Although they have given relief to businesses, by deferring the mandate of QR Codes on B2C Invoices to December 1st, 2020.
e-Invoicing will have a mixed impact on businesses, but it will mostly ease the overall GST compliance, says business & GST analysts.
e-Invoicing will help ease up various aspects of GST such as Quick e-Way Bill Generation, Precise GST Filing, & Accurate ITC Claim.
The fact that e-Invoicing will enable businesses to claim maximum & accurate ITC is one of e-Invoicing's most salient features, as Input Tax Credit is linked directly with businesses' monetary aspects.
Let us see how e-Invoicing will help you claim 100% ITC.
e-Invoicing under GST- An Introduction
After a prolonged delay, e-Invoicing is finally ready to implement in India from October 1st, 2020, on large scale enterprises that have an annual aggregated turnover of Rs. 500 Crores or above.
Under e-Invoicing, businesses will have to generate invoices in their billing systems in the specified SCHEMA format that is standard for all types of businesses & supplies.
Post creation, accountants will have to upload the JSON of the invoices on the e-Invoicing Portal or IRP (Invoice Registration Portal) for validating the invoices to find & eliminate errors.
The validation will check for errors in the supplier/recipient details, SCHEMA Format, missing mandatory fields, invoice & tax values, etc.
Upon successful validation, the IRP will generate unique IRN & QR Codes for the invoice converting it into an e-Invoice.
The accountants can download these e-invoices for further use.
Any invoice in any other format or without validation, IRN & QR Code shall be considered void, and any transactions carried out using such invoices will be considered as false.
Businesses will have to report the following documents on IRP for e-Invoicing-
e-Invoicing under GST is a standard process of generating & operating B2B Invoices, introduced by the GSTN back in 2019.
- B2B Invoices
- B2G Invoices
- Export Invoices
- Reverse Charge Invoices
- Credit Notes
- Debit Notes
e-Invoicing may look like it is a lot of work, but despite that, it will make overall GST compliance simpler in various ways.Read our articles Link-1 & Link-2 to understand the e-Invoicing process better.
8 Business Benefits of e-Invoicing under GST
There are more benefits of e-Invoicing than there are disadvantages, & here are 8 most substantial benefits of e-Invoicing for businesses-
All invoices of all businesses & all types shall be generated by the businesses in one specified standard format as provided by the Government. The same will make e-Invoice reading & accounting simpler in various billing systems. Having a standard e-Invoice format is better & more sophisticated than having multiple random formats.
Since all e-Invoices are validated for errors at the very beginning of the transaction process, there will be less chance of errors, making tax accounting simpler.
The IRP will also share the finished e-Invoices with the recipient via an e-mail, this is an effective step as the record is officially shared through the portal with the recipient via web in real-time, enhancing vendor compliance up to a large extent.
Data Auto-population in e-Way Bill System
The e-Invoice data will auto-populate in the e-Way Bill system & generate both parts of the e-Way Bill for all eligible e-Invoices. The e-Invoice format has also included the field of transporter details to generate Part-b of an e-Way Bill.
Data Auto-population in GST Return Filing
The IRP will also share the e-Invoice data with the GST Portal & auto-populate the details in the relevant fields of GSTR-1. This feature will be of great help for accountants & will be immensely beneficial in business tax accounting. GST Filing will become more accurate & effective due to e-Invoicing data auto-population.
Real-time data recording & validation
The e-Invoices will be recorded & validated by the IRP in real-time that will help businesses in steering clear of troubles caused by errors & missing invoices. With e-Invoicing, the transactional data will be more authentic & genuine.
Because the e-Invoice data will be in a relatively open arena & accessible to the supplier, recipient, & government officials, reconciliation will be more thorough & precise. Additionally, the data will auto-populate in the returns, so there will be less to no chance of invoices being missing. Also, the validations will ensure errorless e-invoices. All the three factors pile up together to make Reconciliation more advanced & accurate.
100% ITC claiming
With such accurate reconciliation, authenticity & precise accounting you will be able to calculate & claim 100% ITC for your Business.
Input Tax Credit Mechanism under GST:
Input Tax Credit plays an essential role in the business cycle.
In fact, ITC is the base of GST as it helps in overcoming the tax-on-tax effect.
From the business perspective as well, ITC plays a vital role, as it affects the business monetarily.
Businesses need to claim full & eligible ITC as it is the credit of the tax that they had already paid as an input in the making of a finished good.
However, claiming full & accurate ITC is a task for most businesses & accountants as it requires too much work, efforts, & time investment.
Accountants need to reconcile the data very carefully and as the volume increases, this gets even tougher.
And even after applied efforts, there is no guarantee that the reconciliation will be 100% precise that leads to businesses claiming over or deficient ITC, which is either legal trouble or monetary loss.
Hence it becomes very important for businesses to calculate accurate ITC through reconciliation.
Role of e-Invoicing in helping Businesses claim 100% ITC:
Although, e-Invoicing changes this to a large extent as it will directly affect the GST Return Filings that is the base of ITC reconciliation.
Basically, accountants reconcile GSTR-2A data with the purchase accounts books of the business to calculate ITC.
GSTR-2A data is auto-populated from the supplier’s GSTR-1, which can be erroneous & may miss out some invoices due to manual entry or accounting errors.
In such cases the recipients have to communicate with the suppliers & urge them to file their GSTR-1 accurately & furnish the missing details.
Post this, the accountants have to reconcile the data manually or using an external solution, which consumes their time, efforts & productivity.
All this is eliminated with e-Invoicing. The authentic e-Invoicing data auto-populates in the GSTR-1 of the supplier, this data is accurate as it is updated in real-time in the presence of Government officials, so there are no chances of accounting/manual entry errors or missing invoices.
As e-Invoicing will make GSTR-1 of the supplier accurate it will eventually make GSTR-2A of the recipient accurate as well.
With accurate & officially authentic data auto-populates in the GST returns of the taxpayers, it makes the GSTR filings more accurate.
With errorless GST return data, the reconciliation will be easier & more efficient up to a large extent.
Accountants will have to apply less energy in the task, & there will be lesser possibilities of errors & missing data making the reconciliation more organized & efficient.
With the improved quality of reconciliation, businesses will automatically be able to claim 100% & precise eligible ITC.
Ultimately, e-Invoicing will improve the cash flow of businesses as well as their relations with the vendors, whilst removing the extra time & effort consumption.So, e-Invoicing affects GSTR filing, reconciliation & ITC from the core making the compliance of these aspects of GST easier.
However, e-Invoicing itself is an additional compliance burden that may increase the work of accountants of a company.
The Government has offered many alternative solutions to make e-Invoicing simpler for businesses to comply with such as APIs, GSPs & ASPs.
GSP being the most reliable solution for e-Invoicing, businesses must choose the best & most relevant one for their business.
GSTHero is one of the best & most recommended GSPs in the market for its reliability & ever-updating features.
Here is why GSTHero is the best e-Invoicing Solution for your Business-
- Simple integration
- Data Security
- Direct integration with the IRP
- Scalable for high data volume
- Highly Automated- requires minimal human input
- Reduced Errors with automation
- Enhanced productivity of your accounts team
- Compliance in real-time
- Bulk Operations- Generate, cancel, print, validate & edit e-Invoice in bulk within the ERP
- Achieve 100% Compliance with e-Invoicing