E-invoicing Aims For a Paradigm Shift In Tax Administration
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In GST, electronic invoice, or e-invoice, is basically the registration of invoice particulars on invoice reference portal (IRP) maintained by the government and obtain the invoice reference number (IRN) with QR code from there against such an invoice. Newly inserted clause 4 in Rule 48 of the CGST Rules 2017 specifies certain specified taxpayers are required to upload invoices particular in Form GST INV-01 and generate IRN with QR Code. Because of the standard e-invoice schema, the exchange of invoice data between buyer and supplier can be done electronically.
Challenges and requirements for e-invoice
As India is focused on technological development, digital economic development including ease of doing business to reduce complexity, improved compliance, curb tax evasion or fraud. Government has introduced a new-invoice system (e-invoice) considering the current technological developments and user behaviors with global trends. Based on the survey and global data in, 2020 smartphone users are increased to approximately six billion and businesses are seeing expansion and new markets at nearly every turn. E-invoice is already implemented successfully in more than 100 countries globally including developed countries such as France, Australia and Sweden etc. So, India is also approaching the new trend. This digital trend is not just providing benefits for users but to governments and tax collection as well. Following are the current challenges which push to bring e-Invoicing into the existing GST system:
- There is no standardization of the invoice, which requires manual entries into the ERP, which could result in transaction error while recording.
- A taxpayer required to upload the same invoices into the GST portal as well as e-way bill portal.
- Carrying multiple copies of Invoice for various purposes.
- Difficulties in data sharing of invoices due to non-standardization.
- There is no option to upload purchase transactions.
- There is no reconciliation of purchase with input tax credit (ITC), which could result in the wrong availment of ITC.
Advantages of e-invoicing introduction and implementation
As government introduced e-invoice to improve ease of doing business and to curb tax evasion/fraud, this new system has various advantages for both government as well as business. Here is the list of advantages of the e-invoicing system:
For the taxpayers
- Standardization of Invoice which brings uniformity into the existing system.
- Sharing of Invoice data from one software to another through the electronic exchange system.
- Invoice generated from one software can be read by others.
- The only generation of e-invoice fulfills other compliance requirements as the same data will be shared with the GST portal (For GSTR-1) and e-way bill portal (For e-way bill).
- No need to carry physical copies or detailed invoice, only QR code embedded with IRN will serve the purpose.
- Reduction in invoice processing cost.
- Less disputes related to invoice as compare to the existing system.
- Improved payment cycle.
For the government
- Elimination of fake invoicing
- Complete trail of B2B Invoice
- System-level matching
Challenges in the implementation of the e-Invoicing system
Yes, e-Invoicing has lots of benefits compared to the existing system, but every change in law or new system brings fear of adaptation of new policies and procedures especially when it comes to record-keeping. No change comes easily, following are the challenges which may face by the taxpayers:
New Infrastructure: Taxpayers must ensure all-time available internet and up-gradation of hardware and software and related staff which dent in the profit of the taxpayer.
Knowledge gap: Implementation and related compliance must require knowledge of the new system, e-invoice schema, GST law changes, e-way bill effect, etc. Taxpayers like in tier II cities and rural areas may face problems related to implementation and knowledge support.
Self-governance: As e-invoice adaptation requires changes in invoice fields, taxpayers shall require to finalize the invoice before submission.
Real-time support: As e-invoice implementation brings lots of change along with new technology adoption, taxpayers may face issues while generating e-Invoice and stuck on related queries.
Role of an ERP or proper software for smooth implementation of e-invoice
The government proposed multiple ways to generate e-Invoice in the future such as API based, mobile app-based, offline tool-based, and GSP based. Currently, the government has released the only API based e-invoice generation facility. As the main purpose to introduce e-Invoice to reduce complexity and increase efficiency in invoice generation and related compliance, ERPs play a vital role in the successful impletion of the e-invoicing system.
ERPs will integrate with the IRP portal using available APIs (i.e. to enable reporting of invoices to IRP and obtain IRN) and provide the facility to generate e-invoice right from the software dashboard without any hassle. Users will continue to use their existing ERPs/accounting and billing software provided they made the necessary changes as required to generate e-invoice, without any shift in new technologies. ERPs will enable e-invoicing along with ancillary services such as canceling e-invoice, getting IRN, search IRN, bulk upload, bulk canceling, management of e-invoicing, etc. These services certainly help users to manage e-invoice smoothly.
Way forward to implementation of e-invoicing in India
Presently, from October 1, 2020 onwards e-Invoicing is mandatory for the taxpayers having an annual turnover exceeding INR 500 crore.
From January 1, 2021 onwards it will become mandatory for the taxpayers having an annual turnover exceeding INR 100 crore and from April 1, 2021 onwards it will mandatory for all the taxpayers for all B2B transactions (as per official sources).