling book of accounts is the best practice that will have to be followed and Cygnet GSP can help you in the same.

Constant Vendor Communication

Minimizing the bad effect on cash flows that happens due to the delay by the vendor in uploading invoices. We make sure constant reminders are sent to the vendors to stay compliant and avoid any kind of delays.

Here’s an overview of the same

Other ways Cygnet can help

  1. We ensure you complete GST compliance through automation. 
  2. We allow you to generate Invoice Json file, create the hash and get it registered with the IRP 
  3. We help in the reconciliation of the invoices  
  4. We provide end-to-end automation of your GST compliance that also includes extracting data from the source systems, data validation and auto-preparation of the returns.  

If you want to be GST compliant and make the most of the e-invoicing system, then get in touch with our team on

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