Government of India announced the adoption of electronic invoicing (E-invoicing) from 1st Jan 2020. The benefits expected from E-invoicing system include reduced payment cycles, quicker input tax credits, better compliance, lesser errors etc..
It is important for companies to adopt E-invoicing, prepare accounting/ERP systems ready for this very important compliance
The new e-invoicing system proposed by the government mandates that an invoice file with parameters (Json File) with an Invoice Reference Number (IRN) shall be submitted to the Invoice Registration Portal (IRP) or it can be created at the portal. To generate the IRN, GSTIN of the company, the financial year and invoice number are the base parameters.
GST council of India had proposed E-Invoicing as invoice reconciliation between companies became a big issue and many fraudulent activities were reported in the past, also that many companies faces problems in getting proper input credit. To avoid these, the council suggested to have a system which enables interoperability between the systems used by companies and report the invoices in a unified format to the government through a dedicated portal. This will solve problems exists in getting GST credits due to mismatches in data, delay in filing etc.
The major benefit is the easier compliance achieved to GST taxation system. Since the invoice is available to the buyer instantly, reconciliation is not required or it is become very easy. Further, because only an invoice registered on the IRP is a legally valid invoice, the instances of fake invoices will go down. This streamlines the GST input credit saving money and huge effort for this. The entire process become paperless and easier to manage. This can help companies to raise working capital or to facilitate bill discounting etc as the banks and financial institutions can take it as a proof for the sales transaction. In future E-invoicing will help to reduce the burden of compliance significantly, mainly while interstate transportations are happening. The e-way bills can be generated using the E-invoices.
Since the data is available to tax authorities, there audits and surveys will come down drastically.
Quicker GST input credit as it is instant matching of invoices and acceptance by the buyer.
Controlling, monitoring and curbing tax evasion in the following ways: