To ensure the interoperability of invoices throughout the GST ecosystem, the GST Council proposed e-invoicing in December 2019. Check out how this new electronic invoicing system could impact businesses in India.
Businesses across the country usedifferent types of 3rd party accounting software for generating invoices. Often, software systems are unable to read invoices generated by other systems.
Due to this, the invoices need to be manually translated again, with the help of data entry so that the other software can read it. This whole process leads to invoicing errors and provides businesses with an opportunity to evade taxes.
To eliminate this problem, the GST Council has introduced a new electronic invoicing system. It is a unified invoicing format that applies to B2B taxpayers with a turnover of up to Rs. 500 crores across industries and to all the invoicing and accounting software solutions used by them.
Take a look at how this rollout of the new e-invoicing system is impacting businesses in India-
- Additional investment for already struggling businesses
While the e-invoicing system will ultimately help businesses in many ways, its implementation would need additional investment.
Businesses were first required to get their accounting systems integrated with the GSTN portal or e-way bill portal when GST was introduced. They will now be required to re-configure their systems to work with the Invoice Registration Portal (IRP).
Even the invoice printing infrastructure would require significant upgrades for capturing all the additional fields of the electronic invoice. This can be an extra burden on businesses that are already struggling financially due to the COVID pandemic.
- Sufficiency of the IRP Invoice
The latest e-invoicing format introduced by the CBIC on 30th July 2020 features 12 different sections, with a total of 138 fields. However, only 5 sections are mandatory, and the rest are optional. It is up to the businesses to select the optional fields that are important for their tax reporting.
For instance, batch date, batch number, and place of manufacture are crucial details in the invoice of a pharmaceutical company. But these details are left in the optional section of the e-invoice. Also, there are no fields for entering bank account details, terms and conditions, or even the logo of the company.
Moreover, there is a different e-invoice format with additional fields compared to the standard e-invoice format for businesses with a turnover of above Rs. 500 crores. Thus currently, a lot of companies are not sure whether or not the electronic invoices that are generated by the IRP are sufficient.
- Staff Training
Businesses would also be required to provide additional training to their GST compliance staff members so that they can effectively implement and use the new invoicing system. They need to thoroughly understand what the new invoicing system entails, the steps required for adoption, and a lot more to implement the new system successfully.
Even if a business wants to upgrade to a new e-invoicing software system, they will be required to provide detailed training to the team members involved in tax compliance. Companies will have to spend a significant amount of time and money so that the staff members are equipped with all the knowledge and information about the new invoicing system.
Is your business ready for e-invoice?
Any kind of significant alteration to the taxation system leads to a bit of disruption initially. But the GST Council has always considered suggestions and comments not just from the industry/trade bodies but even the taxpayers to avoid major disruptions.
Even with e-invoicing, the council has consulted various industry and trade bodies, like ASSOCHAM, FICCI, ICAI, and more before introducing the new invoicing system. The proposal of the new system was also kept in the public domain for a considerable duration to collect suggestions from taxpayers and other stakeholders.
With e-invoicing becoming mandatory from 1st October 2020, businesses should look out for a reputed e-invoicing software system to ensure compliance and minimum business disruption.
Reputed tax advisory firms now offer advanced e-invoicing solutions to help you seamlessly comply with the new electronic invoicing system and protect against the consequences of non-compliance.