The new invoicing system was introduced in phases. On October 1 2020, e-Invoicing was made mandatory for businesses with an annual turnover of more than INR 500 crores. In the second phase, businesses with an annual turnover of more than INR 100 crores had to implement the e-Invoicing mechanism.
Under this system, B2B invoices of notified businesses/taxpayers must be electronically authenticated through the common Invoice Registration Portal (IRP). Taxpayers do not have to raise invoices through the IRP. They have to generate/raise invoices on their internal accounting system/ERP in the notified format and then share the invoice with the IRP. This IRP will validate the details in the invoice and send back a digitally signed e-Invoice with the Invoice Reference Number (IRN) and Quick Response (QR) code.
With the introduction of the e-Invoicing mechanism, Businesses faced teething problems as their internal systems/ERPs needed to be modified to meet the Government’s requirements. ERP providers had to consider the required changes to help their users adopt the new standardized format of invoices.
The main aim of introducing this new invoicing system was to ensure that all taxpayers’ invoices are standardized and uniformed. However, every coin has two sides. In this article, let us look into the pros and cons of the e-Invoicing system.
Advantages Of E-Invoicing
- With the introduction of e-Invoicing, the invoices issued by all are now completely inter-operable. This eliminates transcription and other errors.
- The need for issuing invoices in multiple formats (one for GSTR-1 and the other for the e-Way bill) is eliminated.
- This mechanism helps in the reduction of tax evasion by providing a complete trail of B2B invoices.
- Suppliers can track the invoices issued in real-time.
- System-level matching of Input Tax Credit (ITC) and output tax is enabled. This allows faster availability of Input tax credits.
- Eligible taxpayers have to report invoices just once. In other words, once a taxpayer uploads the invoice on the Invoice Registration Portal (IRP), the details are shared automatically with the GST and e-Way Bill portal. Because of this, details in GSTR-1 and Part-A of Form EWB-01 are auto-populated. This reduces manual intervention to a large extent. In turn, it will reduce the number of errors caused because of the manual input of data.
- Since Part A details in Form GST EWB-01 are auto-populated, the efforts to generate EWBs are reduced. Post this; the registered person has to enter only the Part-B details to complete the EWB generation process.
- The signed e-Invoice is digitally shared with the buyer (via email). Thus the buyer can reconcile his purchase order with the e-invoice and accept or reject it in real-time.
- The feature of real-time reporting leaves no scope for invoice manipulation. This further reduces the scope for creating fake GST invoices.
- Furthermore, only those invoices with genuine ITC claims can be dealt with. Tax authorities can also easily track phoney input credits as the ITC and output tax details are readily available.
- Under the e-Invoicing rules, suppliers have to mandatorily add the QR code received from the IRP in the invoice shared with the recipient. This QR code can be scanned ‘n’ number of times, and the invoice can be generated again even if the taxpayers misplace the original invoice.
Disadvantages Of E-Invoicing
- As of today, the new invoicing system covers only B2B invoices. B2C invoices are yet to be brought under the purview of e-Invoicing. A lot of frauds are reported when B2C invoices are involved. This is because there is no ITC element involved.
- IRP does not support the archive option. As per the rules, the IRP does not store invoices for more than 24 hours.
However, if these and other operational hurdles are tactfully handled, a massive GST ecosystem change can be expected soon.