Issues and Challenges of E-Invoicing Under GST
Introduction
In GST the E-invoicing system can be termed as digital invoice. It is produced for goods and services provided by a enterprise or business at the GST portal as guided by Government of India. The said concept of E-Invoicing was adopted to reduce the tax evasion under GST. The GST officers were of the opinion that businesses must follow a system where they can easily access the details of GST. Considering the same, the government made it mandatory for each and every business registered under GST must generate e-invoice for sale made by them on GST portal. However, the said system of e-invoice is not applicable to businesses who have not exceeded the threshold limit of the annual revenue as prescribed by the government.
A official statement given by the GST officials provides that the businesses that are falling the under prescribed threshold limit will be given a unique reference number each time whenever a e-invoice is generated. Simultaneously, the businesses have to match the provided unique reference number with the required invoices clearly written sales return and taxes paid with regard to verification process. The implementation of e-invoicing in GST was suggested at the 39th GST Council meeting and the said scheme was applied with specific QR codes with effective from 1st October 2020 during the corona virus pandemic.
Ultimately, the government launched the trial version of GST e-invoicing. This is one of the famous and convenient mechanisms of invoicing as suggested by the GST Council. The system of GST e-invoicing will provide the categories where the taxpayer can access and fill the invoice as per the turnover and conditions. The GST provisions provides that a taxpayer whose turnover is exceeding 500 Crore or more has to fill the GST e-invoice through GST portal.
Advantages of E-Invoicing For Businesses and Government
The advantages of E-Invoicing under GST are mentioned below;
- In case of B2B businesses, invoices are made to eliminate the needs of bill reports in more than one format. This helps to reduce the probability of omissions and errors.
- A accurate and complete record can be maintained with regard to the total sales and purchases of goods or services of a enterprise and considering the same the return for GST can be filled under GST portal automatically.
- E-Way Bills can be created with the help of details mentioned in the e-invoice.
- The chances of settling the data between the books of accounts and GST returns filed.
- The creation of actual time invoice from the starting point of the entry on the part of the supplier that can lead to fastening of the process of Input tax Credit on the part of the recipient. Ultimately, this will lead to maintain accurate and faster availability of credit.
- The information provided on the GST portal is auto-loaded that helps to file the compliance documents in a easy manner for the taxpayer.
- There will be reduction in the tax evasion and it will show only real time entries.
General Benefits of E-invoicing
The general benefits of E-invoicing are mentioned below;
- E-invoicing helps to authenticate the transactions electronically by business to business.
- It also delivers e-invoice as a proof and creates transparency of monetary transactions made by businesses.
- In recent times, a supplier and purchaser of goods or service can make a transaction without providing any proof for such exchange to the Government. With GST, it is mandatory to upload each transaction in the GST portal which will be validated with a unique number known as Invoice Reference Number (IRN). Once IRN is issued the tax invoice will be shared to both supplier and purchaser of goods and services.
- In India, the rate of tax evasion is increasing day by day. With GST and its E-invoicing it is a boon. The invoice tracking system with real time measure which is best for both vendors and government. It reduces the fake and duplicate GST invoice and eliminates fraud.
- The recent upgrade system of GST returns curbs human errors and also saves ample of time and effort. Ultimately, it eliminates all sorts of reconciliation issues.
Challenges to Address for E-Invoicing
It is undoubtedly a good decision to adopt a new system for indirect tax, however, there are some of the challenges that needs to be acknowledged too. In a country like India, GST is just a starting process but to some extent the country has grown significantly due to large internet coverage all across the country. Still, the country is facing lack of infrastructure. This is can be better analyzed with the help of an example. For example, a small business unit has a factory at a rural area which do have internet connectivity or has poor network issues seems to be great hassle when we consider about the e-invoicing aspects.
Large scale businesses who have already adopted the automatic e-waybills for tax invoice creation have to make amendments in the process of invoice generation. The GST guidelines states that the businesses must adopt the system with the IPR portal and not the e-waybill portal for IRN generation. Apart from that changes must be made in the software and databases.
The taxpayers who have adopted automatic e-waybill scheme have to contact OEM for software configuration.
Potential stakeholders must be provided training for the new changes made in e-invoicing and considering the same accurate and proper will be allocated to the IT department. If there is an effect in the working capital then proper arrangement has to be made.
The accounting software and manual account bills required to be revamped which is a complex and time consuming task. The sector of MSMEs suffers from the shortage of manpower. Thus, it is not easy for MSMEs to hire a qualified professional with good knowledge of e-invoicing. The investment in the manpower may also be costly. However, with the help of trusted software including ERPs for goodwill and distribution management owned by MSMEs can be helpful to eliminate the issue.
Exempted Sectors under e-Invoicing System
The concept of e-invoicing under GST was introduced last year and it was effective from 1 January 2020. The businesses whose annual turnover is Rs. 500 crore or more have to adopt the e-invoicing process. The GST council decided to implement the e-invoicing and QR codes with effective from 1st October 2020. However, there are sectors which are exempted to adopt the e-invoicing process that includes banking, insurance, Financial Corporations, Transport services in respect of passengers, financial institutions, GTA, Non Banking etc.
Common Challenges and Issues under GST:
Sorting of B2B and B2C Invoice:
E-invoice is only applicable for B2B. Hence, the B2B businesses need to adopt both e-waybill and e-invoice as a source of revenue generation mechanism. In some cases, e-waybills is required as well. Hence, there is a need of sorting of invoices for automation of transactions without investing a lot of effort and time.
Cancellation and Amendment of e-invoice:
Although there is small error or change in the e-invoice, it cannot be cancelled partially. A e-invoice can be cancelled in 24 hours on the IRP system according to GST provisions. After 24 hours the cancellation cannot be made. It is also to be noted that the cancellation process must be done manually. Considering the same, the vendor can revise the invoice numbers apart from fixing the errors and also can raise another e-invoice request.
Alternate arrangement for data Storage:
The data will remain for only 24 hours in the IRP system. Hence, there must be an alternate arrangement to archive the records.
No Bulk generation of E-Invoice:
There is a no provision for bulk generation of e-invoices on the GST portal. According to GST guidelines, a single invoice will be generated at a particular time. Accordingly, the ERP of businesses required to be customized.
Implementation Issues:
The uploading capacity of e-invoicing is basically based on the data of GSTR-1 which have been submitted over past couple of years. Hence, if there is a large number of users in GSTN, then the government must be prepare to adopt the latest technology which can affect negatively in compliance matters.
Non-applicability B2C transactions:
It is very common to know these days about frauds happening in B2C invoices as the input tax credit scheme is not there in B2C invoices. Hence, the e-invoicing also should be implemented in B2C businesses to avoid frauds as well as tax evasion.
Questions that is unanswered:
There are certain questions which are unanswered including the revocation of auto populated data in e-waybills as the e-invoice can get cancelled due to wrong or incorrect details. However, GSTN section has been proactively maintained in the GST portal with FAQs heading where we can expect the answers of these questions soon hopefully.
The changes in the workflow can produce other types of documents:
Generally, e-invoicing is meant for B2B invoices. Hence, it is essential to differentiate the workflow which can be mentioned for delivery challans, bill of supply, job work and some other similar transaction which are made. It requires ample of time and effort to create and different workflow for different transactions.
Conclusion
E-invoicing is indeed a push for improvement towards the digital economy of the country. The rise in collection of tax and to eliminate the tax evasion for the government is ensured. Accordingly, the government can consider hiking the GST rates further. E-Invoices can also be saved as document where both debit and credit note is there. The implementation of e-invoicing can probably have a positive effect on the businesses that can lead to reduce the eradication of data entry omission and errors. It will help to make greater transparency in each and every transaction made by the supplier and purchaser.
Team
Tax4wealth
