E-Invoice Rejection and Cancellation Processes in Malaysia: Essential Information and guide

In the evolving landscape of digital transactions, e-Invoicing has become a cornerstone for seamless business operations. However, like all processes, errors can occur, necessitating a clear understanding of e-invoice rejection and cancellation scenarios. This comprehensive guide sheds light on what happens when an e-Invoice is rejected or cancelled within the stipulated timeframe, providing a detailed explanation based on e-Invoice guidelines.

Rejection and Cancellation of E-Invoices

Upon validation by the Inland Revenue Board of Malaysia (IRBM), both Suppliers and Buyers are given the flexibility to cancel or reject the e-Invoice within a specific timeframe. This ensures that any discrepancies can be addressed promptly, maintaining the accuracy and integrity of financial records.

Buyer-Initiated Rejection via API

1. Rejection Request by Buyer
   • Timeframe: The Buyer has up to 72 hours from the time of validation to request a rejection.
   • Process: The rejection request is communicated via API and must include the unique identifier of the e-Invoice along with the reason for rejection. Common reasons include erroneous information such as incorrect SST number, business registration number, or any other relevant business-related details.
2. Supplier Notification & Response
   • Upon receipt of the rejection request, a notification is sent to the Supplier.
   • If the Supplier agrees with the reason provided, they must proceed to cancel the said e-Invoice within the same 72-hour window from the time of validation.
3. Outcome if Supplier Disagrees
   • If the Supplier does not accept the rejection request or fails to cancel the e-Invoice within 72 hours, the cancellation will not be allowed post the stipulated timeframe. Any further corrections will necessitate issuing a new e-Invoice, such as a credit note, debit note, or refund note.

Supplier-Initiated Cancellation via API

1. Cancellation by Supplier
   • Timeframe: The Supplier can cancel an erroneous e-Invoice within 72 hours from the time of validation.
   • Process: The request, made via API, must include the unique identifier of the e-Invoice.
2. Buyer Notification
   • Upon cancellation, a notification is dispatched to the Buyer. The Supplier must then issue a new e-Invoice, adhering to the standard process.

Post 72-Hour Adjustments

If the e-Invoice is neither rejected nor cancelled within the 72-hour period, cancellation will not be permitted afterward. Any amendments must be undertaken by issuing a new e-Invoice, such as a credit note, debit note, or refund note.

Practical Example Using API

To better understand how these processes work, consider the following scenario involving Hebat Group (Buyer) and Fresh Food Hub (Supplier):

Scenario: Rejection and Reissuance Process

Hebat Group receives various fresh produce supplies from Fresh Food Hub weekly. Using its ERP system, Fresh Food Hub generates and issues e-Invoices via API in XML/JSON format, attaching a digital signature to validate the invoice's origin. After validation by the LHDN, a QR code containing a validation link to the visual representation of the validated e-Invoice is embedded and shared with Hebat Group.

Upon receiving the e-Invoice, Hebat Group's Finance Manager detects errors in the quantity and pricing for certain products. Within 72 hours, Hebat Group requests a rejection of the e-Invoice via the MyInvois Portal or API, explaining the detected errors. A notification is sent by IRBM to both Fresh Food Hub and Hebat Group.

Fresh Food Hub swiftly contacts Hebat Group's Finance Manager to discuss the errors. After verifying the discrepancies, Fresh Food Hub reissues a revised e-Invoice, repeating the issuing process.

Conclusion

The 72-hour window for Buyers to request an e-Invoice rejection and/or for Suppliers to cancel the e-Invoice ensures a crucial period for both parties to rectify errors. While the flexibility of rejection and cancellation within this timeframe safeguards against inaccuracies, Suppliers and Buyers can still make adjustments post the 72-hour period via the issuance of credit, debit, or refund note e-Invoices. This structured approach enhances the reliability and precision of e-Invoicing, fostering greater trust and transparency in business transactions.