On September 29, 2019, the GST Council approved the introduction of ‘ e-invoicing ‘ or ‘ electronic invoicing ‘ to report business-to-business (B2B) transactions to the GST system. From January 1, 2020, the new system will be introduced. Previously, there was no generic e-invoice model in India, but the latest GST return set a standard to meet the business needs of traders and industrial entities. E-invoicing is the submission on a common portal of a standard invoice that has already been produced. Thus, multi-purpose reporting is automated with a one-time input of invoice details.
What is E-Invoice?
If an invoice on the computer or Point of Sales (PoS) machine is generated by software, then does it become an e-invoice? Is e-invoice as a system that allows taxpayers to generate invoices centrally? When discussing e-invoice, many such questions are raised.E-invoice does not mean generating invoices from a tax department’s central portal, as any such centralization will result in unnecessary restrictions on the way in which trade is carried out. In fact, taxpayers have different requirements and expectations that cannot be met through one software that generates e-invoices from a portal for the entire country. Invoice generated by each software may look more or less the same, but another computer system cannot understand it even though business users fully understand it.
The key objective behind the E-Invoice System
The intention behind the e-invoicing problem is to reduce manual data entry errors. Since the machine regulates the e-invoicing system, the e-invoices of sellers, banks, agents, or anyone else involved in trading will be analyzed and read. As part of the Return, the e-invoice will also provide details to the GST system in addition to a seamless record of transactions.
Benefits of E-Invoicing
- Invoice addresses and fills a significant gap in GST information reconciliation to minimize misalignment.
- E-invoice resolves and mends a flaw in the GST data reconciliation process in order to reduce flaws.
- Another software can read e-invoices created on one software, allowing interoperability and helping to reduce errors in data entry.
- E-invoice addresses and mends a flaw in the GST information reconciliation process in order to reduce flaws.
- Get real-time invoice tracking generated by the various suppliers with e-invoice.
- As tax authorities receive all the necessary transaction-level information via e-invoices, audits/surveys must not be deterred.
- Any program will read the e-invoices that were generated on one application, thereby allowing interoperability.
- E-Invoice cannot be partially canceled; it has to be fully canceled.
- E-Invoice has the option of canceling the invoice within 24 hours of IRP registration. Any cancellation after 24 hours could not be made via IRN; before filing the return, taxpayers must manually cancel the same on GST Portal.
The e-invoice mechanism is expected to be implemented on a voluntary basis in stages from 1 January 2020. It will be phased enforced.
How will E-invoicing curb tax evasion?
It will help in curbing tax evasion in the following ways:
- Tax authorities will have access to transactions as they occur in real-time as the e-invoice must be generated compulsorily through the GST portal.
- There will be less room for invoice manipulation as the invoice is created before a transaction is performed.
- It will reduce the chances of fake GST invoices, and it is possible to claim the only genuine input tax credit as all invoices need to be created through the GST portal.
- Since the input credit can suit output tax data, monitoring fake tax credit claims becomes easier for GSTN.
