GST

Advantages and Disadvantages of E-Invoicing System Under GST

GST E-invoicing Advantages and Disadvantages

In the 35th GST Council Meeting, the GST Council implemented the E-invoicing system to apply to specified categories of persons. In the 37th GST Council Meeting, the standard of the new e-invoicing mechanism was discussed and approved, and the same, along with the scheme, has been published on the GST portal.

Further to the discussion held in the GST Council Meeting, a notification was issued on 21st March 2020 regarding postponing the implementation of e-invoices. Notification No. 13/2020-Central Tax came into force on 1st October 2020. Once your financial year’s aggregate turnover exceeds one hundred crore rupees, you’ll receive a notification that you’re part of a group of registered individuals who must prepare invoices and other prescribed documents. This crucial requirement helps to ensure compliance with relevant regulations and standards. These registered persons shall be registered persons except those referred to in sub-rules (2), (3), (4), and (4A) of rule 54.

In this blog, our focus is on understanding the advantages and disadvantages of E-invoicing under GST.

Advantages of E-Invoicing

  • Standard reporting and no duplication

Business-to-Business (B2B) invoices are recorded once only. E-invoicing has eliminated the need to report the bill in multiple formats, reducing the chances of errors and duplications. Therefore, it will facilitate interoperability.

  • Auto-Generation of GST returns
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E-invoicing will facilitate the proper recording of overall Sales and Purchases of a business. The result will be that GST returns will automatically be ready for filing under the new GST system. B2B transactions will auto-populate in ANX-1.

  • E-way Bill

E-invoicing will replace the e-way bill. It will facilitate the easy generation of e-way bills as the taxpayer must only update vehicle details. Part- A of the e-way bill will auto-populate from the e-invoice authenticated from the GST portal1.

  • No Reconciliation

E-invoicing reduces the chances of data reconciliation between the books and filing GST returns. It will resolve data reconciliation for Sales under the GST to reduce mismatch errors.

  • Real-Time

Input Tax Credit will be processed faster as there will be a real-time invoice entry from the supplier’s side, resulting in faster and more accurate credit availability to the recipient.

  • Curb tax evasion

E-invoicing will reduce the instances of tax evasion and fraud as the new process requires real-time data entries. It will reduce the probability of manipulation through invoicing scams.

  • Verifying the genuineness of the refund

As the input tax credit and output tax details are readily available for tracing, it becomes easier for tax officials to track fake input credits. Thus, verifying the genuineness of a refund for unutilized credit will be easy. 

  • QR Code

The QR Code is provided, with the help of which the invoice can be generated any number of times in a PDF Format. This comes as a rescue when the assessee misplaces the invoice issued or requires additional copies.

  • Reduction in data entry errors
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As the invoices, once authenticated, will be transferred to the GST portal and the e-way bill portal on a real-time basis and will auto-populate, there will be no need for manual entry, and this will, in turn, reduce the data entry errors.

Disadvantages of E-invoicing

  1. The E-invoicing system only applies to B2B invoices and not B2C invoices and bills of supply.
  2. Most frauds happen in B2C invoices where the question of availing of ITC is not involved. Therefore, the basic purpose or advantage of E-invoicing will be fulfilled only after complete implementation for all types of invoicing.
  3. Invoice Registration Portal (IRP) does not support the archive option. As per the rules, the IRP does not store invoices for more than 24 hours.

Conclusion

All-in-all, we can see that the advantages of e-invoicing are more than the disadvantages. So, e-voicing has the potential to reduce manual errors and curb tax evasion. It will also reduce duplication as the QR Code allows regenerating the invoice as many times as possible.

FAQs

  1. Is e-invoicing mandatory under GST?

    Yes, e-invoicing is mandatory for GST Taxpayers with an aggregate annual turnover exceeding INR 5 crores in any financial year for a B2B supply of goods or services.

  2. Is it mandatory to issue a tax invoice under GST?

    As per section 31 of the CGST Act, 2017, the issue of tax invoices under GST is mandatory.

  3. What are the benefits of e-invoicing under GST?

    The benefit of e-invoicing under GST is that it provides a standard reporting method and auto-generates GST Returns.

  4. What is the concept of e-invoice under GST?

    E-invoice is a system under which B2B invoices are authenticated electronically by GSTM for use on the common GST portal.

  5. What is the limit of e-invoicing under GST?

    From 1st August 2023 onwards, the e-invoicing turnover limit has been reduced to INR 5 crores.

  6. What is the latest e-invoice rule?

    The latest e-invoice rule from 1st August 2023 is that all registered businesses whose annual turnover in any previous financial year from 2017-18 onwards surpasses INR 5 crore will have to generate e-invoice as a mandate.

  7. What is one downside of electronic billing?

    One downside of electronic billing is that it only applies to B2B invoices, not B2C invoices and bills of supply.

  8. What is one of the challenges faced by electronic invoicing?

    One of the challenges electronic invoicing faces is that the IRP does not store invoices for more than 24 hours.

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References

  1. https://www.gst.gov.in/

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