e-Invoicing under GST is live & in the working for large scale businesses. So far, it has achieved its objectives & proved its usefulness for both businesses & the Government. The Government will have a closer eye on business transactions that will eventually reduce the tax frauds that lead to massive revenue leakages. Which may be a reason the Government is considering expanding the span of e-Invoices on other & small businesses as well. Learn more about the effects & expansion of e-Invoicing on businesses through this informative blog.
e-Invoicing System under GST for Turnover of Rs. 500 Crore & more
e-Invoices or electronic invoices are electronically validated & signed documents that are generated in a standard format by accountants of businesses for carrying out business transactions. In other words, e-Invoicing is mostly applicable to businesses related transactions only.
Although, businesses will also have to repost certain other documents on the official Invoice Registration Portal as well-
- B2B Invoices
- B2G (Business to Government) Invoices
- Export Invoices
- Reverse Charge Invoices
- Credit Notes
- Debit Notes
- QR Code generation for B2C Invoices (Postponed to a later date, possibly December 2020)
Earlier the Government had planned to generate QR Codes for B2C Invoices as well but the same is now postponed until the end of this year, which is December. Under e-Invoicing solution, businesses need to generate e-Invoices in their billing system in the SCHEMA Format & then upload them on the IRP (Invoice Registration Portal) for validation.
The IRP will validate e-Invoices for errors such as missing mandatory fields, the party details, invoice value, tax value, etc. Upon successful validation, the IRP will digitally sign the e-Invoice & assign a unique IRN (Invoice Reference Number) & QR Code for the e-Invoice.
Upon validation, the e-Invoice will be considered valid & suitable to carry out transactions. Invoices generated in any other format or without an IRN & QR Code shall be considered void by the GSTN & the transactions will be deemed unethical. For now, e-Invoicing has been implemented only on large businesses having an annual aggregated turnover of more than Rs. 500 Crores. The Finance Department of our country has hinted towards expanding e-Invoicing to other businesses as well, soon.
Working of e-Invoices in Businesses
Earlier, invoices are made in random formats & shared with the dealers or customers as hard-copy or soft copy as per the convenience of both the parties.
There was too much manual work in the previous system-
The accountants had to create the invoices manually, share them with the recipients, enter the details in the ERP, furnish the invoice details in the GST Return Filing, & make e-Way Bills using the invoice details.
All the above is repaired in the e-Invoicing era. We have mentioned the changes that e-Invoicing has brought in GST, below-
- Format- CBIC has already drafted & modified recently, a new universal invoice SCHEMA format that all the taxpayers will have to follow. (Including the e-Way Bill detail section for generating both parts of the e-Way Bill)
- Electronic- Since e-Invoicing will take place on desktops, most of the invoice-sharing & storage will be in the form of soft-copy, unless required otherwise.
- Digitally signed & validated- The e-Invoices will be 100% authentic because it will be validated & digitally signed in real-time
- Data auto-population- The IRP will share the e-Invoice data with the GST portal & the details will auto-populate in your GST returns.
- e-Way Bills- The IRP will also share the e-Invoice data with the e-Way Bill Portal, & part A of your e-Way Bill will be auto-populated from the same.
- Recipients- The IRP will also share the e-Invoices with your recipients in real-time this will help you to enhance the cash flow of your business.
Status of e-Invoicing in the Indian Market
e-Invoicing has completed a little more than a month in the Indian Market & in the first week itself, around 70 Lakh (approx.) Invoices were generated on the IRP by businesses. e-Invoices are doing well in India so far. In fact, e-Invoicing can be one of the most successful limbs of e-Invoicing & can be the basis for other future-dated provisions as well.
The e-Invoicing system is a very well thought & organized system of invoicing the B2B transactions, which is implemented very successfully so far. So well that the Government even intends to spread e-Invoicing further to smaller businesses as well.
The 2 main objectives of e-Invoicing under GST are-
- Taming Tax Evasion
- Making GST & compliance easier for businesses
With its strict rules & firm build, e-Invoicing will help the government immensely in enhancing revenue generation by eliminating tax evasion.
Additionally, e-Invoices have made a big difference in the working of businesses in the GST context, with the unified Format, data auto-population & sharing with the recipients. With all this & more, e-Invoicing has achieved its second objective of making GST simple for businesses as well. So, for now, it can be said that e-Invoicing is a success in the Indian Market & as per the movement of the Government towards improvement, it will continue to get better.
Is the government planning to spread e-Invoicing to all Businesses?
The Indian Finance Secretary Mr. Ajay Bhushan Pandey shared the views of the GST committee on the success of e-Invoicing in India. The committee is considerably satisfied with the performance of e-invoices & is thinking of even expanding e-Invoicing to other large, medium & even small enterprises in the near future.
e-Invoicing may be open to businesses that have an annual aggregated turnover of Rs. 100 Crores and more, from January 2021. And by April 2021, e-Invoicing will be mandatory for all businesses (except composition taxpayers), as per the Finance & Revenue Secretary.
He also added that e-Invoicing will fully replace the classic invoice & e-Way Bill system. With e-Invoicing users will not have to generate separate e-Way Bills for e-Invoices in the future. Here GSP like GSTHero eInvoice software helps businesses for e-Invoicing compliance.
e-Invoicing will also affect the small businesses as the invoice data will auto-populate their returns & they will only have to pay the taxes (This will apply only if MSMEs deal with large businesses that are liable to e-Invoicing).
Despite the success, experts think that it may be too early to implement e-Invoices in smaller & medium-sized businesses. Considering the pandemic these businesses have shown the signs of utter vulnerability & adding any further compliance burden on them may not yield as good results as it did with the Big Corporate Sharks.
The government can further make a few changes to e-Invoicing to make it simpler for medium & small businesses, as they may not have the relevant resources to comply with the strict provisions of e-Invoicing such as the SCHEMA Format.
After the early success of e-Invoicing, it is clear tet e-Invoicing will stay & even expand to the rest of the businesses as well. It becomes important for taxpayers to find easier ways of complying with e-Invoicing, more sooner than later.
GSTHero is a government authorized GST Suvidha Provider which is also the best e-Invoicing Software in the market, stacked with features to make e-Invoicing way simpler to understand & to operate.
Here is why e-GSTHero is the perfect match for your business-
- Simple integration
- Data Security
- Direct integration with the IRP
- Scalable for high data volume
- Highly Automated- requires minimal human input
- Reduced Errors with automation
- Enhanced productivity of your accounts team
- Compliance in real-time
- Bulk Operations- Generate, cancel, print, validate & edit e-Invoice in bulk within the ERP
- Achieve 100% Compliance with e-Invoicing