E-Invoice is a system in which B2B invoices are authenticated electronically by GSTN.
Under the e-invoicing system, an identification number will be issued against every invoice by the Invoice Registration Portal (IRP), which will be managed by the GST Network (GSTN).
All invoice information will be passed directly by the IRP portal to the GST and e-way bill.
Therefore, there is no need for manual data entry while filing GSTR-1 returns and generation of part-A of the e-way statements.
The exchange of the invoice document takes place in electronic format through the e-invoice schema (INV01).
Presently, e-invoice is compulsory for businesses with an annual turnover of over ₹20 crores.
The Central Board of Indirect Taxes and Customs (CBIC) has made mandatory E-invoicing for businesses with aggregate turnover exceeding ten crores from October 1.
E-invoicing has been introduced to achieve the following benefits-
(a) Since the information under e-invoicing goes to the department in real-time and at the transactional level, the chances of tax evasion are less. As a result, it will reduce the number of litigations by tax authorities.
(b) Faster availability of input tax credit will release the blocked working capital.
(c)The return filing process will become easier as data from e-invoices will get auto-populated in returns.
(d) There will be lesser instances of mismatch in the reconciliation of data.
(e) Real-time tracking of invoices will be enabled.
Since it is a new compliance and a new system, implementing it will be challenging. Businesses may even show resistance to adapting to the new system.
Challenges that businesses could face in the implementation of e-invoicing –
(i) The new entities coming under the purview of e-invoicing will have to train their staff to adopt e-invoicing.
(ii) They will have to update their existing accounting and ERP software to ensure seamless e-invoicing.
(iii) The businesses will take time to adapt to the new system, and the compliance may not be foolproof initially.
(iv) The businesses using traditional accounting systems will have to upgrade according to the changing requirements.
(v) The process of e-invoicing may cause some delays in business operations. Some businesses issue several e-invoices in a day. Having to generate e-invoices every time will create a lag in business operations and can irritate both the buyer and the supplier.
(vi) Additional staff might be required to perform tasks like segregating the transactions requiring e-invoicing and managing the overall process. Accurate details must be presented in e-invoicing hence records need to be appropriately maintained.
E-invoicing will greatly help in curbing the issue of fake invoices. Since the invoices will be issued in real-time, the chances of manipulation will be lesser. Only genuine invoices will be uploaded, tax collections will improve, and only genuine input tax claims will be made.
GST E-Invoicing Challenges for Small Businesses
The GST E-invoicing system has several challenges, especially for small businesses.
Small business owners must integrate their current IT systems, implement new invoicing practices, and train employees on the new system.
Under the GST system, companies must upload invoice-related data from their ERP software to a dedicated web portal.
This data must be in a structured, fixed format and include data relating to the supplier, receiver, and GST.
Businesses must ensure that they reconcile data between e-invoices and GSTR-1. Incorrect data can lead to non-compliance issues.
Business owners who fall in this category can consult with professionals in this field. E-invoicing and GST compliance requires help from professionals because they are the ones who know the process of setting this.
You can consult GST consultancy service providers online or by visiting their offices and letting them know all the details of your business so that they can offer the best solution to you.
Thankfully, powerful tools on the market can help companies reconcile their e-invoices with their GSTR-1 returns.
E-invoicing is expected to improve the tax administration process in India. By ensuring that every taxpayer has the same access to tax-related information, businesses will be able to track and report their GST collections in real time.
E-invoicing will also help prevent fraud. Businesses can see what their customers are paying for their goods and services and ensure that every taxpayer receives the right amount of tax.
GST E-invoicing is a new requirement under the GST laws. It will require a high level of integration and can disrupt business processes.