Electronic invoicing or e-invoicing is the initiative of the Indian government to transform how businesses interact with each other in the long run. Mandated for high-turnover companies from 1st October 2020, the system completes one year of its implementation today, with more businesses joining the ecosystem.
The latest roadmap
e-Invoicing was mandated to businesses with an annual turnover of more than Rs.500 crore from 1st October 2021. After that, it encompassed businesses with a yearly turnover of more than Rs.100 crore from 1st January 2021. Currently, GST-registered businesses with annual turnover above Rs.50 crore must use e-invoices for their Business-to-Business (B2B) sales from 1st April 2021. Sooner or later, it shall also cover businesses with more than Rs.5 crore as annual turnover.
The e-invoicing vision
e-Invoicing was launched to plug gaps while reconciling data under GST. It aims to curtail fraud of tax evasion, an issue that India has long suffered. It allows taxpayers to claim genuine input tax credit faster and lays a path for automating GST return filing. Additionally, the data interoperability between different business and tax compliance ecosystems is the crowning stroke.
How this works
The GST Network verifies and authenticates such reported B2B invoices and debit-credit notes by allocating unique Invoice Reference Numbers (IRN) and signed Quick Response (QR) codes. Sellers can issue digitally signed e-invoices to their buyers and find these details automatically declared in their GSTR-1 return.
A journey that has been a game-changer for Indian businesses
In the one year of the Indian e-invoicing system, certain apparent benefits are noticeable for the onboarded businesses and government. The system has decreased taxpayers’ efforts in preparing the B2B sales reporting tables of the GSTR-1. Only validated e-invoices are processed and updated on the GST system. It reduces tax evasion and leaves less scope for errors in the GST returns.
The generation of e-way bills has become much quicker and convenient as the Part-I details of the e-way bill can be auto-filled on a real-time basis for its generation. Moreover, the QR code on every e-invoice helps tax officials easily verify invoices during the transit of goods offline.
Additionally, the e-invoicing system helps streamline invoice management. It improves efficiencies in accounts receivables management of an organisation, together with reducing the audit risks. All these perks of e-invoicing prove why e-invoicing can be a potential game-changer for Indian businesses.
Hiccups and the much-needed push
e-Invoicing necessitates businesses of all sizes to embrace digitisation. Such businesses must adopt tech-based integrated billing, accounting, and tax filing solutions to ensure 100% compliance with the regulatory requirements to reap the benefits.
However, the true potential may be realised when all businesses, including small-sized ones, join this ecosystem at a much faster pace with a clearly defined roadmap from the government.
Small businesses continue to heavily depend on pen and paper for invoicing, which is a serious concern to the tax department finds. Several cases of fake invoicing and fraudulent input tax credit claims continue to be reported. The companies illegitimately avoid discharging taxes in cash. Moreover, the conventional invoicing system poses transcription errors and duplication risks, causing a ripple effect on accounting and tax returns.
The taxman has recently issued GST Circular number 150/2021 in September 2021. It clarifies that physical invoices and debit notes while transporting goods are not needed where e-invoices are in use.
Significant steps to be taken by businesses
The e-invoicing system acts as a step to prevent such mishappenings. It allows businesses to communicate via their e-invoicing systems. Business owners must build on their digital literacy for their teams and look at investing in technology. The government may have to extend colossal support in smooth implementation for every business through dedicated schemes and pocket-friendly tools.
Hidden benefits galore in e-invoicing
Once the small businesses board the e-invoicing system, they can navigate their business options in the mainstream market in no time. Also, it allows them to conveniently operate from tier-II, tier-III cities and other remote areas. Invoice discounting and digital lending in India will get a big push if e-invoicing expands to cover small businesses and MSMEs.
Businesses can confidently approach large-sized enterprises with the process becoming transparent. Larger enterprises should also encourage their customers to embrace digital invoicing practices to make e-invoicing a massive success in India.
Several countries have set the pace of adopting and implementing e-invoicing, like Saudi Arabia. The gulf country has announced timelines for implementing e-invoicing for all its taxpayers from 4th December 2021. India must also accelerate its adoption of the e-invoicing system to touch new highs in the global competition of ease in doing business.
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For any clarifications/feedback on the topic, please contact the writer at annapoorna.m@cleartax.in
Annapoorna, popularly known as Anna, is an aspiring Chartered Accountant with a flair for GST. She spends most of her day Singing hymns to the tune of jee-es-tee! Well, not most of her day, just now and then.
