Ever since the concept of e-invoicing was approved by the GST council, the buzz around e-invoicing has gained importance among the business community. E-invoicing is scheduled to be rolled out for large taxpayers having an aggregate turnover of ₹500 crores or more from October 2020.
E-Invoicing or electronic invoicing is a process of validating all B2B & export invoices electronically through a designated portal. The taxpayers would be required to upload the details of each invoice on the Invoice Registration Portal (‘IRP’) and obtain an Invoice Reference Number (‘IRN’) and digitally signed QR code. Post the issuance of IRN and QR code, an invoice would be considered as a valid invoice under GST.
Preparing for e-invoice would entail a 2-pronged approach by businesses. On one hand, a holistic review of existing IT systems needs to be undertaken and at the same time, various processes of businesses need to be modified to ensure that the new tax requirements are adequately met.
Businesses need to first evaluate their current technology setup and review its readiness to cope with and accommodate required changes. They would then need to identify a compatible technology solution basis the business needs (real-time or delayed periodic response). A good technology solution should be regularly updated as per tax requirements as well as flexible to support compliance obligations across jurisdictions.
Once the technology solution is finalised, business processes for day to day activities like supply, cancellation, return, discounts etc. need to be updated to match the reporting requirement from a GST perspective. With e-invoicing, an invoice for supply has to be reported in real-time as opposed to the present regime where the details are uploaded next month at the time of filing of returns. Further, no amendments are allowed, and cancellation post 24 hours are ideally to be done through credit notes only. This reduces the flexibility of the business to deal with issues like amendment or errors while generating invoices. Since several practices would have been ingrained in day to day working, it would be very important to monitor and ensure that the new processes are strictly followed.
Importantly, the staff and relevant personnel need to be trained to handle the solution as well as follow the processes set. This is imperative as any deviations would ideally be noticed only at the time of annual compliances or subsequently in a government audit.
The government’s intention while implementing the e-invoicing system is to improve ‘ease of doing business’ and reduce compliance. Data once provided would be used to complete all compliances and would not have to be resubmitted multiple times and at multiple intervals. With this intention, the government has linked e-invoicing and e-waybill, which is slated to act as a feeding mechanism for monthly compliances.
Businesses may face teething issues in the beginning, however, they would also be on the receiving end of paybacks from this futuristic change which may include reduced government intervention, higher customer satisfaction, lowering of commercial disputes as the authenticated data would be always available to government servers.
Given that we still have few weeks left before the implementation date, companies, where e-invoicing is applicable, should undertake all efforts to implement the new system by 01 October with the help of technology solutions, so that the intended benefits are maximised.
(The article has been co-authored by Rahul Aggarwal, Partner - Indirect Tax and Abhinav Srivastava, Partner - Indirect Tax, BDO India. Views expressed by the experts are their own.)