E-Invoicing has been implemented in a phased manner by the government to make the transition from the previous system as smooth as possible. All businesses that are under the purview of e-invoicing need to upload the invoices of their B2B transactions, along with some other documents, to the Invoice Registration Portal for authentication. The intention here is to facilitate better GST compliance through improved efficiency.
In this article, we will discuss the impact of e-invoicing on businesses in India. To better understand the impact, we will start with a brief overview of what e-invoicing is, before discussing its impact.
E-Invoicing, or ‘electronic invoicing’ is the process of digital authentication of B2B invoices on the Invoice Registration Portal (IRP) set up by the GST Network (GSTN). Businesses that fall under the purview of e-invoicing are required to upload all the invoices of their B2B transactions on the IRP, which then authenticates them. If authentication is successful, the IRP generates an e-invoice for the uploaded invoices. It also provides a unique 64 digit Invoice Reference Number (IRN) and QR code for each e-invoice.
Taxpayers only need to upload their invoices to the e-invoicing portal. The invoice details are automatically shared with the GST Portal and the E-Way Bill Portal as well, facilitating the generation of e-way bills and filing of GSTR-1 Return. This saves time and effort for the taxpayers.
The implementation of e-invoicing in India began in a phased manner starting in October 2020. During the first phase, e-invoicing was made applicable only to businesses with a turnover greater than ₹500 crores. In total, five phases have been implemented so far since e-invoicing was introduced, with the turnover threshold reducing with each phase. As of 1st October 2022, E-Invoicing is applicable to any business that has had a turnover greater than ₹10 crores in any financial year from FY 2017-18 to FY 2021-22.
The phase by phase implementation of e-invoicing in India is shown in the table below:
|Phase||Minimum Turnover Threshold||Applicable date||Notification number|
|I||Rs 500 crore||01.10.2020||61/2020 – Central Tax and 70/2020 – Central Tax|
|II||Rs 100 crore||01.01.2021||88/2020 – Central Tax|
|III||Rs 50 crore||01.04.2021||5/2021 – Central Tax|
|IV||Rs 20 crore||01.04.2022||1/2022 – Central Tax|
|V||Rs 10 crore (current)||01.10.2022||17/2022 – Central Tax|
Businesses that use the GSTN-initiated electronic invoice will gain the following benefits:
E-invoicing is aimed at standardising the invoice format and compatibility between the business and tax ecosystems. The advantages of electronic invoicing go far beyond this, though. E-invoicing enables the government to monitor each B2B transaction made by companies in real-time, reducing the incidence of fraudulent invoices and input tax credit (ITC) fraud. Every electronic invoice has a QR code that aids tax officials in verifying its validity, particularly when items are in motion.
There are many advantages for corporations. In the GST returns and e-way bills, the information from e-invoices is automatically filled in. As a result, less data needs to be duplicated overall. Additionally, it expedites the ITC claims procedure and gives taxpayers confidence that only real ITC is being submitted.
Hefty fines of up to Rs. 10,000 per invoice for non-generation and up to Rs. 25,000 for improper e-Invoicing could be imposed on eligible organisations that do not adhere to the e-invoicing requirements.
Additionally, it might have a negative effect on the company’s operations. For instance, the B2B invoices do not appear in the GST reports if an e-invoice is not generated. Relationships between sellers and buyers are impacted since buyers’ GSTR-2A/2B forms do not automatically populate, and they cannot claim the input tax credit. Since an IRN is now required to develop e-way bills, the inability to generate e-invoices also prevents the generation of e-way bills for B2B supply. Penalties and the detention of goods may result from this.
Small and medium-sized companies having a turnover of at least Rs. 20 crore must act rapidly to identify a solution that will enable them to be prepared for e-invoicing by 1 April. With the appropriate tools, creating electronic invoices is not a complex process. However, it can take a few weeks to set up, understand the system, and adjust. These newly qualified businesses must be ready to take on this digital revolution.
The first step is for qualified businesses to sign up on the government’s e-invoice platform. The login information for the e-invoice portal can be used by taxpayers who have already registered on the e-way bill portal. The business must next decide which method for creating e-invoices is ideal. The government offers an Excel-based application for creating electronic invoices. However, using this program takes time because there is no option for mass IRN production. Given that the entire procedure is manual, it might also be prone to mistakes.
Several well-known, reputable e-invoicing systems offer an improved web-based tool for creating e-invoices. These UI tools are simple to use and take only 10 to 15 minutes to set up. Businesses receive an Excel template here that they may use to upload and ingest data to produce e-invoices in masses with just one click.
In addition to bulk e-invoice production, it’s critical to choose an e-invoicing solution with sophisticated features like 200+ data validations, MIS reports, smart dashboards, 7-8 years of data archival, quick response times, and SmartScreen fixes to reduce errors. Additionally, it would be highly beneficial for a business if its e-invoicing solution included a centralised mechanism for e-way bill preparation.
With E-Invoicing becoming applicable to more businesses with each phase of implementation, it is going to have a positive impact on operational efficiency when it comes to GST compliance. With reduced data entry errors due to the electronic authentication, and shared data between the e-invoice, GST and e-way bill portals, the effort for taxpayers is reduced, but the scope for tax evasion is also reduced, since now the Government can track wrongful activity faster and more accurately.A sixth phase of implementation has been proposed by the GST Council, which would make e-invoicing applicable to businesses with a turnover of ₹5 crores. Generating the e-invoices can be a time consuming exercise, so it is recommended that you use a robust E-Invoicing Software to help you save time and effort while not disrupting your workflow.