The e-invoicing process involves electronically generating and submitting invoices to a government portal for validation and authentication. While the exact process can vary depending on the country and its specific regulations, here’s a general overview of how the e-invoicing process typically works:
- Invoice Generation: Businesses generate invoices in a standardized electronic format that adheres to the specific requirements set by the government or tax authority. The format usually includes mandatory fields such as invoice number, invoice date, buyer and seller details, line item details, tax amounts, and more.
- Invoice Preparation: Using accounting or invoicing software that’s compatible with the e-invoicing system, businesses prepare the invoice data. The software ensures that the invoice structure and content meet the required standards.
- E-Invoice Submission: The prepared e-invoice data is submitted electronically to the designated government e-invoicing portal. This can often be done through API integrations between the business’s software and the government portal.
- Validation and Approval: The e-invoice is validated by the government portal. This validation process checks the invoice for accuracy, completeness, and compliance with tax regulations. If any errors or discrepancies are identified, the system may reject the invoice or prompt for corrections.
- Unique Invoice Reference Number: Once the e-invoice passes validation, the government portal generates a unique Invoice Reference Number (IRN) and a QR code. The IRN is an essential identifier for the invoice and is used for tracking and verification purposes.
- Digital Signature and QR Code: The e-invoice is digitally signed by the portal, ensuring its authenticity and integrity. A QR code is also generated, containing key invoice details and the IRN.
- Sharing with Recipient: The business attaches the digitally signed e-invoice with the unique IRN and QR code to the email or digital communication sent to the recipient (buyer). The recipient can then access the QR code for quick verification.
- Reconciliation: Both the supplier and the recipient can use the QR code and the e-invoice’s IRN for easy reconciliation of transactions and tax compliance.
- Reporting to Tax Authority: The government tax authority receives a copy of the e-invoice data for record-keeping and further processing. This data helps them monitor transactions and ensure accurate tax reporting.
- Archiving: Both the supplier and the recipient are responsible for archiving the e-invoices and related documents as required by tax regulations. These records may be subject to audits or reviews by tax authorities.