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E-invoicing under GST Scheme
‘E-invoicing’ or ‘electronic invoicing’ is a system where Business to Business invoices are authenticated electronically by GSTN for further use on the common GST portal. An identification number is issued against every invoice by the Invoice Registration Portal (IRP) which is ultimately managed by GSTN.
In the current situation, if a transaction is made between the supplier and the recipient, it is done directly without the interference of the govt. and govt. does not have any proof of the transaction. But with e-invoicing, it will be uploaded on the GSTN as soon as the e-invoice is made in real-time. It will be pre-validated by the GSTN and a unique reference no. (IRN) will be issued. With the help of it, the invoice will be shared by the recipient also.
The purpose of implementing e-invoicing is to have invoices in a particular format which could be readable and acceptable by different ERPs used across various companies. As this system is automated, it will bring more transparency, accuracy, and reduce the need for manual work and it will help in curbing tax evasion.
As e-invoice will have to be mandatorily generated by the GST portal, the tax authorities will have direct access to the transactions. It will reduce the chances of fake GST invoices and the only genuine input tax credit can be claimed. Since the input tax credit can be matched with output tax details, it becomes easier for GSTN to track fake tax credit claims.
Initially, the govt. has made e-invoicing mandatory for companies with turnover of Rs.100 crores or more implementing it from April 1, 2020, but now as per the notification published in July, the threshold has been increased to the companies with the turnover of Rs.500 crores or more implementing it from October 1, 2020. Units in SEZs, Insurance and banking companies, financial institutions, non-banking financial institutions, goods transportation agencies, and passenger transportation services will be exempted from e-invoicing and dynamic QR codes.
The problem with limited implementation is that where, large companies will have to implement it, but small companies who could be vendors/suppliers of these companies would not implement it in the first phase and the desired result of sales and purchase returns may not be achieved.
Experts say, instead of implementing it at the time of the pandemic, the govt. could have waited for another few months and implemented it for the wider section to serve the purpose. Implementing e-invoicing at the time of pandemic could be a challenging task, according to the experts.
E-invoicing can help businesses to cut costs and ensure that companies are paid faster. It will help businesses to reduce errors and to be more productive.
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