What is E-Invoicing and the idea behind E-invoices?
Since as long as it can be remembered, Tax evasion has been a huge concern for the Government, and even after all these years and the multiple steps taken by the Government the issue remains to be fresh and topical.
Tax evasion continues to be an aching nerve for the Government to this day. Even with the Government’s constant efforts against the matter, evaders tend to find new ways to trick the system and dodge taxpaying.
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However, the GSTN is now more serious than ever, and is willing to take severe actions to curb the heavy Revenue Leakage. To tame the increasing number of defaulter taxpayers, the Government has introduced a new term, E-Invoicing.
e-invoicing under GST is a modification of the Invoicing process. The implementation of E-Invoicing was announced in the 35th GST Council Meeting.
E-Invoicing is a System for B2B Invoices, under which the Taxpayers are to authenticate their E-Invoices on a specialized Portal, the Invoice Registration Portal. Invoices, post-authentication will be given an (IRN) Invoice Reference Number and a QR Code.
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The Invoices are to be created in the taxpayers’ billing system, same as the existing system, except in a specified SCHEMA format. Mandatory and optional fields in the Invoices have been specified by the GSTN.
These prepared Invoices simply need to be uploaded in the IRP for authentication. On successful authentication, the IRP will generate a unique IRN and QR Code for the Invoice.
The IRP can also reject the Invoice in case of an error or missing mandatory fields, upon which the user has to rectify those errors and re-upload the Invoice in the IRP.
Invoices without authentication, IRN and QR Codes, shall be considered invalid, and can be levied with penalties.
The scenario before E-Invoicing
The current system of Invoicing is in no way helping the Government to identify Fake Invoicing and Tax frauds, hence the increased cases of Tax theft and Revenue Leakage.
The GSTN is firming their grip around the matter by introducing new rules and laws, some are efficient, some not so much.
In the current System, the Invoices are created by the taxpayers on their ERP and directly filed in the GST Filing, and the Government is left out of the loop. In no way can the Government figure out the fake Invoices.
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To counter this, the E-Way Bill System was introduced. It did bring the Government into the loop since the E-Way Bill is a mandatory document for the movement of consignments worth Rs. 50,000 and more.
But the E-Way Bill was not as effective since several cases of fake Invoices and E-Way Bills started to rise. To this day Thousands of Crores worth of Taxes have been Evaded through Fake E-Way Bills, Fake Invoices and also Fake Companies.
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All these fraudulent activities go unseen by the Government due to its least involvement in the Business Transaction Loop. There is no particular validation of the Invoices in the current system.
There is no authenticity of Invoices and thus no one can tell if a particular Invoice is real or not.
Case Study-
A Delhi based company was caught by the Tax Department stealing Tax worth of around Rs. 6 Crores in a single month. The company was renowned in its sector and had a position in the market.
This made it difficult for the Government to suspect the Company of any felonies. But the Company had been generating Fake Invoices for the past whole year.
The Company also managed to generate Fake E-Way Bills to support the Invoices and the evasion was running smoothly. Unless an ex-employee complained about the unethical practices that led to a Tax audit.
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Audit brought into light all the gaps in the transactions, Invoices and consignments. The audit was extended to other businesses of the Company and the Tax officials discovered the total amount of Tax evaded exceeded even the Annual Turnover of the Businesses.
The Initiation of E-Invoices- A threat to Tax evaders
The E-Invoicing System shall be implemented mandatorily from October 1st, 2020, for Businesses having an aggregate turnover of Rs. 100 Crore and above. All businesses eligible for E-Invoicing must generate IRNs and QR Codes for their B2B Invoices.
It has also been made mandatory for Businesses with an annual turnover of Rs. 500 Crore and above, to generate QR Codes for B2C Invoices.
Apart from the B2B Invoices, other important documents need to be reported to the IRP, such as the Credit Note, Debit note, B2G Invoices (Business to Government), Reverse charge Invoices and Export Invoice.
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This makes the process sheer and crystal clear to the GSTN. If the Invoices are not considered valid without the authentication, IRN and QR Code, then fake invoices stand less chance.
Also, since all the invoices are to be uploaded to the IRP and validated, all the transactions are reported too. So the taxpayers can hide no transactions from the IRP.
With the clearance of the fake invoices tax evasion shall downfall. Since fake invoices are majorly used for Fake ITC claims and to hide the actual sale value to dodge taxes. Without fake Invoices both of these fraudulent activities wash away, thus fixing the revenue leak.
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This is an efficient measure and is anticipated to be successful by Tax experts and entrepreneurs. Needless to say, the positive change E-Invoicing has brought to the Businesses in the GST context.
E-Invoicing has only perks both for Businesses and the Government. It has made both compliance and reconciliation simpler for Businesses, so businesses may adapt to it quicker.
Make your Business 100% E-Invoicing compliant
Get accustomed to the new E-Invoicing Better with GSTHero Software Solutions. GSTHero is a Government authorized GST Suvidha Provider, and uses enhanced APIs to provide the best E-Invoicing Solution to your Business.
With GSTHero, you can bulk generate E-Invoices from within the ERP in fewer and easier steps and generate IRNs and QR codes faster and easier. Even for high volume of Invoices, GSTHero is capable of handling volume and the changing trends of GST.
What makes GSTHero better is the accuracy that it provides by eliminating the human work, and thus the following human entry errors. File your GSTR faster and more accurately, to claim correct ITC and avoid penalties and notices etc.
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GSTHero comes with the ISO promise of data security and confidentiality and is 100% safe and trusted.
The software plug-in is easier to integrate the ERP and is highly user-friendly. GSTHero delivers prominent support to the clients at every step of difficulties and queries.
GSTHero E-Invoicing Solution integrates the IRP with the ERP and makes compliance simpler and shortens the process. The users can auto-populate the GST Return data as well as the E-Way Bills, with GSTHero plugin.
The future of E-Invoicing in the system is totally dependent upon how the Businesses adapt to it. And the only thorn in the way is the fact that E-Invoicing will increase work and load. To combat this obstacle, technology can be put to its right useand that is what GSTHero does.
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GSTHero simplifies the E-Invoice generation and other subsequent processes that are required for GST compliance and make Businesses compliant to smoothen the progress and avoid trouble.
About the Author- GSTHero- Making Life Simple! GSTHero is the best GST filing, E-Way Bill Generation & E-Invoicing Software in India. GSTHero is a government authorized GST Suvidha Provider. Both Businesses and Tax Practitioners can file GSTR 1, GSTR 3B, GSTR 9 and GSTR 9C with all supporting reports. 1-Click Auto Reconciliation & report-matching feature helps you in claiming up to 100% ITC and finds your GST Defaulting Suppliers. GSTR2A vs GSTR-3B, GSTR-1 vs GSTR-3B, ‘GSTR-1, GSTR-2A & GSTR-3B’ annual report matching is also provided by GSTHero.
GSTHero ERP Plugins provide 1 Click E-Way Bill & E-Invoice, Generation, Operation & Printing from your own ERP like Tally, SAP, Marg, Busy, Microsoft Dynamics, Oracle & others itself with high data security.
Disclaimer: The above post is sponsored by GSTHero. The article or blog or post (by whatever name) in this website is based on the writer’s personal views and interpretation of Act. The writer does not accept any liabilities for any loss or damage of any kind arising out of information and for any actions taken in reliance thereon.
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