A new invoicing system has been formulated under India’s GST regime. The implementation of the e-invoicing system will take place from 1st October 2020. Specific sectors have been kept exempt from following this new invoicing system.
These sectors include banking, financial services, NBFCs, insurance, GTA, and passenger transportation services.
Under the new system, all business to business e-invoices will need to be electronically authenticated by the GSTN. These invoices will continue to be generated by businesses using their ERP. The ERPs need to adapt to the new format for these invoices and keep them in line with the changes.
All e-invoices need to be generated using a standard format which can simplify the procedure for businesses and taxpayers. Take a look at the benefits and drawbacks of e-invoicing in 2020.
Benefits of E-invoicing
Real-time tracking means that you can keep track of invoices being generated by your supplier through the online portal. You will be able to suggest any changes that need to be made to the invoices and keep in touch with your supplier about overdue invoices.
Real-time invoicing will help you ensure that all invoices are made on time and made correctly. Due to real-time tracking, you will be able to access these invoices faster rather than wait for weeks to process them.
Real-time tracking allows you to receive your input tax credit (ITC) faster once these e-invoices have been authenticated by the tax authorities.
Simplified Way to Create E-way bills
E-way bills can now be generated more efficiently. All you have to do is enter the details of your transport vehicles since the other details that need to be filled is done automatically once your e-invoice has been authenticated by the tax authorities on the GST portal.
Part A of the bill will be automatically filled once your e-invoice has been generated and authenticated.
Reduction in Fraud
One of the main problems with invoicing using paper was that it was much easier to get away with committing fraud. Paper bills were much harder to keep track of and could be easily duplicated or hidden.
However, once e-invoicing becomes the norm for businesses, it will be much harder for them to commit fraud. All data regarding invoices will be available to the tax authorities through the new GST portal. They can keep track of invoicing and quickly check if there is a discrepancy.
Easier for the Buyer
After an e-invoice has been uploaded to the GST portal by a supplier, an email will be sent to the buyer informing them of the same. Hence, the buyer will be able to know once an invoice has been generated.
They will be able to cancel or reject the invoice or request changes to it. They can also reconcile their purchase orders with e-invoice without any extra hassle or uncertainty. All of this will be done on a real-time basis.
Easier Reporting of Invoices
Under the new system, the taxpayer only needs to fill out the invoices once. After the invoices have been authenticated by the tax authorities on the GST portal, the details that have been filled out will automatically be copied to ANX- 1 and ANX- 2.
Hence, the taxpayer does not need to fill in the same details on multiple forms. However, do remember that only B2B invoices can be added to the platform, and hence this benefit only applies to B2B invoicing.
Helps Avoid Data Entry Errors
Once an invoice is uploaded on the common portal, it can serve several purposes. After an invoice has been uploaded, it will be authenticated by the tax authorities. Once an invoice has been authenticated, it will be transferred to the GST portal as well as the e-way bill portal. All of this will be done on a real-time basis.
Since the details from invoices are going to be taken and used to automatically populate the details of your GST returns and e-way bills, it will save you from doing a lot of manual data entry. Since entering data manually is time-consuming and prone to errors, the new system will be much faster and completely accurate.
Helps Reduce Tax Evasion
Under the new system, all the data about invoicing will be available to the tax authorities on a real-time basis. Since the data is available as soon as it is generated, there will be less scope for manipulation of the data.
The invoices need to be generated before the transaction is going to be carried out. Hence, this will reduce the scope for generating fake GST invoices, and only genuine ITC can be claimed.
Since tax authorities can easily track both the input tax credit and output tax credit, it will be much easier for tax authorities to spot discrepancies between the two.
Invoices are in Standard Format
Since all invoices that are going to be generated will be in the same format, users who are using different software will be able to work with the same invoices without any hassle.
Drawbacks of E-Invoicing
Does Not Solve Tax Evasion
Even though the reduction in tax evasion is the primary purpose behind the introduction of the e-invoicing system, the new system only allows for the generation of B2B invoices and not B2C invoices. This means that the final invoice that is generated and given to the customer will not be an e-invoice following the new GST system.
Since a large part of the current tax evasion relies mainly on the manipulation of B2C invoices, the new system does not help to curb it. Since no ITC is involved in B2C invoices, it will also be much easier for the businesses who are dealing with the final customer to engage in tax evasion.
Needs to Ensure Minimum Downtime
Since the new e-invoicing system relies heavily on the same portal which will be used by millions of users, it is essential to ensure that the portal functions smoothly and there are no downtimes.
The ability to upload invoices on the GST portal is based on the GSTR-1 data that has been collected over the last two years. However, the number of businesses is expanding, and the tax authorities need to be ready with the latest upgrades to keep pace with the change.
There are more benefits to e-invoicing than there are drawbacks. E-invoicing is a central part of the new GST system, and you should make an e-invoicing system to make your business operations smoother. You should find out more about the benefits of gst and check how to make an invoice format in excel to get the maximum benefit of his system.