E-invoice to Replace the Physical Invoice

The commencement of E-Invoicing has been one of the most discussed business topics for the past couple of months. The government has taken a great leap forward in the country’s tax administration by making e-invoicing mandatory for a business to business (B2B) transactions for taxpayers having turnover of over Rs 500 crore from October 1, 2020.  The Central Board of Indirect Taxes notified that as a second stage to this regime, the e-invoicing would be mandatory for the business to business (B2B) transactions for taxpayers having turnover of over Rs 100 crore from January 1, 2021. It is expected that sooner in the proceeding months of the year 2021 this e-invoicing system will cover mid-size business and these businesses need to gear up and make themselves hot to trot for e-invoicing. Still not sure about e-invoicing? 

What is e-invoicing? 

E-invoicing or Electronic Invoicing is an electronic authentication mechanism under GST. This mechanism enables B2B invoices generated by the business to be reported to and authenticated on the GSTN portal. Each invoice gets a unique 64-digit alphanumeric identification number known as Invoice Reference Number, also known as IRN to manage these invoices. 

The Finance Secretary Ajay Bhushan Pandey stated that the government would roll out the electronic invoicing system for all business-to-business (B2B) transactions under the Goods and Services Tax regime from April 1, 2021, that will replace physical invoices. He also quoted that ‘It replaces the physical invoice and will soon replace the existing e-way bill system and taxpayers will not have to generate separate e-way bills. Therefore e-invoicing seems to be an exceedingly progressive system and soon, more medium and small businesses will need to adapt to this regime. The government has introduced this schema bearing in mind many advantages both for the business and the tax administration. This new tax regime is indeed opening up a new door for paying taxes with ease and enables and ensures the standardization of invoices 

Advantage of E-invoicing 

Curb tax evasion 

With the adaptation to e-invoicing, the lesser will be the chances for tax evasion through invoice scams. Under e-invoicing, the invoices are generated in real-time and before a transaction is carried out, thus preventing any opportunities for fake invoice claims. 

Real-time tracking of invoices 

In e-invoicing, buyers and sellers will have access to real-time information of the invoices. Thus, allowing faster availability of input tax credit on the recipient’s side  

Reduction in data entry errors 

Under the e-invoicing system, due to the auto-population of data, the need for manual data entry is minimized.  All invoices under this system will be authenticated and transferred to the GST portal and e-way bill portal on a real-time basis, thus reducing the need for multiple entries and reducing chances for data entry errors. 

Auto-generation of GST returns

Under e-invoicing, the taxpayer needs to report the invoices only once, because of authentication, the invoices’ details will be auto-populated on the taxpayers GSTR1. Therefore, the GST returns will automatically be ready for filing under this new GST system. 

Standard reporting and no duplication

Here in e-invoicing B2B invoices are recorded only once. It will eliminate the chances of reporting the bill in multiple formats and ultimately reduce the chances of errors and duplications. 

No Reconciliation

The chances for data reconciliation between the books and filed GST returns are diminished due to e-invoicing. It will resolve data reconciliation for GST and reduce the chances for mismatch errors 

Saving time and effort

With the e-invoicing, GST returns are auto-populated, e-waybill is done away with, and the need for reconciliation is eliminated. It saves lots of time and effort for the business.  E-invoicing is capable of bringing ease to the taxpayers. There are no more issues like the supplier not filing the return, which delays the buyers’ input credit.   

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