A passage to e-invoicing in India

The case for electronic invoicing was recently boosted in India, where there was a significant change in legislation that will help propel the country from a paper to an electronic invoicing world, made possible through a digital signature.

A digital signature ensures the authenticity of an invoice. It is common practice in the EU and other developed markets, and facilitates global trade in an electronic manner, which is considerably more effective than waiting to receive a piece of paper with a manual signature. As with many technological advancements, a digital signature – as opposed to a manual one – provides added security (for starters, it can’t be easily forged like a manual signature) and ensures that the invoice satisfies the authenticity of origin and integrity of data requirements.

Since its enactment, The Indian IT Act, 2000, has provided a legal basis for a digital signature in lieu of a handwritten one. However, in practical terms this has meant little for the supplier, buyer or service provider that wanted to adopt an electronic process for invoicing. The recent clarification on the use of digital signatures as a means for authenticating invoices confirmed that, for service invoices across India, the existing legislation is now truly a practical reality. Furthermore, and through a mix of skill and persistence, Tungsten has managed to receive formal, written approvals for goods invoices in the following Indians states: West Bengal, Himachal Pradesh, Karnataka and Delhi.

Such positive news may seem like the end of the story. Yet for industry specialists such as Tungsten, the hard work and real questions begin now. Firstly, the usual “who, what, how and when?” questions were raised as soon as this latest piece of legislation was released. It’s easy for the legislator to dictate something, but much harder for the industry to execute it effectively. Secondly, the digital signature is just one important part of a compliant invoice, and any serious e-Invoicing service provider that claims compliance will have performed a detailed analysis of the invoice content and also ensured that this is reflected on the legally valid PDF. In India there are further complexities due to state-specific differences about how an invoice should look and what rules should be applied to it.

Over the coming months we expect to see changes in India to clarify the two points made above. The Central Board of Excise and Customs (CBEC) has issued a Circular Letter for industry comments which, once in final format, will hopefully address the outstanding questions relating to who should sign, with what certificate, in what way and at what part of the invoicing process. With this clarity in place, the industry can begin proper execution of the legislation. For the latter point above, Tungsten Network has initiated projects to make sure all of these factors are considered for digital signatures, invoice content and the applicable taxes due on both service and state VAT invoices. E-invoicing in India with Tungsten will be a compliant offering with more than just a digital signature attached to the PDF.