Last Updated On:
March 13, 2021, 8:52 p.m.
HOW E-INVOICING UNDER GST WILL HELP BUSINESSES IN THE LONG RUN
Electronic invoice, or e-invoice is the future means of electronic billing. It has been adopted by many governments internationally. It has been implemented in a staggering manner over a period of time, initially launched for B2B (Business to Business) and B2G (Business to Government).
Electronic invoicing (E-invoicing or online invoicing)is a system in which B2B invoices are authenticated electronically by GSTN (Goods and Services Tax Network) for further use on the common GST portal between suppliers and buyers. A true method of e-invoicing should be entirely electronic in such a way that supplier data can be directly integrated into the buyer’s system, GST portal and e-way bill portal in real time.
A digital invoice is usually confused with an electronic invoice or an e-invoice. Both can be processed electronically from creation to payment, but there is a considerable difference between these two. An e-invoice is basically created in the invoicing system of the seller, online bank or in a web-based form. The e-invoice file can be downloaded from here or sent directly to the buyer’s software.
“The digital transformation will have an impact on businesses that do not choose to adopt the up and coming technology. In fact, these businesses may suffer the consequences and be left behind.
Unnecessary steps like manual data entry, accuracy checking, and software swapping are eliminated with the help of e-invoicing. Therefore, the invoice must be in a format that can be processed by the buyer’s system. The files on the e-invoice come as structured data and some of the XML and EDI formats are some commonly used.
Benefits of e-invoicing:
- E-invoicing is the new system through which business to business (B2B) transactions are authenticated electronically by GSTN for further use on the common GSTN portal. The biggest benefits that e-invoicing delivers are transparency and proof.
- Today, a transaction between the supplier and recipient is done directly without the government having any proof of the exchange. With e-invoicing, the moment an invoice is made, it will be uploaded to GSTN portal where pre-validation will be done and a unique number called IRN (Invoice Reference Number) will be issued. Once IRN is issued, the tax invoice will be shared with the recipient also.
- For a nation like India where tax evasion is rife, this system can be a boon. This real time tracking of invoices can be done by both, vendors and the government, and will result in a reduction of frauds and fake GST invoices—a major concern today.
- Secondly, e-Invoice further boosts the automation when it comes to GST return filing process. GSTR filing currently involves immense manual work that is prone to errors. e-invoicing can bring ease, speed and accuracy to this process. Once IRN is issued, it will update the Annx – 1 of the Supplier & if e-waybill is required to be issued, Part – A of the same will be updated. It will also update the Anx-2 of the recipient.
- Updating GST Returns also saves lot of time, human errors for data entry and also avoids major reconciliation issues.
Challenges to address:
- Although the move to a new system is exciting, there are some challenges. For starters, in a country like India, although internet coverage has improved significantly during the last decade, many parts of India continue to suffer from lack of infrastructure. For instance, for an MSME with a factory at a remote location grappling with poor network connectivity, e-invoicing may appear to be a compliance hassle
- Large organizations, who have implemented auto generation of the e-waybill on creation of the tax invoice has to change their existing process. Now they have to interface their system with the IRP portal rather than the e-waybill portal so that IRN issued. Also changes have to be done to their software to capture the IRN number in the databases.
- Taxpayers who have not up taken automation of e-waybill have to reach out their OEM’s for the configuration of the same.
- Training has to be provided to all the concerned stakeholders for the new changes, proper budgets should be allocated for the IT and also if any impact of working capital is foreseen, proper arrangements should be made for the same.
- Similarly, the manual bill books and accounting software products used today may need to undergo an overhaul. This may prove to be a time-consuming task. MSME segment also suffers from acute manpower shortage. Getting the right professionals with in-depth knowledge of e-invoicing will not be easy for MSMEs. Investing in manpower training may be costly too. Given such circumstances, using tried and trusted software products like ERP, distribution management systems from reputed vendors will help tackle these issues.