Introduction
The government recently introduced a concept of E-Invoice in the GST eco-system from January 1, 2020. A great forward move taken towards the ease of doing business, which will certainly reduce compliance burden as well as increase business efficiency. Globally E-Invoice is not a new concept, already implemented successfully in more than 100 countries. Don’t go with its name, it is not an invoice which will be required to be generated from Govt. portal rather it will be generated in the same manner as currently generated, additionally it will be reported to Centralized portal where such invoice will be validated and reverted back with invoice reference number along with QR code to the taxpayer.
Change in the invoicing system after GST E-Invoice implementation
GST E-invoice will change the existing invoicing system by adding few new steps and aims to reduce compliance burden, errors in manual processing of invoices, paper use, fake invoices, etc. the government is going standardize the invoicing system.
Currently, Invoice generated by each software may look more or less the same, however, they can’t be understood by another computer system even though business users understand them fully. (For example, an Invoice generated by SAP system cannot be read by a machine, which is using ‘HostBooks’ system) Likewise, there are hundreds of accounting & billing software, which generate invoices, but they all use their own formats to store information electronically and data on such invoices can’t be understood by the GST System if reported in their respective formats. Further, the format of reporting in GSTR-1 and that for the e-way bills are different from the original invoice and are to be done separately. The consignor or transporter must generate his e-way bill by again manually importing the invoices in excel format or JSON.
To cope with these issues the invoicing system is standardized which will no way impact the way the user would see the physical (printed) invoice or electronic (ex pdf version) invoice. There will be changes in the current operating accounting systems to make them available for the E-invoicing facility. This will have a huge disadvantage for Desktop and other accounting systems, which are not integrated with the GSTN Portal. Whereas all these software providers would adopt the new e-Invoice standard wherein they would re-align their data access and retrieval in the standard format.
In other words, users of the software would not find any change, the taxpayer would continue to use his accounting system/ERP or excel based tools or any such tool for creating the electronic invoice as s/he is using today. The required updation will be done by software/ERP providers into their software/ERP.
Benefits of E-Invoicing
1. Better taxpayer services
- One-time reporting on B2B invoice data in the form is generated to reduce reporting in multiple formats (one for GSTR-1 and the other for the e-way bill).
- To generate sales and purchase register (ANX-1 and ANX-2) from this data to keep the Return (RET-1 etc.) ready for filing under New Return. e-Way bill can also be generated using e-Invoice data
- It will become part of the business process of the taxpayer
- Substantial reduction in input credit verification issues as the same data will get reported to the tax department as well to the buyer in his inward supply (purchase) register.
- On receipt of info through GST System as the buyer can do reconciliation with his Purchase Order and accept/reject in time under the New Return.
2. Reduction of tax evasion
- Complete trail of B2B invoices
- System-level matching of input credit and output tax
3. Efficiency in tax administration
- Elimination of fake invoices
Responsibility of generation of E-invoice
Responsibility to generate e-invoice has been assigned to the taxpayers, E-invoicing will be implemented in a phased manner and it is currently applicable to B2B (Invoice/Debit Note/Credit Note), where in the first phase it is optional to the taxpayer from January 1, 2020, to March 31, 2020. In the second phase from April 1, 2020, it will be mandatory to be generated by the registered person, whose aggregate turnover in a financial year exceeds one hundred crore rupees.
Process of the generation of E-invoice
- Step 1: E-invoice will be created by Taxpayers on their own accounting/billing/ERP System
- Step 2: The e-invoice, as prepared, will be reported on Invoice Reference Portals (IRP)
- Step 3: IRP will generate unique Invoice Reference Number (IRN) which will be attached to the e-invoice and the system will digitally sign the same and return to the taxpayer (supplier) as well as the recipient.
- Step 4: The IRP will also generate a QR code containing the unique IRN along with some important parameters of the invoice like GSTIN of supplier and buyer, invoice number, date,
- Invoice value, total tax amount and HSN code of the major item. And the same is to be returned to the supplier.
- Step 5: GST System will then generate a return as well as an e-way bill from this data.
- Step 6: QR code will enable offline verification using the Mobile App.
Refer to the technical flow of e-Invoice generation below:
Conclusion
The GST officers have come over the conclusion that it would be mandatory for businesses (with a turnover of Rs. 100 crores) to generate ‘e-invoice’ for every sale on the government GST portal. Surely, the concept of the GST e-invoice generation system has been taken into consideration to reduce GST evasion and to bring transparency to the tax regime.
