Secure e-Invoicing: Two-Factor Authentication Guide

Data security is an important aspect of sensitive financial transactions and tax-related processes. The National Informatics Centre (NIC) has introduced Two-Factor Authentication (2FA) for e-invoicing and e-way bill systems, recognizing the need for enhanced security.

The aim was to enhance the security of the GST e-invoice system besides username and password. Here, we'll explore the purpose, mandate, modes, registration, and drawbacks of two-factor authentication.

1. What is e-invoicing?

The e-invoice system is designed to verify B2B invoices before they are used on the shared GST portal. In this system, each invoice is given an identification number by the Invoice Registration Portal (IRP), which is managed by the GST Network (GSTN).

The GST portal and e-way bill portal receive real-time transfers of invoice data from the einvoice1.gst.gov.in portal. This means that since the data is sent straight from the IRP to the GST site, there is no longer a requirement for manual data entry when completing the GSTR-1 return or creating part A of the e-way invoices.

2. What is two-factor authentication?

NIC implemented 2FA or dual-factor authentication to enhance the security of the e-invoice system. Enabling this requires users to authenticate their login using a one-time password besides username and password.

The main aim of it is to provide additional safety to businesses' important and sensitive information. Once 2FA has been set up, the e-invoice system can be accessed. For example- The user visits the GST portal and enters a username and password.

The portal prompts you to initiate the second login step. Then, the user must provide a one-time code shared on the registered mobile number. After providing the one-time code, the user is authenticated and granted access to the portal.

Furthermore, businesses can strengthen their security protocols by implementing dependable e-invoice software solutions customized to meet the needs of their business.

3. Mandate on two-factor authentication

The National Informatics Centre has made 2FA mandatory for certain taxpayers using its portals.-

1. It is mandatory for taxpayers with an annual aggregate turnover (AATO) of more than Rs.100 crore starting August 21, 2023. 

2. Taxpayers possessing aggregate turnover under a trust (AATO) of more than Rs.20 crores up to Rs.100 crores from November 20, 2023.

4. Importance of two-factor authentication

Here are several benefits offered by two-factor authentication

Enhanced security:

The e-invoice system has an extra level of security, which is two-factor authentication. This reduces the risk associated with unauthorized access when one submits their OTP as the second form of authentication.

Protection of sensitive data:

E-invoice system regularly indulges in important financial data that needs to be protected. Enabling two-factor authentication provides additional security, restricting the data to authorized users.

Reduction of unauthorized access:

Two-factor authentication restricts access to authorized access, reducing unauthorized access to the system. The users can log in using their username, password, and OTP received on the registered mobile number.

Compliance with security standards:

Several guidelines from regulators and industry standards promote the use of two-factor authentication for systems containing sensitive financial information. Businesses must ensure that they comply with these security standards and regulations, including two-factor authentication for the e-invoice system.

Trust and user confidence:

Implementation of two-factor authentication builds trust and reliability for the system among users. It should be noted that two-factor authentication registration is applicable to both the e-Way Bill system and the e-Invoice system.

5. Purpose of two-factor authentication

Here are the main reasons for implementing this two-factor authentication in the e-invoice system-

Efficiency

Implementing two-factor authentication simplifies the use of complicated systems, making it easy for users.

Robustness

Two-factor authentication contributes to the overall robustness of the e-invoice system so that it remains functioning under disturbances.

Security

The most important objective of implementing the two-factor authentication process is to provide a secure environment for accessing sensitive data within the system.

6. Modes for two-factor authentication

OTP can be generated using different modes; log in to the system by entering any of the OTPs. Here are the three different ways to generate OTP:

SMS

An SMS with your OTP will be sent to the registered mobile number.

On the "Sandes" App

Sandes is a messaging app provided by the government.

Download and install the Sandes app on your registered mobile number to receive OTP in it.

"NIC-GST-Shield" App

The e-invoice system offers an app called "NIC GST Shield" that allows you to generate OTP.

1. You can download and install this app using the link available on the official e-invoice portal.

2. Once downloaded, install and register on your registered mobile number.

3. Make sure the time displayed on the app matches the e-invoicing system.

4. Enter the OTP to proceed with the authentication, which is displayed on the screen.

5. Additionally, OTP can be generated in this app without an internet connection or mobile network.

7. How to register for two-factor authentication?

1. login to the e-invoice system

2. Go to the Main Menu

3. Select two-factor Authentication

4. Confirm the registration

5. Once confirmed, You will need to provide an OTP with a username and password.

The registration process is completely applicable to both the e-Way bill and the e-Invoice system.

8. Drawbacks of two-factor authentication

Dependency on registered mobile numbers

The process of this two-step authentication is fully dependent on the registered mobile numbers because OTP is shared on these numbers. Now, if authorized personnel are unable to access these numbers on time, there is a delay in OTP authentication, leading to a slowdown in the process.

Delayed e-invoice generation

Two-factor authentication requires a one-time password on a registered mobile number for authentication. This process is fully dependent on the registered mobile number, and any delay in accessing this mobile number affects the process of e-invoice generation.

Business disruptions

Timely generation of e-invoices, e-waybills, etc, is essential for smooth business operation. Dependency on registered mobile numbers and delays in OTP verification lead to business disruptions.

As mentioned above, two-factor authentication is essential as a security measure but has its own advantages and drawbacks. While it provides additional security, it also delays the generation of e-invoices due to the dependency on the registered mobile numbers for One Time Password (OTP).

Conclusion

NIC implemented two-factor authentication to enhance the security of the e-invoice system, providing additional security of OTP besides username and password. After its implementation, only authorized users can access the system. The users can select their preferred mode of generating the OTP for a seamless login experience.

FAQs:

Does 2-factor authentication for GST mandatory?

Having the latest update to the GST e-invoice system, all taxpayers with an Annual Aggregate Turnover (AATO) of more than Rs.20 crores must use two-factor authentication, effective November 20, 2023.

Is two-factor authentication mandatory for the e-way bill?

Taxpayers using the e-Waybill/e-invoice System must abide by the statutory 2-factor Authentication (2FA) requirement if their Annual Aggregate Turnover (AATO) exceeds Rs 20 crore.

What is the procedure for two-factor authentication?

E-Invoice system login requires a username and password, but enabling two-factor authentication requires a one-time password beside the credentials, which is sent to your registered mobile number. The purpose of implementing 2FA is to secure a user's access as well as their login credentials.

Is two-factor authentication secure?

An extra layer of security is added to the entire authentication process by making it harder for attackers to access an assessee's account in the event that the assessee's password is compromised.

Nevertheless, 2FA is not necessary if a third-party solution possesses the essential certifications for data security and privacy, such as SSL encryption, SOC-2 audits, and ISO 27001 certifications.

Does GST need two-factor authentication?

No, two-factor authentication is not required in order to access the GST portal. It is now required in order to access the e-way bill and e-invoicing portals.

How can I disable the two-factor authentication on the e-way bill portal?

Using the link "Two- Factor Authentication Registration / Deregistration," you can de-register this facility at any time when it is optional. Once it is mandatory, You will be unable to disable it.