The GST Council decided to introduce electronic e-invoicing in phases voluntarily with effect from 1 January 2020. Under the e-invoicing system, companies will need to generate electronic invoices from the GSTN portal.
E-invoicing will help to restrict the actions of fake taxpayers and to bring down the number of cases of fraudulent nature since the tax authorities will have access to data in real-time.
Why Was e-Invoicing Introduced?
Currently, the invoices generated by one accounting software are generally not readable by another. For example, a computer that uses the ‘Tally’ software will not be able to read an invoice which is generated via SAP software. Additional data entry will be needed at every step when a business stakeholder accesses the information via his/her form of auditing or accounting software.
The additional data entry is cumbersome and expensive, and it is also vulnerable to human errors. Likewise, when invoices are generated by hundreds of people using different third-party accounting systems, a computer may not be capable of capturing the information automatically without human input. Thus, the need for opting a standard data format for the generation of e-invoices arises.
To enhance the ease and speed of doing business, the introduction of a standard e-invoicing system is extremely vital. The goal is to develop machine readability of invoices across different ERP’s.
How Will e-Invoicing Benefit Businesses?
- E-invoicing will help in automating the process of authenticating invoices. With e-invoicing, the overall process will speed up, and costs will reduce. It will put an end to the probabilities of human errors due to manual data entry. Before the implementation of e-invoicing, a lot of fake invoices were being generated, which will now be under the radar as the system gets automated.
- The e-invoicing system will become a part of the company’s business process and practice. A single format across the industry will improve the relationship of banks, investors, and auditors with businesses. The business stakeholders will be able to access the data without first having to convert it to the format they are using. The department is going to provide free accounting software to small businesses who do not have automated accounting software through the Digital India Initiative.
- With e-invoicing, verification of information before the final submission can be done with ease. The system will produce a draft return after uploading the details to the GST system, which can be checked against the actual business invoices to ensure that the accurate data is received. If an invoice has incorrect information or is not related to a buyer, he will be able to reject the invoice. If taxpayers find the required information to be accurate after verifying it, they can submit the final return through the system.
- Inaccurate Input Tax Credit (ITC) claims will result in a substantial loss for the company, and it leads to department notices. The automated system will minimise human errors to a great extent and will ensure accurate ITC is claimed.
With more than 60 countries participating in the programme, the popularity of e-invoicing has spread across the globe. Now, India has made it to the list, paving the way for an efficient tax return processing system that removes data entry errors to a considerable degree.
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Bhavana is a Senior Content Writer handling the GST vertical. She is committed, professional, and has a flair for writing. When away from work, she enjoys watching movies and playing with her son. One thing she can’t resist is SHOPPING! Her favourite quote is: “Luck is what happens when preparation meets opportunity”.