Digital Signature for an E-invoice
From 1st October 2022, E-Invoicing has been made applicable to businesses that have exceeded an annual turnover of ₹10 Crores in any financial year from FY 2017-18 to FY 21-22, regardless of whether their current revenue exceeds that amount or not.
E-Invoicing is the process of electronic authentication of B2B invoices. All taxpayers (that fulfil the criteria mentioned above) are required to upload invoices for B2B transactions to the Invoice Registration Portal. After this data is verified and authenticated, it is then shared with other portals managed by the GST Network as well, which saves time and effort for the taxpayer, and also reduces errors. In a move to increase the efficiency of the e-invoicing system, users are allowed to sign their invoices digitally, as opposed to the physical signatures that were required before e-invoicing was implemented.
As per the latest update, in GST invoicing now allows taxpayers to download all GST returns—GSTR-1, GSTR-2A, GSTR-2B, and GSTR-3B—in one click, simplifying compliance and saving time. Additionally, a new ITC Reconciliation Report has been introduced to help users match ITC claimed in GSTR-3B with actual utilization. This ensures accurate reporting and reduces the risk of ITC mismatches. These updates make the invoice management and GST return filing process more seamless for businesses and tax professionals.
In this article, we will look at what a digital signature is and how it is beneficial for e-invoicing. We will also show you how to use the digital signature for an e-invoice. Use BUSY E-Invoicing Softwareto generate e-invoices automatically in seconds, without needing to go to the portal at all.
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What is a Digital Signature Certificate?
Digital Signature Certificate (DSC) is a digital document that contains a person’s digital signature, which is used to electronically sign documents and transactions. In the context of the Goods and Services Tax (GST), a DSC is used to authenticate the identity of a taxpayer who is filing their GST returns and other documents electronically.
Under GST, every taxpayer who is required to file their returns electronically must sign the documents using a DSC. The DSC ensures that the documents have not been tampered with or altered in any way, and that the person signing the documents is the authorised taxpayer.
To obtain a DSC, a taxpayer must apply to a certifying authority, who will verify the taxpayer’s identity and issue the digital certificate. A DSC is issued for a fixed validity period of either one or two years, after which it must be renewed.
Benefits of Using a Digital Signature Certificate
The benefits of using a digital signature certificate are:
- Documents like Form 16, challans, contracts, statements, etc., are signed in bulk.
- It saves time as the documents are not signed manually or individually.
- The documents can be searched, retrieved, or archived with ease.
- It is a procedure integrated into the system and works with the signing, sending, and processing of electronic documents.
- It reduces the expense associated with the manual process by up to 70%.
- It ensures that the data’s integrity and validity are well-protected.
Using a Digital Signature certificate in an E-Invoicing system
A provider must submit the JSON of the invoice to the Invoice Registration Portal as part of the e-invoicing system. The JSON must adhere to specific essential and optional parameters when reporting the bills. One of the optional elements in this scenario is the digital signature. If the JSON is considered authentic, the IRP will create the hash (Invoice Registration Number, or IRN) and then digitally sign the JSON using its private key. The e-invoice will become invalid, and the digital signature will not work if the signed JSON is altered.
The e-invoice will be legal for use by the seller in his business dealings once the IRP has signed it. Additionally, the IRP will send this electronically signed invoice to the GSTN and the e-way bill system.
Why is a Digital Signature Certificate Required?
The invoice’s JSON file must be uploaded to the IRP, and one of the optional factors is a digital signature. The JSON will be digitally signed, and a QR code will be generated once the IRP has verified the invoice. The Invoice Reference Number (IRN) issued by the IRP, the QR Code, and the supplier’s digital signature must all be disclosed when the supplier gives the recipient a printed copy of his invoice. The supplier’s digital signature and QR code must be provided separately and are not interchangeable.
Steps to Attach a Digital Signature to an E-Invoice
Before connecting a digital signature to an E-Invoice, ensure the software required to read the DSC is installed and that the GST portal’s “emSigner” function is operational. Follow the steps mentioned below to attach a digital signature:
Step 1: There are numerous methods, such as offline tools, mobile apps, etc., for producing an invoice in the required JSON format. After that, we must access the IRP and attach the JSON.
Step 2: Select the “Verify using DSC” button. The available digital signatures will be displayed in a dialogue box that will appear.
Step 3: Choose the proper digital signature and press the “Sign” button. Verify that the Authorised Signatory shown on the GST portal is the one who owns the DSC. You could be asked to input the DSC password by the utility.
Step 4: If the attachment of the Digital Signature Certificate were successful, a success message would appear. Press OK or Continue.
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Use of DSC Under the E-Invoicing System
A Digital Signature Certificate (DSC) plays a crucial role in the e-invoicing system under GST by ensuring authenticity, integrity, and legal compliance of e-invoices. It is used to digitally sign invoices to confirm the identity of the issuer and prevent any alterations to the document.
Key Features of DSC in E-Invoicing:
- Authentication: Confirms the issuer’s identity.
- Integrity: Ensures that the invoice has not been tampered with after signing.
- Legality: Digital signatures are legally valid under the IT Act, 2000.
Taxpayers can use Class 3 DSCs, which are recognized for e-invoicing purposes. These signatures are applied using specific software tools that integrate DSCs into e-invoices.
E-invoices do not mandatorily require a digital signature if they are generated through the Invoice Registration Portal (IRP). The IRP adds its own digital signature and QR code to the invoice. However, businesses often use DSCs for added security and compliance with internal or contractual requirements.
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Obtaining a DSC involves approaching a certified authority and completing verification procedures. Businesses must ensure their DSC is valid and compatible with e-invoicing software to avoid errors.
Conclusion
The use of digital signatures for e-invoicing provides a secure and efficient way to authenticate the identity of the sender and ensure the integrity of the invoice data. It helps in reducing the risk of fraudulent activities and errors, which ultimately leads to a smoother and more transparent invoicing process. With e-invoicing becoming applicable to more and more businesses, it is becoming increasingly important for taxpayers to be aware of how to efficiently use the system to save both time and effort.
As a Chartered Accountant with over 18 years of experience, I have honed my skills in the field and developed a genuine passion for writing. I specialize in crafting insightful content on topics such as GST, income tax, audits, and accounts payable. By focusing on delivering information that is both engaging and informative, my aim is to share valuable insights that resonate with readers.
Frequently Asked Questions
- Why is a digital signature required for e-invoices?Digital signatures authenticate the issuer’s identity and ensure the e-invoice remains secure and unaltered.
- Are digital signatures legally valid for e-invoices?Yes, digital signatures are legally valid under the IT Act, 2000, and widely used in e-invoicing.
- How do I apply a digital signature to an e-invoice?A digital signature can be applied using DSC-compatible software tools integrated with your invoicing system.
- Which types of digital signatures can be used for e-invoices?Class 3 Digital Signature Certificates (DSCs) are commonly used for e-invoices.
- Do all e-invoices need a digital signature?No, the IRP digitally signs the invoice, but businesses may use DSCs for additional security or compliance.
- What are the benefits of using a digital signature on e-invoices?It ensures authenticity, prevents tampering, and provides legal validity to e-invoices.
- Can I use the same digital signature for multiple e-invoices?Yes, the same DSC can be used for multiple e-invoices within its validity period.
- What are the security features of digital signatures in e-invoicing?Digital signatures encrypt data, prevent tampering, and confirm the signer’s identity.
- How do I obtain a digital signature certificate (DSC) for e-invoices?Apply for a DSC from a certified authority and complete identity verification.
- Are there specific software tools required to add digital signatures to e-invoices?Yes, DSC-compatible software or tools are required to apply digital signatures to e-invoices.
- What should I do if my digital signature doesn’t work on an e-invoice?Verify the DSC’s validity, compatibility, and proper installation, or seek technical support from the issuing authority.
