The Central Board of Indirect Taxes and Customs (CBIC) notified on December 13, 2019, that the e-invoicing would be implemented from April 1, 2020, for the taxpayers whose turnover is more than Rs 100 crore. The CBIC, along with Goods and Services Tax Network (GSTN) has been working continuously towards the implementation of e-invoicing, and new GST returns from even before issuing the notification. However, the CBIC made few changes to the proposed system, such as an increase in turnover threshold, reduction in mandatory fields and changes to the process flow.
During February 2020, GSTN emphasised the readiness of systems and also stated that they were capable of generating more than one crore e-invoices in a day, expandable up to 10 crores if necessary.
However, the ground reality showed that businesses have struggled with the complexities of multiple GST compliances. The ERPs of the businesses were not yet aligned for e-invoice generation.
Considering the hardship faced by the businesses, the 39th GST council meeting headed by Hon’ble Finance Minister Nirmala Sitaraman decided to defer the implementation of e-invoicing, and new GST returns to October 1, 2020.
Despite the pandemic situation, during July 2020 an empowered panel of the GST Council recommended excluding entities with turnover up to Rs 500 crore from mandatory e-invoicing which is intended to improve tax compliance. Also, the panel recommended that the CBIC can roll out the e-invoicing from October 1, 2020 with a specified higher threshold limit.
In continuation of the panel recommendations, the CBIC notified on July 30, 2020 that the e-invoicing under GST is mandatory for the entities with a turnover of Rs.500 crore or more from October 1, 2020. The CBIC stated that the decision to increase the threshold for e-invoicing from Rs 100 crore to Rs 500 crore was taken on the recommendation of the GST Council.
Now, the large entities should proceed to adopt the new e-invoicing system at any cost, but it gives an idea and ample time for the small entities to observe and adopt the system.
Coming to the e-invoice format, the CBIC notified the latest e-invoice format on July 30, 2020 with a total of twelve sections and six annexures. A standard e-invoice has a cumulative of 138 fields, most of which are optional. Out of the twelve sections, five are mandatory, and seven are optional. The GSTN reduced the mandatory fields so that only the most essential and required information will be asked mandatorily to generate an e-invoice.
The applicable businesses have to make a Business Impact Analysis (BIA) comply with the above format. The businesses can get to know which fields are to be captured mandatorily to generate an e-invoice, the list of mandatory fields that ERP already covered and how to incorporate the changes.
They can also decide on the way to comply with e-invoicing, whether it is through acquiring a GSP or through API integration or offline utility.
The businesses should also consider what additional fields are to be reported in e-invoicing for better compliance. For example, all the pharmaceutical manufacturers have to report critical information in their invoices such as batch number, batch date, and manufactured place, etc.
This critical information is in the optional fields of the e-invoice format. However, the businesses will be benefited by reporting them in e-invoice as the government will authenticate the data. This additional reporting leads to the impression of more transparency and better compliance.
The businesses are not ready to use the e-invoice generated by the IRP, as it does not contain all the additional and required information. When we consider the latest e-invoice format released by the government, it does not provide information such as company logo, terms & conditions, and bank account details, etc. The businesses having more than Rs.500 crore have their own invoice format which covers more fields than an e-invoice format.
Hence, there is confusion among the businesses, whether the e-invoice generated by IRP is sufficient or not. The possible solution to comply with the e-invoice is that a business has to capture the IRN once the e-invoice is generated, and then the same has to be placed on their own invoice format.
By doing so, the businesses have to add just one additional column for the IRN in their invoice format, keeping the rest as same. This process might look similar to the UDIN process followed by the Chartered Accountants, where they place a UDIN on every certificate issued by them.
However, the main challenge to businesses here is the continuous generation and capturing of the IRNs. The smoothness of invoice generation will be based on the task of generating IRNs. So, the businesses have to choose an efficient GSP (GST Suvidha Provider) which can provide IRN within seconds of time.
For example, when we take large retailers as an example, they have to generate thousands of B2B invoices in a day. They can not ask their customers to wait for the e-invoice generation process to provide an invoice or they can not ask them to collect the invoice later.
Thus, an efficient GSP should be adopted, which can eliminate the timing difference between the present invoice generation process and the e-invoice generation process.
Till now, the businesses followed a simple process of generating invoices in their own ERPs and forwarded them to the buyers/recipients. While the e-invoice process may increase the efforts in the invoice generation process, the compliance burden will be reduced once the e-invoicing system is implemented efficiently. The auto-population to GSTR-1 and e-way bill system will reduce the manual intervention to a great extent.
The investment due to the e-invoicing process may vary from business to business. It is purely based on the fields that a business wants to report in e-invoice and the number of e-invoices generated on a daily basis. Investing in an efficient GSP will save a considerable amount of money and time when compared with investment in API integration.
The businesses should also focus on employee awareness which plays a crucial role in e-invoicing implementation. The employees must be made aware of how an e-invoice process works, and also they should be trained to handle the error scenarios in the e-invoice process.
—Archit Gupta is Founder and CEO at ClearTax. Views are personal
First Published: Aug 25, 2020 3:22 PM IST
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