How does e-invoice work?

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How does e-invoice work?

The overall work flow of ‘e-invoice’ system is as follows:

The above flow of e-invoice generation, its reporting/registration, and receipt of confirmation
can be logically divided into two major parts:

  1. Interaction between the business (supplier) and the Invoice Registration Portal (IRP).
  2. Interaction between the IRP and the GST/E-Way Bill Systems and the Buyer.

Step 1:

the invoice was generated by the seller in his accounting or billing system (it can be any software utility that generates invoices, including those using excel or MS-Word). The invoice must conform to the e-invoice schema (standard format notified) and mandatory parameters. The optional parameters can be according to the business need of the

supplier. The supplier’s (seller’s) software should generate a JSON of the final invoice ready to be uploaded to the IRP. The IRP will only take JSON of the e-invoice. In case the taxpayer’s billing software/ERP cannot generate

JSON of e-invoice as per notified Format, she should either ask the software provider to

provide the same or take this service from others who are providing this as a service.


1. Seller should have a utility that will output invoice data in JSON format, either from his accounting or billing software or his ERP or excel/word document or even a mobile app. [All accounting and billing software companies are being separately asked to adopt the e-invoice standard so that their users can generate the invoice in notified

standard from the software and upload the same on the IRP.]

2. Eco-system of Fin-Tech companies has been created to provide this as a service. In

case ERP/Accounting/Billing software does not provide the service. Can take it from one of the providers.

3. The small and medium-size taxpayers who do not have accounting/billing software can avail of free accounting and billing systems offered by GSTN-empaneled providers.

Currently, taxpayers having annual aggregate turnover below Rs 500 Cr are not

required to report e-invoice to IRP.

Steps 2 and 3: To upload and push the e-invoice JSON to the IRP by the seller. The JSON may be uploaded directly on the IRP or through GSPs or a third party if the software is available.

Step 4: The IRP will generate Invoice Reference Number (IRN), based on the Supplier’s GSTIN, Document Type, Document Number, and Financial Year and check the same from the Central Registry of GST System to ensure that the same document (invoice, etc.) from the same supplier

about the same Fin. The year is not being uploaded again. In computer science language, IRN is called a hash. On receipt of confirmation from the Central Registry, IRP will add its signature on the Invoice Data and a QR code to the JSON. The QR code will contain GSTINs of seller and buyer, Invoice number, invoice date, number of line items, HSN of the major commodity contained in the invoice as per value, hash, etc. The hash computed by IRP will become the IRN (Invoice Reference Number) of the e-invoice. This shall be unique to each invoice and hence be the unique identifier for each invoice for the entire financial year in the entire GST System for a taxpayer. [GST System will create a central registry where will keep hashes sent by all IRPs to ensure uniqueness of the same]. Currently, GST System uses similar logic to ensure the uniqueness of each B2B invoice that is uploaded as part of GSTR1.
If the same document has been uploaded earlier, the IRP will reject it with an error code back to the supplier.
Step 5: will involve returning the digitally signed JSON with IRN back to the seller along with a QR code.
Step 6: will involve sharing the uploaded data of the document (invoice etc.) with GST and e-way bill system.