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GST e-invoicing module- Curbing tax evasion

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E-invoicing is a common B2B practice involving exchange of an invoice between a supplier and a buyer in an integrated electronic format. Businesses may have a number of reasons to use e-invoicing. Commercial considerations are likely to drive a company’s decision to adopt e-invoicing, as the administrative costs and processing times for issuing and processing electronic documents are typically far lower than those for traditional paper documents. The savings come not only from reducing printing and postage costs, but also from adopting integrated processes for all invoice-related tasks. Since the introduction of GST (Goods and Service Tax) in the Indian taxation system, GST officials have been diligent to work out a mechanism to stop tax evasion in India. There have been instances wherein tax fraudsters have been caught using fake invoices to evade taxes or claim additional ITC. And such occurrence was only possible in the absence of a proper mechanism to tackle such a situation on a nationwide level.  From now onwards, businesses will be generating full electronic- tax invoice (e- invoice) recording entire sales value. If the country adopts the system, businesses will likely have to issue invoices, or bills, directly via the GST network, and the data will be available to the authorities right away.

A committee has been set up by GST council to look into the feasibility of e-invoicing. E-invoicing is defined as a concept alike a mechanism to check tax evasion easing the compliance burden on businesses.  A software will be provided linked to GST or a government portal for generating e-invoice. The threshold can also be fixed on the basis of the value of invoice.

Qualitative and quantitative advantages
Below mentioned are some qualitative and quantitative advantages of GST e-invoicing:

  • Improved relationship with the suppliers and the customers.
  • Modernized the accounting function resulting in increased productivity
  • Limiting risks of error and strengthen the internal control system
  • Improvement in ecological image of the company
  • Refocusing the resources on rewarding tasks
  • Reduced deadlines and processing costs
  • Controlling the cash flows and improve the management of the working capital

Quick takeaway

  • Businesses will have to generate an electronic invoice either on a government portal or on the GST portal.
  • Business with turnover above the given threshold will initially get a unique number for every e-invoice generated.
  • The unique number can be matched with the invoices reported in the sales return and taxes paid.
  • The process of generating e-invoice would be similar to the one being followed for the e-way bill on ewaybill.nic.in or GST payments.

The proposed system of e-invoice will eventually replace the requirement of generation of e-way bill for movement of goods, as invoices would be generated through a centralized government portal. Currently, e-way bill is required for moving goods exceeding INR 50,000. Depending on the success of the project in the business to business (B2B) segment, the revenue department would be looking at extending it to business-to-consumer (B2C) sales, especially in sectors where the probability of tax evasion is high.

With almost two years into GST implementation, the government is now focusing on anti-evasion measures to shore up revenue and increase compliance. For multinational groups, considerations will include the commercial advantages and the mandatory obligations imposed in each jurisdiction where they do business.

The government is optimistic about e-invoicing after the successful launch of the e-way bill system in 2018. This process will help the government capture transactions instantly on their network and help in curbing tax evasion. Companies will also earn tax credits and compliance will be easier. E-invoicing will make things easier for businesses but it still needs time to be developed. “To the extent of e-invoices, data should be automatically populated in the GST returns and hence, compliance would be simplified. However, the industry needs to be given adequate time to prepare for this significant change. Another important consideration for each jurisdiction relates to the legal obligations for invoicing, including conditions imposed by the tax authorities, frequently for VAT (Value added tax) / GST accounting. This means that any solution must potentially be acceptable to administrations with different requirements and attitudes as well as to customers or suppliers.

If you are looking for more updates on e-invoicing or need any assistance in filing of GST returns, GST assessments and GST audits, GST advisory, our experts can assist your business with the assessment phase through operating implementation to meet the starting dates for E-invoicing.

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