The GST Council, in its 35th meeting, has decided to implement a system of E-invoicing, which will be applicable to specified categories of persons. In the 37th GST council meeting, the standard of new e-invoice mechanism was discussed and approved and the same along with the schemes are published on the GST portal (https://einv-apisandbox.nic.in). The 39th GST council meeting held on 14th March 2020, discussed issues related to various procedures in GST laws relating invoicing, Periodical Return Forms and Refund etc.; subsequently on 21st March 2020 a Notification was issued regarding deferment of implementation of e-invoice. Notification No. 13/2020-Central Tax shall come into force from 1st October 2020, which hereby “notifies registered person, other than those referred to in sub-rules (2),(3), (4) and (4A) of rule 54 of the said rules, whose aggregate turnover in a financial year exceeds one hundred crore rupees, as a class of registered person who shall prepare invoice and other prescribed documents, in terms of sub-rule (4) of rule 48 of the said rules in respect of supply of goods or services or both to a registered person.”
It is very important to understand the advantages, need and limitations for E-invoicing before going to the concepts and process of issuing E-invoice.
Advantages of e-Invoicing:
- Standard reporting and no Duplication: B2B invoices are recorded for once eliminating the need to report the bill in multiple formats and ultimately reducing the chances of errors and duplications. This allows inter-operability.
- Auto-Generation of GST Returns: There will be a proper record of overall Sales and Purchase of a business and as a result, the GST returns will automatically be ready for filing under the new GST system. B2B transaction will be auto populated in ANX-1.
- E-way Bill: The system of generating the E-invoice should replace the e-way bill. From current information E-invoicing will facilitate the easy generation of the e-way bill as the taxpayer will have to update only vehicle details. The details in Part-A of e-way bill will get auto-populated from e-invoice authenticated from the GST portal.
- No Reconciliation: There are fewer chances of data reconciliation between the books and filed GST returns. It will resolve data reconciliation for Sales (Outward Supply) under GST to reduce mismatch errors.
- Real Time: Real-time invoice entry from the supplier’s side will lead to faster processing of input tax credit on the recipient’s side resulting in faster and accurate credit availability to the recipient.
- Curb tax evasion (For Department): Less instance of tax evasion and fraud as the new process asks for real-time data entries. It will lessen the scope of manipulation through invoicing scams.
- Verifying genuineness of Refund (For Department): As the input tax credit and output tax details are readily available for tracing one to one, it becomes easier for the tax officials to track fake input credit. Thereby verifying genuineness of Refund for un-utilised credit will be easy.
Limitations of Current E-invoicing model:
1. The new system facilitates e-invoicing of B2B invoices only and not B2C invoices and Bill of Supply.
2. Maximum number of frauds happen in B2C invoices where question of availment of ITC is not involved hence the basic purpose or advantage of E-invoicing will be fulfilled only after complete implementation for all types of invoicing.
Operating hurdles to be tackle carefully:
The first and major hurdle is the capacity for uploading data should be sufficient and generation of Unique number should be quick. Up to date technology should be used to ensure minimum downtime as the same may impact compliance entirely. Secondly the process should be user friendly and option of Saving (draft), editing before submission should be available to reduce final generation of Unique Number easy.
Author Bio
A lot of those who would be paying GST this time, might be left behind given the pandemic going on currently, Having said that, integrating online functionality to GST reform is one of the biggest step forward in my opinion. A transparency between businesses and the govt is the need of the hour.
~Sanjeev Nanda