GST:  why E-invoicing benefits Govt revenues & Businesses

E-invoicing is emerging technology across the globe. It is estimated to save the US treasury $450 billion every year. In India, the introduction of electronic invoicing for B2B businesses is expected to curb tax evasion and promote a highly efficient, digital method of doing business. E-invoicing has become mandatory for medium and large firms for their business to business transactions.

With e-invoicing, the moment an invoice is made, it will be uploaded to GSTN portal where pre-validation will be done and a unique number called IRN (Invoice Reference Number) will be issued. The transactions are sent as real-time, online information to the government and serve as proof of exchange. 

Under this system, invoices must be submitted to the GSTN portal. The data will then be authenticated for further use in the GSTN. For example, once a unique IRN is issued, it becomes a tax invoice & can be shared with the recipient, and it can be collated for filing returns. E-invoicing allays concerns of tax authorities and benefits business in many ways.

Manual bill books and accounting software will be dispensed with or radically altered. Medium-sized businesses may prefer to buy tried and tested software rather than undergo additional staff training or hire a professional advisor (which are in short supply!). Organizations that have automated e-way billing will now have to interface with the IRP portal rather than the E-way bill portal so that an IRN is issued. An upgrade to the software will be needed to capture the IRN number in the databases.

Introduction Link

• E-invoicing requires the submission of business invoices to the GST portal. Likewise, E-way bills need to be input on the E-way portal before goods are transported. Businesses would prefer to automate the process for transferring the invoices from their invoice generating software.
• Invoice Registration Portal assigns an ID to each invoice, which facilitates data transfer on to the GST and E-way portals. A single point data entry into the electronic software will allow data to flow across different portals with the help of an IRP.
• All accounting software must follow the PEPPOL standard, the most common global standard for invoice generation.
• Businesses do not need to manually fill out GST returns. In the new system, GST ANX-1 will take the place of the GSTR-1 return.
• The electronic invoicing will be mandatorily implemented from 1 April 2020, for taxpayers with turnover over Rs 100 Crore. The aggregate turnover will include the turnover of all GSTINs under a single PAN, across India.

How will Electronic invoicing benefit businesses?

• E-invoice resolves and plugs a major gap in data reconciliation under GST to reduce mismatch errors.
• E-invoices created on one software can be read by another, allowing interoperability and help reduce data entry errors.
• Real-time tracking of invoices prepared by the supplier is enabled by e-invoice.
• Backward integration and automation of the tax return filing process – the relevant details of the invoices would be auto-populated in the various returns, especially for generating the part-A of e-way bills.
• Faster availability of genuine input tax credit.
• Lesser possibility of audits/surveys by the tax authorities since the information they require is available at a transaction level.

How will E-invoicing curb tax evasion?

• Tax authorities will have access to transactions as they take place in real-time since the e-invoice will have to be compulsorily generated through the GST portal.
• There will be less scope for the manipulation of invoices since the invoice gets generated prior to carrying out a transaction.
• It will reduce the chances of fake GST invoices and the only genuine input tax credit can be claimed as all invoices need to be generated through the GST portal. Since the input credit can be matched with output tax details, it becomes easier for GSTN to track fake tax credit claims.
• Curbing tax evasion and increasing tax collections for the government may ensure that the government will not increase GST rates any further.