A B2B invoice issued in India is not an invoice until the tax authority has validated it. For a European CFO used to issuing first and reporting afterwards, this reversal is the costliest one: a subsidiary whose ERP is not connected to the official portal can no longer bill its Indian customers, nor ship goods without risking seizure.
This article is the operational companion to our guide to implementing an ERP in India. It focuses on compliance: the e-invoicing flow, the e-way bill, ERP configuration, the choice between group ERP and local ERP, and consolidation under group accounting standards.
Why India Is a Special Case for a European ERP
Three features set it apart from the other countries we have covered (see Brazil, Mexico or Japan).
Near real-time control. GST (Goods and Services Tax) is a single tax with several rates, but what matters for the ERP is the reporting architecture: invoices are registered on a public portal (the IRP, Invoice Registration Portal) that automatically feeds the returns of both the issuer and the buyer. The tax authority sees the same invoice as you do, before your customer does.
Input tax credit conditioned on your supplier. Your right to deduct depends on what your supplier has reported, not only on the invoice you hold. A supplier who files late or incorrectly blocks your credit.
An obligation per tax entity, not per group. Each GSTIN (GST registration number, one per State where the entity operates) is a compliance unit. A subsidiary present in three States means three registers to maintain.
The E-Invoicing Flow: IRN, Digital Signature, QR Code, Role of the IRP
The mechanism, as described by ClearTax, works as follows:
- The ERP produces the invoice in a JSON format that complies with the official schema.
- The JSON is sent to the IRP by API, either directly or through a GSP (GST Suvidha Provider), an approved intermediary.
- The IRP validates the data and returns an IRN (Invoice Reference Number), a unique 64-character string generated from the supplier’s GSTIN, the invoice number, the financial year and the document type, together with a digital signature and a QR code.
- The ERP prints or archives the invoice with the IRN and QR code, then sends it to the customer.
- The data automatically feeds GSTR-1 (sales return) and the e-way bill portal.
The architectural point to remember: the ERP does not generate the IRN, it receives it. An ERP that numbers its invoice and prints it before the IRP call produces a document with no value. The call must therefore be triggered at invoice validation, with an intermediate “pending IRN” status and handling of return errors (invalid customer GSTIN, missing HSN code, duplicate).
Applicable Turnover Thresholds
The obligation was introduced in stages based on aggregate annual turnover (AATO). According to ClearTax, it now applies to businesses whose AATO exceeds INR 5 crore, for B2B sales and exports. Excluded notably are B2C sales, non-taxable supplies, and certain categories such as units in special economic zones (SEZ), banks, insurers or goods transport agencies.
Two consequences for a subsidiary. A trading subsidiary starting with low turnover may fall below the threshold in its first year, but applicability is determined on the basis of AATO: check with your local tax adviser before skipping the setup. And as soon as business takes off, the switch must be possible without a new project: integrate the IRP API from the initial deployment, even if you do not activate it.
Reporting Deadline
For taxpayers with an AATO of INR 10 crore or more, the GSTN advisory of 5 November 2024, applicable since 1 April 2025, requires invoices, credit notes and debit notes to be reported to the IRP within 30 days of the document date (ClearTax). After that, the portal rejects the registration: a new invoice must be issued.
For the ERP, this means a sanity check on dates (blocking any invoice backdated by more than 30 days), a queue with automatic retry when the portal is unavailable, and a dashboard of unregistered invoices at day 20.
Penalties
According to ClearTax, failing to issue an e-invoice can trigger, under section 122 of the CGST Act, a penalty of INR 10,000 or the amount of tax evaded if higher, and INR 25,000 per incorrect invoice. The risk goes beyond the penalty: an invoice without an IRN prevents your customer from deducting the tax, which is an immediate commercial problem.
E-Way Bill: Goods Transport and the Link with Logistics
The e-way bill is the electronic document that accompanies any movement of goods above a value threshold, set at INR 50,000 per consignment in the standard case, with variations for intra-State transport depending on the State (ClearTax).
Its characteristics relevant to ERP design, from the same source:
- Two parts. Part A carries the consignment data (GSTIN, invoice, value, HSN codes); Part B carries the transport data (vehicle number or transport document). Validity only starts once Part B is entered.
- Distance-linked validity. One day per 200 km for standard cargo.
- Document age. Since 1 January 2025, an e-way bill can only be generated for a document dated less than 180 days ago.
- Penalty. INR 10,000 or the amount of tax evaded if higher, with possible detention of the goods and the vehicle.
The link with e-invoicing is direct: when the invoice is registered first, Part A of the e-way bill can be populated from the IRN, avoiding double entry (Taxmann guide to generating the e-way bill). The correct sequence in the ERP is therefore: invoice, IRN, e-way bill Part A, carrier and vehicle assignment, Part B. The logistics module (order picking, shipping) must wait for the e-way bill before allowing the truck to leave, otherwise the warehouse relies on a manual check.
ERP Configuration: Multi-State GSTIN, HSN/SAC, TDS/TCS, Reverse Charge, GSTR-2B
An Indian localization project involves five configuration workstreams.
Multi-state GSTIN. Each establishment in a State has its own GSTIN. The ERP must link each site (plant, warehouse, office) to its GSTIN, determine the place of supply to choose between CGST/SGST (intra-State) and IGST (inter-State), and handle stock transfers between establishments, which are taxable transactions.
HSN and SAC codes. Each item carries an HSN code (goods) and each service a SAC code. The code determines the rate and appears in the IRP JSON and on the e-way bill. In the item master it is a mandatory field, with a format check at creation: a wrong HSN gets the invoice rejected by the IRP.
TDS and TCS. India also applies withholding taxes under income tax law, separate from GST. The ERP must calculate withholding (TDS) on the relevant supplier payments, for example the withholding on purchase of goods under section 194Q (Tally Solutions), produce the certificates and feed the quarterly returns. Thresholds and rates change with each Finance Act: do not hard-code them, configure them through a section table with validity dates.
Reverse charge (RCM). For certain categories of purchases, the buyer pays the GST. The ERP must identify these purchases, self-assess the tax and open the right to deduction at the right time.
GSTR-2B reconciliation. GSTR-2B is the static statement, generated on the 14th of the following month, listing the tax credits you are entitled to based on your suppliers’ filings. Since 14 October 2024, the Invoice Management System (IMS) lets you accept, reject or hold each document before GSTR-2B is generated (Tally Solutions). GSTR-3B is due on the 20th for monthly filers. The ERP must therefore reconcile posted supplier invoices against GSTR-2B line by line every month and isolate the differences: non-filing supplier, wrong GSTIN, invoice posted in another period. The deadline for claiming credit (section 16(4)) is strict, which calls for monthly follow-up rather than an annual catch-up (ClearTax Advisors).
SAP, Oracle, Dynamics 365: Localizations or Local ERPs?
Group ERPs offer Indian localizations: Dynamics 365 Finance, the India Localization SuiteApp for NetSuite, the Country Package for SAP S/4HANA, or the e-billing function of SAP Business One through a GSP (Agentropic). Their advantage is a single data model with head office. Their limit: the localization follows regulatory changes with a lag in patch release, and the GSP remains an extra contract to manage. Ask the vendor, in writing, for the localization update timeline at the last regulatory change (for example the 30-day advisory): it is the most reliable indicator.
Local ERPs (Tally, Zoho, Marg, Busy) or Group ERP
Local ERPs cover GST compliance natively. According to comparisons published by Busy and Tally Solutions, they handle e-invoicing and e-way bills, and several include GSTR-2B reconciliation.
| Criterion | Group ERP (SAP, D365, Oracle) | Tally / Busy / Marg | Zoho Books / ERP |
|---|---|---|---|
| GST compliance (IRN, e-way bill) | Vendor localization + GSP | Native | Native, depending on plan |
| GSTR-2B reconciliation | Depends on localization, often via third-party tool | Built in (varies by product) | Built in |
| Consolidation with head office | Native | Export / interface to build | Interface to build |
| Internal controls (SoD, audit) | Extensive | Limited | Roles and audit trail |
| Suited to | Manufacturing, high volumes | Small local teams | Services, cloud |
Exact features vary by version and plan: verify them in a demo on your own cases (inter-State transfer, late credit note, export invoice).
Recommendation by profile.
- Trading subsidiary (trading, distribution, modest volumes): a local ERP or Zoho is defensible for compliance, provided a standardized monthly trial balance is pushed to the group. If the group requires tight inventory control, the group instance remains preferable.
- Manufacturing site: localized group ERP. The bill of materials, multi-site inventory and inter-State transfers justify the single data model, and the e-way bill must be wired into shipping.
- Services center (IT, support, back office): compliance mostly concerns SAC codes, export of services and TDS. A lightweight local ERP with monthly consolidation is often enough, and the group’s shared services center architecture can absorb the accounting.
Integration with Group Consolidation: INR, Ind AS and IFRS
Two distinct topics.
Currency. The rupee is the subsidiary’s functional currency. Translation differences flow up into consolidation; the ERP must keep historical and average rates by period. See our guide on multi-currency management.
Accounting standards. India has chosen convergence with IFRS, not adoption: Ind AS corresponds to IFRS with carve-outs and carve-ins (Taxscan). Depending on the entity’s status, the subsidiary may keep its statutory accounts under Ind AS or earlier Indian standards, while your group consolidates under IFRS. You therefore need a group chart of accounts with a mapping table, and Ind AS to IFRS adjusting entries handled in the consolidation tool rather than in spreadsheets. Have your statutory auditors validate the list of differences before the first closing.
8-Point Compliance Checklist
- Qualify the obligation: calculate AATO and confirm with local advisers whether e-invoicing applies to each GSTIN.
- Choose the IRP connection mode: direct API or GSP, with the service contract and expected availability level.
- Configure GSTINs by site and the place-of-supply calculation (CGST/SGST or IGST).
- Make master data reliable: HSN/SAC on all items and services, validated GSTINs for all customers and suppliers.
- Orchestrate invoice, IRN and e-way bill: statuses, retries, warehouse release blocked without an e-way bill.
- Monitor the deadline: alert on invoices not registered before the 30-day limit (AATO of INR 10 crore or more).
- Industrialize GSTR-2B reconciliation and IMS follow-up every month, with a named owner and the 20th as deadline.
- Align consolidation: chart of accounts, exchange rates, Ind AS to IFRS adjustments, closing synchronized with the group.
Common Mistakes and Countermeasures
Numbering the invoice before the IRN. Consequence: invalid invoices and numbering to redo. Countermeasure: a “pending IRN” status and printing blocked until the IRN is received.
Believing the threshold protects the subsidiary forever. Consequence: abrupt switch mid-year. Countermeasure: integrate the API at deployment and monitor AATO every quarter.
Letting the 30 days lapse. Consequence: portal rejection and reissuing invoices. Countermeasure: queue, alerts and weekly review of pending invoices.
Separating logistics from compliance. Consequence: trucks held up, penalties and detention of goods. Countermeasure: the e-way bill gates shipment validation in the ERP.
Reconciling tax credit only at year-end. Consequence: credits lost beyond the section 16(4) deadline. Countermeasure: monthly GSTR-2B reconciliation and supplier discrepancies handled within the month.
Hard-coding TDS rates. Consequence: wrong withholding after each Finance Act. Countermeasure: configurable tables with validity dates.
Further Reading
To compare this approach with other controlled-invoicing regimes, read our guides on Brazil (SPED and NF-e), Mexico (CFDI 4.0) and Japan (Qualified Invoice System). To structure vendor selection, use our 100-point ERP evaluation grid.
Indian regulations change frequently: confirm thresholds, deadlines and penalties with your local tax adviser and the official portals (GST, e-invoice, e-way bill) before any project decision.
