With the final nod from GST Council, electronic invoicing or e-invoicing shall soon be a reality. A transformational move by the CBIC, e-invoicing can help curb tax evasion drastically and also bring efficiency and ease in GST compliance. Not only this but with e-invoicing, India can join the bandwagon of countries worldwide who have adopted universally accepted standards to streamline their invoicing, taxation and compliance reporting to the Government.
Is E-invoicing compulsory in India?
This new invoicing system is expected to be rolled out on a voluntary basis from January 2020 onwards. More information on the implementation model and final formats are anticipated to be released in the coming weeks.
Who defines the e-invoice framework?
After the go-ahead for e-invoicing mandate in India, GSTN along with the Institute of Chartered Accountants of India (ICAI) had published an e-invoicing draft for public consultation. The feedback thus received from the stakeholders, industry associations, businesses and technology enablers shall be incorporated to define the e-invoicing framework for India.
As the Government is working to get the implementation framework in place, let us get some fundamentals clear
How does an e-invoicing system work?
Generally, the e-invoicing implementation involves defining a standard format/data fields for an invoice, a centralised or federated approach for exchanging the invoice data between the supplier, a government body (or the Tax Authorities) and the recipient. Furthermore, the eco-system can also include technology enablers and system integrators for a smoother implementation process. Businesses send the standard data-fields as required by the e-invoicing system, which could be direct or through technology enablers and system integrators. Here a unique/standard number is used to identify and separate the documents from each other.
While the contours of the e-invoicing system in India are yet to be announced, the established network of ASPs and GSPs are going to play a critical role in the system.
What are the benefits of e-invoicing system for a business?
Inter-operability and seamless exchange of data are often the compelling reasons when it comes to implementing standards, not only to the Government but also to the businesses.
At the outset, it may appear to be an additional process that businesses need to follow and efforts will be needed to get data ready as per the specified e-invoice standard. However, with e-invoicing becoming an integral business process, it will have more benefits to offer, such as:
- Standardization: One format and standard data fields applicable to all businesses. Thus, eliminating the need to generate invoice data in varied formats and purposes.
- Seamless Reconciliation: Reconciliation and data verification between suppliers and recipient will be seamless and thus provide better control over input tax credit computation and claim.
- Automation: Auto-generation of Sales and Purchase Registers (ANX-1 and ANX-2).
- Lesser Compliance: Reduction in overall compliance burden.
- Information Availability: Near real-time availability of information to all the relevant participants in the supply chain.
On the other hand, the e-invoicing system will allow the tax authorities to keep a check on under-reporting and reporting of fictitious transactions, which probably can result in tax evasion.
Which e-invoice standard will be followed in India?
The standard for India is currently being formulated. Recently the e-invoice format and the specifications of the data fields in this format was released for public consultation
There exist various standards for e-invoice that cater to varied needs to countries and implementation agencies, there are various standards for an e-invoice. However, looking at the globally used standards, PEPPOL and UBL are indicative of preferable choices.
When GST was introduced in 2017, there was no standard format prescribed for invoices. Until now, the information specified under GST law and rules defined the general framework of invoices under GST. With e-invoice, a standard e-invoice format is expected.
With the implementation of these e-invoices, one can ensure:
- Inter-operability of E-invoices across the entire GST eco-system.
- Uniform machine readability and interpretation of invoice data
- Obviation of data entry errors in the absence of Standard language amongst various players in a business eco-system.
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