e-Invoicing Under GST | Impacts & Advantages in 2021
After involving businesses with an aggregate above 5 Crore, the number of e-Invoicing subscribers has increased notably.
This upsurge in the businesses eligible for e-Invoicing has also impacted the current GST return filings system.
e-Invoicing under GST is the new face of the GST structure and will soon apply to all the businesses irrespective of their turnovers.
Businesses should accept e-Invoicing with a positive approach for their benefit.
In this article, we will understand some of the direct impacts of e-Invoicing under GST and understand the benefits of this system on taxpayers and businesses.
e-Invoicing under GST allows paperless record-keeping of Invoices
In the world of fast-moving technology, everything is going online, and paper has reduced notably. There is no doubt that online record-keeping is more convenient, is accessible from anywhere in the world and is not very difficult to use.
eInvoice solution has provided these benefits to the taxpayers by allowing them to manage their invoices in a completely paperless way & not only manage but also authenticate their invoices from the IRP portal in a completely online environment.
This is a giant leap in modern technology, giving a complete reformation to the indirect taxation structure in India.
The businesses recently entered the e-Invoicing umbrella should see this as a positive step in GST structure and understand that this is for the benefit of the taxpayers in many ways.
However, there is always a condition for every good thing. Businesses must have a robust IT infrastructure in place to keep the e-Invoicing process flowing elegantly.
GST reconciliation becomes easier in e-Invoicing under GST
Hardly any taxpayer is unaware of the reconciliation process in GST.
Reconciliation is seen as one of the most crucial processes in GST, which is essential to file accurate tax returns.
Havinga proper GST reconciliation mechanism in place will always help you file the correct amount of GST returns and also helps you in getting the maximum eligible Input Tax Credit under GST o the tax paid.
e-Invoicing under GST has impacted the reconciliation process notably. The government has provided an auto-population of the e-Invoice data for the GSTR-1 of the taxpayer's GSTR-1 and the E-way Bill generation for the transport of goods.
This auto-population of the data is essential as it saves much time for the taxpayer that goes into re-filling the data in the GSTR filings or E-way Bill generation.
However, it is also crucial that the data furnished by the taxpayer to the Invoice Registration Portal (IRP) for e-Invoice generation should be accurate and well reconciled. There can be compliance issues on failure to do so.
Tax experts advise the taxpayers that using GST filing software can be the best way to avoid all the human errors and maintain 100% accuracy in data furnishing, as the e-Invoice data will have a long time impact.
Claims of Input Tax Credit under GST
As discussed above, e-Invoicing directly impacts the Input Tax Credit under GST. The auto-population of the e-Invoice data in the supplier’s GSTR-1 form and the recipient’s GSTR-2A will save much time for the taxpayers and eliminate the need to upload the same data twice.
Auto-population of the e-Invoice data will help eliminate the errors to a greater extent. However, the taxpayer should observe utmost diligence while furnishing the data to the IRP portal for an e-Invoice generation.
In GST Input Tax Credit, taxpayers rely heavily on their GSTR-2B to claim the eligible ITC, and this becomes accurate when their respective suppliers file the correct GSTR-1. Their supplier’s GSTR-1 will now be dependent on how accurately they generate their e-Invoices.
Hence, we would advise all the suppliers to have arobust system in place for an e-Invoice generation so that you could generate the e-Invoice right from your ERP and that too in bulk & without any error introduction.
GST return filing procedure will be revamped
The auto-population of data in the e-invoicing system has enabled the e-Invoice data to be auto fetched by the GST portal. At the same time, the e-Invoice data will partly be reflected when the taxpayer files his GSTR-1, i.e. his outward sales data, and then the same data will be reflected in the GSTR-2A of the recipient of the goods or services.
Hence, the manual data entry will be eliminated, and the taxpayers' efforts will also be minimized.
However, the e-Invoice generation portal (IRP) stores the e-Invoice data for only 24 hours.
This short period can be a problem for some taxpayers as there are very few modifications possible to the data furnished on the IRP portal.
Some e-Invoice generation APIs do store the data for a longer time in your ERP system so that you can access this data for future reference when you file your GST returns.
E-way Bill in GST
E-Invoicing is going to have a direct impact on the e-Way Bill generation.
The E-way Bill portal can directly use the e-Invoice data of the taxpayer to generate the E-way Bill to transport goods.
This data fetched from the IRP portal will make the E-way bill generation easier, thus allowing the authorities to check the authenticity of the e-Invoices with its unique IRN number.
The taxpayers should understand that merely the pre-populated data from the IRP portal will NOT be sufficient for generating an E-way Bill.
The taxpayers should provide all the necessary details like the route details, the recipient’s address, vehicle registration number etc.
The GST solutions like that of GSTHero will allow 1-click E-way Bill generation with its entirely automated solution.
Reverse Charge Mechanism in GST
Reverse Charge Mechanism in GST (RCM) is expected to be impacted due to e-Invoicing under GST.
The RCM invoices are also applicable for generating e-Invoices as the recipients of the RCM invoices are mandated to create e-Invoices for their inward supplies.
These e-Invoices can be further furnished while claiming Input Tax Credit.
GST Refunds
e-Invoicing applies to export invoices.
Businesses who can claim GST refundsbased on their Input Tax Credit, exports, Reverse Charge Mechanism, etc., will be impacted due to e-Invoicing.
Hence, the GST refunds depending on these invoices will also get impacted due to e-Invoicing under GST.
However, it is also important to note that the e-Invoicing will provide a platform to authenticate these receipts or invoices which will make these invoices valid and the unique IRN shall help in reducing the further scrutiny of the e-Invoices.
To Conclude
The government has introduced e-Invoicing to ease the painstaking efforts of the taxpayers. It is almost certain that the government will enable the e-Invoicing system for all the businesses irrespective of their annual aggregate turnover.
Instead of being sceptical about e-Invoicing, it is high time for small businesses to get themselves equipped with the required IT infrastructure and superfast automated eInvoice software like GSTHero.
e-Invoicing is here to stay, and it is for the taxpayer's good interests. Hence, having a good IT solution and all the necessary information will help you in e-Invoice generation and improve transparency in the GST structure.
Stay updated; stay ahead.
Until the next time….
