GST E-Invoicing Is Now Mandatory: 7 Critical Features Your Accounting Software Must Have

This is a Guest post by Mr. Niraj Hutheesing, Founder and Managing Director, Cygnet Infotech

The Central Board of Indirect Taxes & Customs (CBIC) has already mandated E-invoicing since October 2020 for businesses with a turnover of 500+ crore, since January 2021 for businesses with turnover 100+ crore and from April onwards for 50+ crore companies. Now, small businesses can become a part of the digital process by using an accounting software required for e-invoicing. In the last few years, it has gained traction and become a common B2B practice. As the Government of India has made e-invoicing mandatory for firms with a turnover of 50 crores or more, it will get embedded in every company’s business processes and practices. E-invoicing aids in automating the authentication process for the invoices. 

E-invoicing speeds up the entire process, leading to a massive reduction in costs. It will put an end to the probabilities of human errors due to manual data entry. Using an accounting software, E-invoice and E-way bill generation and cancellation are all just one click away for the user. Apart from compliance, the value additions and the ease of doing business internally and externally has been a challenge. In order to streamline the same, it’s important to automate and integrate as many as business processes as possible. Citing one example – Post e-Invoicing Implementation, it is crucial for taxpayers to comply and further integrate and automate purchase entries backwards in order to reduce the mismatches with vendor and claim accurate ITC.

Identifying IRN, QR Code, and Digital Signature.

Your accounting software should be able to provide all the appropriate information to the IRP (invoice registration portal) to create an IRN (Invoice Reference Number) for an invoice. The information is required for creating the IRN includes GSTIN of the supplier, financial year, document type, and number. Your system should identify this IRN on the invoice PDFs, as it is one of the required fields in the e-invoice format.

The IRP will generate QR codes for businesses with a collective turnover of 100 crores and permit the generation of B2B invoices. Your system should automatically attach these QR codes to the invoices.

You will also receive a digitally signed copy of the e-invoice from the IRP as a part of the validation process, so your software should be able to recognize and read it. This is your authentication that the submitted invoice is valid and it can now be used as a reference document for filing returns.

Standard e-invoice format prescribed by the government. 

Broadly, the E-Invoice contains two fields: Mandatory fields and Optional fields.

The required fields are those columns that imperatively form an important part of the invoices under the e-invoice standard.

Talking about the optional fields are columns that are not  mandatory to generate a valid e-invoice. The option to fill these fields is the choice of the taxpayer or the entity.

As per the most recent e-invoice format, there are 12 Sections in which five are obligatory.

The mandatory sections are:

1. Basic details
2. Supplier information
3. Recipient information
4. Invoice Item details
5. Document total

There are six annexures in which two are mandatory, which includes item details and document total details.

Proper bifurcation of transactions

Your accounting software should be able to classify transactions as:

1. Business to Business (B2B)
2. Export
3. Supply through E-commerce operators
4. Supply applicable for reverse charge.

Your system should integrate capably with the e-invoicing system to categorize your invoices based on the tax category entered by the customer when an e-invoice is generated.

Security of Confidential Information

Your accounting software should provide security features like multi-factor authentication, customer controls that allow you to exercise reasonable precautions while uploading information on the cloud, and appropriate notifications about threats from phishing and malware.

Syncing Invoices to your Accounts Payable and Receivable Module

Your accounting software should allow you to link the IRP-validated invoices to your accounts payable and accounts receivable modules. This will help you make your payments on time. In case you are trying to claim Input Tax Credit (ITC) on invoices, you will have to make the payments within 180 days after the date of invoice generated. You’ll need your incoming cash flow to stay healthy if you want to keep up on your payments, so your system should also help you track due payments so that you can send payment reminders to your debtors.

Integration of Data Analytics

Built-in Analytics and customizable dashboard can help businesses to garner more insights from their data. Everyone wants to know how their business is performing. With the help of E-invoicing, E-way bill, GST, and bookkeeping data, we can generate holistic reports needed to get business insights.

360-degree Support Services

A dedicated technical and functional team with quick response time to solve queries and issues of customers related to E-invoicing, accounting, and software.

All the above-mentioned features of e-invoicing automation can greatly benefit organisations and ensure smooth functioning of business, while eliminating manual errors.