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How will e-invoicing impact mid-market companies?

Livemint |
Rahul Aggarwal , Partner
Indirect Tax
|

12 December 2020

Commencing 01 January 2021, businesses with turnover greater than ₹100 Crore would come under the ambit of e-invoicing compliances.

E-invoicing being a new requirement under the GST law involves a high-level integration between taxpayer’s ERP software and government portals such as IRP, e-waybill and GSTN. Commencing 01 January 2021, businesses with turnover greater than ₹100 Crore would come under the ambit of e-invoicing compliances. Under e-invoicing, B2B invoices are validated on a real-time basis at the NIC Portal and a unique IRN is assigned to each document.

E-invoicing being a new requirement under the GST law involves a high-level integration between taxpayer’s ERP software and government portals such as IRP, e-waybill and GSTN. Commencing 01 January 2021, businesses with turnover greater than ₹100 Crore would come under the ambit of e-invoicing compliances. Under e-invoicing, B2B invoices are validated on a real-time basis at the NIC Portal and a unique IRN is assigned to each document.

The process of e-invoicing requires a technological handshake between the taxpayer system and the government portal. This ideally requires an up-to-date IT infrastructure with equal emphasis on upkeep and maintenance of the same to ensure an error-free and timely generation of e-invoices. It has been seen that mid-market companies generally do not focus on robust and up-to-date IT infrastructure and streamlining various internal reporting processes.

Before e-invoicing, the reporting requirements were generally triggered at the end of the month, and hence a relaxed approach was followed due to the time gap between a transaction and its reporting to the government. Now, with the introduction of e-invoicing, there is a requirement for real-time reporting of all invoices with no option to modify the invoices in case of any errors or omissions. This coupled with inadequate IT infrastructure could prove to be a big challenge for mid-market companies.

Therefore, the time and effort that these businesses would need to invest in IT, compliances and processes would significantly increase. Some of the key processes that would substantially change from a business perspective would be:

  • Identification of transactions which attract e-invoicing
  • Availability of ITC would depend on timely issuance of correct e-invoices
  • Management and upgradation of the IT infrastructure
  • Accounting system updation/ customisation to have required interface with the government portal
  • Data sanitisation and quality control while collating the transactional and master level data

With frequent amendments to the GST laws, mid-market companies need to stay abreast of the changes and be agile to adapt to the changing reporting requirements. The introduction of e-invoicing would require a strong focus from businesses on establishing and following adequate processes which are implemented through a robust IT infrastructure to enable them to compete, without worrying about tax and regulatory requirements.

Source: https://www.livemint.com/news/india/how-will-e-invoicing-impact-mid-market-companies-11607760915889.html