e-Invoicing under GST: A detailed guide on IRN

Introduction

e-Invoicing has changed the face of B2B invoice management for large enterprises ever since its implementation earlier on October 1st, 2020.

With all sorts of technological advancement, the government has now merged technology with taxation & law as well, and businesses will have nothing but gains from this move.

With the implementation of e-Invoices a few weeks ago, businesses still need updated & authentic details & information on the provisions of e-Invoicing.

So here is a blog to help you understand Invoice Reference Numbers (IRNs) under e-Invoicing better.

e-Invoicing under GST- An introduction

e-Invoicing under GST is the new way of electronic authentication of B2B invoices which has rolled out in October 2020 for all businesses having an annual aggregate turnover of more than Rs. 500 Crores.

Businesses will also have to generate QR codes for their B2C invoices, from December 2020.

Under this new system, the B2B invoices will be made in a specified SCHEMA format & the supplier will have to validate it on the Invoice Registration Portal or IRP.

Upon successful validation, the portal will allot a unique IRN (Invoice Reference Number) & QR Code to the invoice as an identification.

The IRP will validate the e-Invoices for- correct GSTIN, mandatory fields specified by the schema, & values, etc.

You can generate e-invoices in your billing/accounting systems just as in the current system but you will have to customize your ERPs to comply with the schema that is specified by the GSTIN.

After the successful validation of the e-invoice, the IRP will share the invoice with both the e-Way Bill Portal & the GST Portal.

Additionally, the e-Invoice will also be shared with the recipient of the invoice & will be accessible for the tax authorities anytime, in case of scrutiny & audits.

Apart from IRN & QR Code for the B2B invoices & QR Code for B2C invoices, you will also be required to report other documents to the IRP- B2G (Business to Government)Invoices, Export Invoices, Invoices liable to RCM, Credit Notes & Debit Notes.

Understanding IRNs under e-Invoicing- Meaning, Role, Importance & Generation

IRN or Invoice Registration Number is the big change that makes e-Invoices different from the traditional invoices.

The IRP assigns a unique IRN to all the invoices & other documents uploaded to the IRP.

This must be done by the taxpayers in realtime, meaning an e-invoice cannot be post-dated. It should either be either of the same date or an earlier date from the date of IRN generation.

IRN is the unique identification number that gives the invoice a face & helps the taxpayers & the authorities to identify it at any point in time.

IRNs are generated by the IRP using the special hash generation algorithm and are 64 characters long.

The algorithm uses the following to create an IRN-

• Document Number
• Supplier GSTIN
• Financial Year
• Document type

The IRNs & IRN containing e-Invoices and documents are available for the taxpayers on the IRP for only 24 hours from the time of generation.

Taxpayers need to establish their own archiving space to store the e-Invoices.

An IRN can consist of numbers, alphabets & specified special characters as well.

Note- There can only be one IRN for a document, as the IRP also validates the e-Invoices for duplicate IRNs.

Note- In the case of the cancellation of an IRN, the same document cannot have the same IRN upon regeneration.

IRNs are highly useful & are the base of the entire structure of e-Invoicing.

An IRN is useful for both Businesses & the Tax Authorities to help identify the invoices as well as to ensure the authenticity of it, as the IRP will only generate IRNs for validated e-Invoices.

Since its implementation earlier in the last month, taxpayers have generated a total of 4.95 Crore e-Invoices & even more IRNs since the IRN is assigned to any document uploaded on the IRP.

e-Invoicing plays the most significant role in e-Invoicing due to the following characters-

• Used to identify documents
• Used to check the authenticity of the document
• Used to avoid duplication of e-Invoices
• IRNs are unique for each document
• Generation of Bulk IRNs & e-Invoices can be done using the IRP
• IRN ensures that the invoices are not only genuine & authentic but also technically & value-wise correct
• Transactions done using IRNless invoices will be considered void

Note- Generating e-Invoices from the Portal can be a difficult task considering that the portal only has nominal features. Here, the Government has allowed the use of einvoice solution to generate IRN & e-Invoice

How to Generate an e-Invoice/IRN? The Process Guide

Here is a brief step-wise guide on how you can generate an e-Invoice or IRN-

Step 1- Invoice Creation in the ERP

You are required to create invoices in your billing or accounting system or the ERP, but to meet the criteria of electronic verification these invoices are required to be made in the specified SCHEMA Format.

You must keep the mandatory & optional fields in mind while creating these invoices. In case incorrect details are filled under the wrong header or if any mandatory fields are missing, the IRP will reject the invoices.

There is a total of 5 mandatory Sections & 2 mandatory annexures in an e-Invoice that you must furnish without fail.

The supplier must also ensure that their billing systems are capable of generating JSON Files of the invoices created in the SCHEMA format. Additionally, e-Invoice JSON File can also be generated using the following-

• Offline tools
• Utility or Mobile apps

Step 2- Uploading the Invoices to IRP

Now, you will have to upload the JSON files of the invoices to the IRP.

You can upload the invoices to the IRP through the following-

• Directly uploading on the IRP
• Through GST Suvidha Providers or GSPs 
• Through third-party application providers (APIs)
• Offline Utility Bulk Generation Excel File

Step 3- Authentication, IRN generation, Signing

The IRP will validate your uploaded e-Invoice and check for errors in the schema, missing fields, incorrect GSTINs, incorrect taxable & tax values, etc.

Upon successful validation, the IRP will digitally sign the e-Invoice and add a QR Code & the IRN to it.

The QR code & IRN will be unique for the e-Invoice & could be used to identify the invoices for the entire financial year.

Additionally, The IRP will share an error file in case of a rejected invoice. You can rectify those errors & try re-uploading the invoices to the IRP.

Step 4- The Backend process & downloading the e-Invoice

The successfully created e-Invoices will be shared with the e-Way Bill Portal, the buyer (if, e-mail id is available & registered with GSTIN), and the GST Portal. The e-invoices will be available on the IRP for the next 24 hours & you can download the JSON of the same within this period.

Step 5- Accounting

You will have to account for these invoices in your billing system, manually.

For this, you will have to download the e-Invoice JSON convert it to PDF or word & account the same in your Billing System.

Note- e-Invoice data will always be available & accessible to the tax authorities if required for audit or scrutiny.

Note- You can also generate e-Invoices using e-invoice solution & e-invoice software, as the government has allowed their use through APIs.

Conclusion

e-Invoicing & IRN generation may seem an easy task but is far more different & difficult than what it looks like, especially for large businesses that have multiple transactions in a single day.

Generating IRNs correctly & at the right time is the key to successful e-Invoicing.

However, this goal may not be manually achievable but the government has allowed to seek help from APIs, GSPs & ASPs, etc.

All these are software solution providers, each different from the other. Out of the three GSPs or GST Suvidha Providers are the safest solution to rely on.

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