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E-Signatures in Invoice Compliance

  • Aug 6, 2020 | Divita S Gupta

E-Signatures in Invoice Compliance

Electronic invoicing or e-invoicing under the Goods and Services Tax is likely to be rolled out in October this year. With just less than a quarter left to acclimatize to this new system that is expected to make indirect tax management much more streamlined, taxpayers and businesses need to know just about everything concerned with e-invoicing. One of the important aspects of e-invoicing will be the use of digital signature certificates or e-signatures to authenticate invoices. This article outlines the role and benefits of e-signatures while maintaining invoice compliance.

For starters, an e-signature is nothing but an authorised signature in a digital format and is one that is made by the provisions under the Information Technology Act.

Why is an e-signature important?
An e-signature is important because it serves as a digital seal of authenticity and is a common practice in countries that have already adopted e-invoicing. An e-signature is important mainly because it is a mandated compliance requirement (in some countries) and helps set a standardised practice for a business’s operations anywhere in the world.

What are the benefits of the e-signature?

Secure
An e-signature helps reduce the risk of duplication or alteration of an invoice as it will be deemed legitimate only after authentication. Authorised signatories are provided with passwords and codes to verify their identity and approve signatures. Additionally, e-signatures are time stamped further reducing the risk of fraud.

Validity
An e-signature holds ground in case of legal proceedings. Because it is time stamped it also makes it easier to archive thereby improving audit compliance. An e-signature also holds validity into the future. ETSI PDF Advanced Signatures with its eIDAS requirements are valid well into the future due to its long-term signature formats.

Going paperless
Businesses are becoming environmentally conscious and most of them prefer to avoid paper-based signatures to keep up with their corporate social responsibility goals.

Cost efficient
Unlike popular belief, integrating e-signatures into business operations is relatively inexpensive. In fact, the benefits are tenfold making e-signatures an ideal practice for small as well as larger organizations.

How will the e-signature be applicable under the new e-invoicing system?
Under the e-invoicing system, the taxpayer will require their supplier to upload the JSON of the invoice onto the Invoice Registration Portal. The IRP will also sign the JSON if it is deemed valid by using their private key.

Once the IRP signs the complete invoice, the JSON payload will bear an invoice registration number or a hash. If the signed JSON is tampered with, then e-invoice will become invalid and the digital signature will fail.

E-signatures might be an optional parameter under e-invoicing initially but are likely to be a mandated process in the near future. It's best if organizations adapt to this practice from the starting line.


Avalara helps businesses of all sizes get GST return filing, e-way bill generation and e-invoicing right with cloud-based GST compliance solutions in India. Goods and Services Tax (GST) rates, rules, and regulations change frequently. Although we hope you'll find this information helpful, this blog is for informational purposes only and does not provide legal or tax advice.
Avalara Author
Divita S Gupta
Avalara Author Divita S Gupta
Divita has served as a writer and editor for top financial services organizations in India. She has written on topics like mutual funds, insurance, taxes, SME financing for globally recognized banking and financial organizations including ICICI, Aditya Birla Group, News Corp. With a Masters in Business Administration from Symbiosis International University, she currently owns a small business in Mumbai.

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