GST e-Invoicing: A Step towards Reduced GST Compliance
e-Invoicing, or Electronic Invoicing, is a modernized way to deal with B2B invoices via an automated and official portal. The Government implemented e-invoicing under GST for large enterprises in October 2020. The Government plans to extend e-invoicing to all businesses by 2021. This article will focus on the effect of e-Invoicing upon overall GST Compliance. You will find the best e-Invoicing software for clients and businesses towards the end.
GST Regime e-Invoicing and What It Means
The Government added e-Invoicing to the GST regime in October 2020. This is a new provision for large businesses. e-Invoicing allows you to validate e-Invoices using the official IRP. Businesses subject to e-Invoicing must generate an e-Invoice in their ERPs using the SCHEMA Format, as defined by the Government.
The IRP will validate the eInvoice and notify the accountants if any missing fields are filled.
After validating all details of the eInvoice, the IRP uses a hash algorithm to generate unique IRNs or QR codes for each invoice. This allows the document to be identified and marked as authentic. The IRP then shares these e-Invoices with the recipient, the GST Portal, and the e-Way Bill Portal.
E-Invoicing is as sophisticated and organized as it appears. E-Invoicing will help reduce errors and fraud by both parties. It will also make it easier for business accountants to manage the overall GST compliance. For now, e-Invoicing in GST is only applicable to businesses with an annual aggregated turnover above INR 500 Crores. However, it will soon be available to all businesses.
However, e-Invoicing does not only apply to invoices as its name implies. Although it is primarily applicable to B2B invoices only, users are required to report the following documents the IRP-
- B2B Invoices
- Invoices B2G (Business To Government)
- Export Invoices
- Reverse-Charge Invoices
- Credit Notes
- Debit Notes
- Generation of QR codes for B2C invoices (Postponed to another date, perhaps December 2020).
Notification: Delivery Challans and the Bill of Supply are not subject to e-Invoicing.
There is also a section among businesses whose annual turnover is more than Rs 500 crores, yet exempted by the Government. And they still do not have to opt for e-invoicing; they are mentioned below-
➤ Developers and SEZ Units
➤ Insurance companies
➤ Banking Companies
➤ Financial institutes
➤ Passenger transportation service, etc.
Phased Implementation of e-invoicing. What does this mean for e-Invoicing in India?
The Government chooses to implement e-Invoicing first on large enterprises. Large businesses are more likely to be e-Invoiced because they have the resources to adapt faster and easier to the new feature.
The Government is slowly moving e-Invoicing across all documents to meet the positive response of businesses, which has countered all negative impacts.
According to the country's high-ranking Finance Officials, a notice was released stating that e-invoicing will be implemented on businesses with an annual aggregate turnover of INR 100 crores or more starting Jan 2020 and continuing through April 2021 for the rest.
This means that e-Invoicing is now a positive initiative and will continue to be a success. Businesses need to understand the importance of electronic invoicing as soon as possible. Learn the details and create ways to comply with the new provision.
Is e-Invoicing a blessing or a curse for businesses?
Both businesses and the Government find e-Invoicing a great solution. Both the Government and businesses have many advantages. Like any other form of payment, e-Invoicing comes with its pros and cons. However, for businesses, the pros outweigh the cons.
E-Invoicing software plays a vital role in business accounting and invoicing. It has made work easier, more accurate, and less time-consuming for accountants.
Below is a list that shows the real-time and practical benefits of e-invoicing for businesses.
1. Less manual input required - Although e-Invoicing adds to the compliance burden, it is still a process that does not require excessive input to ensure accuracy. To maintain accuracy in data maintenance, accountants only need to validate and generate the e-Invoice.
2. E-Invoicing saves time - Yes, e-Invoicing can be a time-saver for businesses. Despite the perception that e-Invoicing adds to the compliance burden, it reduces the compliance load for other areas of the GST regime. E-Invoicing can save you time and ensure accuracy in the accounting process.
3. Is e-Invoicing electronic and automated? e-Invoicing can be electronically done and is therefore highly automated. Validation is an accounting solution for many problems such as duplicate invoices, missing invoices, and fake invoices. The IRP will also automatically populate the eWay Bills, GST Returns, and other data based on the e-Invoice data.
4. Accuracy - This is the most important feature of e-Invoicing. The automation eliminates errors and makes it more accurate.
5. Increases cash flow - The IRP will instantly share the eInvoices with recipients. This means that the recipient will be able to access the documents at any time via an official platform. This will greatly increase the cash flow of your business.
6. Easy Work - GST compliance is now easier thanks to e-Invoicing. With the introduction of electronic invoicing, accountants have found it easier to do their work.
7. Transparency with Government- GST e-Invoicing has improved transparency between business and Government. Businesses used to generate invoices individually and then declare them together at the end of each month. This could raise questions about the authenticity and transparency of the declaration. However, e-Invoices can be reported in real-time, and the same data can be pulled to file GST Returns.
The impact of e-Invoicing upon overall GST Compliance A wider look
Let's now get to the important question: What effect does e-invoicing affect the other aspects of the GST Regime? The question was answered in the sections before, but we will now provide a more detailed explanation.
Many other aspects of GST are directly affected by e-Invoicing, including GSTR Filing and eWay Bills. ITC Refunds etc. But is this an intervention? Or is it a positive, helpful effect for businesses?
The short answer is that e-Invoicing has a positive effect on all aspects of GST. It will help to ease and manage GST compliance.
This list will help you determine the impact of electronic invoicing on various aspects of GST-
1. Invoicing- e-invoicing has revolutionized the structure of traditional invoicing. It has reduced the need for paper documents to a great extent. A lot of the work can be done on the Cloud and stored in the Cloud. This makes it easier to access and store records. The validation process assures the accuracy of invoices. However, the IRN or QR Codes can identify invoices in an emergency despite a large amount of data. e-Invoicing makes invoicing easier and more organized.
2. E-Way Bills - The eInvoice data can also be used to generate eWay Bills. The SCHMA Format includes a field to enter the details of the e-Way Bill. This field is all that is required to generate the e-way bills against eligible e-Invoices. To obtain the eWay Bills, you don't need to go to the eWay Bill Portal.
3. GST Return Filing - The IRP shares the e-Invoice data to the GST Portal to file the GST Returns for both the supplier and the recipient. This is an important step, as many businesses still struggle to file accurate GST Returns. As there is no manual declaration, the real-time, validated eInvoice data will ensure accurate GST Filings.
4. GSTR-2A and Other Reconciliations - Most reconciliations under GST are made using e-Invoice data. This data will be authentic and well-organized, which will improve the quality of reconciliations. Under the e-Invoicing Regime, reconciliations will be more detailed, precise, and well-organized.
5. ITC Claiming - ITC claims are highly dependent on the GTR-2A reconciliation. If the GSTR-2A reconciliation is accurate due to authentic e-Invoice information, you will be eligible to claim the maximum amount of ITC for your company.
6. GST Audits- e-invoicing will help to eliminate the need for GST audits. GST Audits will not be required as long as all base data is accurate and business transactions are transparent. Even if a GST audit is required, authorities will have full access to invoice data that they can use to perform the audit more efficiently and accurately.
Although e-Invoicing offers more benefits than cons, it is still an important addition to the GST Compliance checklist for businesses. All businesses are responsible for e-Invoicing compliance, regardless of the impact, it has on their business.
Sometimes it can be more complicated than it appears, especially when considering the complex SCHEMA Format, Real-time Validation, Bulk operations, and many other factors.
To comply with e-invoicing better, the Government recommends external solutions. One such GSP is GSTHero, which is currently the best e-invoicing solution on the market.
RetailGraph ERP makes e-invoicing easy with its intuitive features and outstanding support.
Retailgraph ERP: Features that ensure an efficient e-invoicing solution
- Simple integration
- Data Security
- High data volumes can be scaled
- Highly Automated - Requires minimal human input
- Automation reduces errors
- Your accounts team will be more productive
- Real-time compliance
- Bulk Operations - Create, cancel, print, and validate e-Invoices in bulk within the ERP
- 100% Compliance through e-Invoicing