By Kapil Rana, Founder & Chairman, HostBooks Ltd
In business, management is everything, the better you manage your business the more you can focus on productively. The purpose of e-invoicing is pretty much the same. It helps businesses run efficiently by simplifying the invoices management and bringing transparency to the overall system. With the same purpose, the government has already mandated the electronic invoice system in India for businesses with an annual turnover of Rs. 500 crore from October 1, 2020, and for businesses with turnover Rs. 100 crore from January 1, 2021.
The introduction of the e-Invoicing system has significantly improved compliance procedures by revamping the whole tax ecosystem and curbing tax evasion in the operations of direct and indirect tax ecosystems. According to the data published by GSTN, around 39.81 crore e-invoices have been registered by 88,000+ suppliers on the Indian government’s GST portal within the first six months of its implementation. On 31st March 2021, 37.42 lakh of e-invoices were generated, which is the highest for a single day in the last six months.
There is no denying that the published data is just the beginning of the new era of the e-invoicing regime. With the passing months, a huge number of businesses under the ₹50-100 crore segment are likely to join the new invoicing system. In fact, there is the possibility that the government could extend the e-invoicing system to small businesses whose turnover is less than ₹50-100 crore in the upcoming years as e-invoicing is one of the major sources of tax revenues in India.
The new e-invoicing system will benefit businesses and the economy in the long run
With the implementation of the e-invoice system, one thing is quite clear that it will be a win-win situation for both businesses and the country’s economy. The fraud, whether it is internal or external, can plague businesses with the decrease of revenue and economy with tax evasion. Fake invoices or duplicity is a nuisance in the tax compliance system, which is significantly affecting the government’s revenue collections. Taking all into consideration, the introduction of e-invoice is a brilliant solution for solving all these problems and boosting revenue collections.
E-invoice records payments and other monetary operations, which make it easier for business owners to monitor and trace every transaction made within the organization. That means, there is no way an employee can commit fraud or a taxpayer can evade the tax. Also, e-invoices are created with digital technology with the company’s digital seals and certificates, which reduce the chances of document forging or duplicity.
E-invoicing enables real-time tracking of invoices generated by a supplier, which makes faster availability of input tax credit (ITC). It also reduces the chance of data manipulation as in the new system; the e-invoices will be generated before carrying out a transaction. This will further reduce the chances of fake GST invoices, therefore only genuine ITC can be claimed. As the input tax credit and output tax details are easily available on the invoice registration portal, tax authorities can easily track fake input credits.
The generation and use of invoices are mandatory for all B2B transactions. That means B2B e-Invoicing obligations will be effective in India from now on. This has applied from January 1, 2021, to companies with an annual turnover of more than 100 crores, and after three months, on April 1, 2021, the obligation has applied to all B2B transactions. Under this, businesses whose turnover exceeds 100 crores have to report the invoices just once and get them authenticated by the Invoice Registration Portal (IRP). IRP validates the invoice and issues a unique Invoice Reference Number (IRN) and meanwhile updates the data on the portal that will be auto-populated to the GSTR-1 return.
With e-invoicing, one-click e-way bill generation is possible as the taxpayers have to update just vehicle details on the portal, and it will generate an e-way bill with auto-filled information. Generating e-invoice or e-way bills with premium accounting software is in fact easier as they offer more customized options.
E-invoicing can fully automate the process like invoice tracking, routing, and approval. This makes the invoice process faster that facilitates on-time payment, avoids late fees, and discovers ways to capture contractually negotiated discounts. Once uploaded on the GST portal, the details of the e-invoice will be shared with the buyer as well on his/her email ID. This will help buyers improve account reconciliation, cash management, and dispute handling.
Upon the e-invoice generation, the details will be auto-uploaded on the e-invoice registration portal, which will facilitate multi-tasks like e-way bill generation, TDS, TCS collection, etc. After authentication, all invoices get transferred to the GST portal and e-way bill portal in real-time. This eliminates the need for manual data entry and the possibility of data errors.
E-invoices generated in a standardized format can easily be synced or read by different software. This facilitates business operations without interruption i.e. interoperability. Interoperability enables suppliers to send invoice details in the exact same electronic format to the buyers. It also makes it easier for suppliers to set up and maintain various e-invoice formats.
The Path Ahead
The e-invoicing system is a vital step to move from a traditional economy to a digital economy. The emerging digital economy can bring various new opportunities for everyone in the country. Also, with this, there will be a decrease in tax evasion and an increase in tax collections that will ensure no increase in GST rates any further. Also, greater ease of e-invoices generation for every document like debit, credit notes, or vehicle invoices, will improve the overall business efficiency.
Good article about E-invoicing, it will be helpful for organizations to choose wisely depending upon their needs.