Indirect Tax News - February 2020

E-invoicing under GST Law

In 2017, India witnessed one of its most significant fiscal reforms in the form of introduction of the Goods & Services Tax (GST). While the Government has been proactive in addressing some of the teething troubles associated with the introduction of the GST, there have been concerns about the revenue growth under GST. Further, as in the case of many global economies, India too has been passing through slower growth due to the prevailing geo-political situation and a weakening in demand. To counter the revenue leakage and simultaneously ease the compliance burden of GST registrants, new reforms have been proposed in the compliance structure and reporting of transactions and are mandatory with effect from 1 April 2020.

India has introduced ‘e-invoicing’ or ‘electronic-invoicing’ for GST for certain categories of taxpayers. This new system applies to those whose aggregate turnover exceeds INR 1 bn. India is implementing e-invoicing in phases.

Under the new system, e-invoicing will not involve generation of invoices through the tax authorities’ common portal. Instead, it will involve the reporting of specified information contained in invoices generated in the taxpayer’s enterprise resource planning (ERP)/accounting system, to the government’s common GST portal.

Presently, transactions between a buyer and seller are not pre-authenticated by the Government. As well, the current system mandates reporting of data separately for GST returns and for generation of electronic waybills (‘e-way bills’) as these reporting systems envisage different sets of information.

Under the new system, business transactions will be recorded electronically in the portals maintained by the Government. This will enable tracing of a complete trail of business-to-business (B2B) transactions to help eliminate fake invoices and fictitious Input Tax Credit (ITC) claims, as well as allow real time data access by tax authorities and elimination of reconciliation needs.

The new system is a significant step towards digitisation in an effort to efficiently manage the voluminous business transactions and eliminate non-standardised formats used in invoice generation. The new system will also provide inter-operability across the GST ecosystem. In addition, the new system of e-invoicing aims to make invoice reporting an integral part of the business process and to reduce the impact of the tedious task of invoice-compilation at the end of the tax period.

Though e-invoicing is a laudable move by the Government, many challenges lie ahead. Taxpayers will have to tailor their billing system in accordance with e-invoicing needs and real-time reporting, as well as train stakeholders.

It is important that businesses not treat implementation of the e-invoicing system as merely a tax compliance process. Instead, it should be recognised as an initiative that will transform the entire business process, requiring the attention of the entire senior management team, from marketing/sales, to logistics, finance, tax, and IT systems.

Dinesh Kumar B