E-invoicing is a system in which each business invoice is reported to the tax authority electronically, in a fixed format, when it is issued. The tax authority checks it and registers it, and only then is the invoice valid. The full name is electronic invoicing. It is a part of indirect tax software.
E-invoicing is not the same as emailing a PDF invoice. A PDF is a picture of an invoice for a person to read. An e-invoice is structured data: every field, such as the seller's GST number, the item code, the quantity and the tax, is in a fixed place that a computer can read. Because the tax authority receives each invoice on the day it is issued, it can compare the seller's and the buyer's records without waiting for monthly returns.
India introduced e-invoicing under GST in 2020, for the largest businesses first. It now applies to most businesses with an annual turnover above ₹5 crore, for their invoices to other businesses. A few sectors, such as banks and insurance companies, are exempt. The seller's software sends each invoice to a government Invoice Registration Portal (IRP). The IRP checks it and returns an invoice reference number (IRN), a unique 64-character code, together with a QR code signed by the portal. The seller prints the QR code on the invoice.
Say a fabric wholesaler in Surat sells cloth worth ₹2,00,000 to a garment maker in Bengaluru. GST on fabric is 5 per cent, so the invoice is for ₹2,10,000. The wholesaler's billing software, often a small business accounting app, sends the invoice data to the IRP. Within seconds, the IRP checks the two GST numbers and the tax, and returns the IRN and the signed QR code. The wholesaler prints the invoice with the QR code and sends the cloth. The same data is then used automatically. It fills in the wholesaler's monthly GSTR-1 return. It can also produce the e-way bill, the document needed to move goods worth more than ₹50,000. The garment maker sees the invoice in its own GST statement, which its GST reconciliation software later matches against its purchases, and can scan the QR code to check that the invoice is genuine.
Why do governments require this? A common GST fraud is the fake invoice: an invoice for a sale that never happened, issued so that the buyer can claim tax credit. When every invoice must be registered on the day it is issued, fake invoices are much harder to create.
Other countries have similar rules. Italy has required all invoices between businesses to pass through a government system since 2019. Mexico, Brazil and Saudi Arabia have their own systems, and many European countries are adding them. A company that sells in many countries needs software that connects to each country's system. The invoice itself is often produced by a billing app's embedded reporting engine, which creates documents inside another product.