By Kapil Rana, Founder & Chairman, HostBooks Ltd
Digital India and one nation one Tax is the essence of the time. E-Invoice is one of the prominent footprints towards this. As the concept – E-invoice is created, sent, processed consumed electronically. It is digital during its whole life cycle, from when it is created by the issuer until it is processed and consumed by the user. E-invoicing is an integrated solution that makes a fully automated flow from the ERP system of one organization to another directly.
By providing the companies with a mechanism by which it would become necessary for them to produce ‘e-invoice’ for all sales on the government GST site, the GST officers have come to a conclusion. From October 1, 2020 onwards, e-Invoicing has been made mandatory for taxpayers with annual turnover above Rs. 500 crore.
The organization will continue to generate invoices on its own ERPs, accounting software or any of the billing software, as per the new operating model, in their view. For the production of the e-Invoice, the taxpayer will be responsible. It is reported to the GST Invoice Registration Portal (IRP) once an invoice has been produced. The IRP will verify the invoice details and establish, together with the QR code, a unique invoice reference number (IRN) and digitally sign the document. Along with the IRN & QR codes, the IRP would return the taxpayer’s e-invoice.
E-invoicing Key Challenges under GST
If an invoice is found not registered in the IRP, the invoice will not be treated as a legitimate tax invoice for all GST-related matters and a penalty of Rs. 10,000 will therefore be incurred for each instance of non-compliance.
The transportation of goods without a legitimate tax invoice can be a cause for the detention of goods and vehicles and fines will also be levied.
If a legitimate tax invoice is not available, consumers may refuse to accept and/or pay products because this would affect the eligibility of the recipient to receive ITC benefits.
In addition, if the IRN is absent, the government plans to introduce a check that will prevent the generation of an e-way bill.
Benefits of e-invoicing framework
Benefits of e-invoicing for taxpayers
• Real-time invoice tracking: E-invoicing makes it possible to track invoices prepared by a supplier in real-time. This allows the input tax credit (ITC) to be made available more easily.
• One-time reporting of B2B invoices: A taxpayer has to record the invoices one time under e-invoicing and get them authenticated from the GST portal. The data will be auto-populated into GSTR-1 upon authentication. This eliminates the manual reporting of returns under GST.
• Easy e-way bill creation: E-invoicing makes the e-way bill simple to produce as the taxpayer only has to update vehicle data. The data in Part-A of the e-way bill will be auto-populated from the authenticated GST portal e-invoice.
• Helps buyers: Once submitted to the GST authentication site, the e-invoice will be exchanged with the buyer as well as the e-mail ID indicated on the e-invoice. This will help the customer reconcile his purchase order with the e-invoice and accept/reject the invoice on an e-invoice as well.
• Reduction of data entry errors: Under the e-invoicing scheme, the invoice will be sent to a standard repository which will allow multipurpose reporting. At the time of authentication, all invoices will be transferred to the GST and the e-way bill portal in real-time. When filing GST returns, this auto-population will reduce the need for manual data entry and decrease data entry errors.
Benefits of e-invoicing for the Government
• Curb tax evasion: Real-time data access would reduce the reach of invoice fraud as invoices are created prior to a transaction. The spectrum of fake GST invoices would further decrease, resulting in a genuine ITC claim. As the input tax credit and input tax data are readily available, it is easier for tax officials to trace the fake input credit.
• QR code: In order to measure the sum of ITC, the GST invoices are crucial. An invoice that has been released may be lost by an assessee or may require additional copies of the same invoice. The QR code will be of great assistance in such instances. The assessee can produce the invoice any number of times in the PDF format by scanning this code.
• Status of ITC: With the use of e-invoicing, the government will be able to balance input credit and output tax at the system level, ensuring a large reduction in losses due to tax evasion and an overall improvement in tax administration efficiency.
Given the above collection of possible problems that may occur due to non-compliance with the provisions of e-invoicing, it is imperative for companies to speed up the pace and initiate the required improvements in their invoicing process.
As far as industry feedback on the architecture of e-invoicing is concerned, though the government has been very accommodating and accommodative, only time will say how this critical problem is treated. This platform would make it easier to regulate governments in a structured manner, and also provides a number of requirements that promote the international tendering process.
