Will e-invoicing under GST help businesses in the long run?

E-invoicing under the Goods and Services Tax framework was voluntarily introduced in January 2020 and was expected to be enforced in April 2020. However, this deadline has now been further pushed and is expected to be implemented in October 2020. In the meantime, the Centre has set up an Offline tool to help taxpayers get acquainted with the new e-invoicing system and the standardised e-invoice format.

E-invoicing is expected to be highly beneficial for both the Centre as well as the taxpayers. While the Centre is implementing this system for helping curb tax fraud and tax evasion, the question remains, is this new system beneficial for taxpayers? The answer is yes. Absolutely! While it will take some time to adapt to this new system, the results will be beneficial for businesses in the long run. Let’s take a look at the benefits of e-invoicing.

Reduced errors
In B2B transactions that use e-invoicing, data is sent directly from the supplier to the buyer’s AP system, eliminating the need for manual and multiple data entry. Similarly, once the taxpayer starts generating an e-invoice, they will be required to report B2B invoice data just once. This will subsequently reduce reporting in multiple formats viz. one for GSTR-1 and another for e-way bills. Adapting to an e-invoice system will encourage system automation - an efficient and time saving process. This means freedom from time consuming data are-entry that is prone to human errors.

Automation gets a boost
While it is common knowledge that adapting to an e-invoice system can eliminate multiple data entry while filing GSTR-1 and can save time, this system can also use the same data for issuing e-way bills. But that’s not all it does. Adapting to this system expands your avenues for other tax returns as well. The same data can be auto populated while filing ANX-1 viz. sales and ANX-2 viz. purchase register. This data will also help you while filing tax returns under GST.

Pre-validation leading to fewer disputes
Taxpayers will witness a substantial decrease in issues around verification of input credit as data from the e-invoice will not only be reported to the tax department but will also be sent to the buyer in their purchase register (inward supply).

Better account reconciliation
Because the data from the e-invoice is sent to the buyer under the e-invoicing system, there is an opportunity for reconciliation with the purchase order i.e. accept or reject the data in real time. This reduces the scope for errors while filing GST returns.

While the benefits are plenty, it does not mean that there wouldn’t be any challenges while adapting to this system. It will require good network connectivity, a certain amount of training and definite changes to the current practices. But once, taxpayers actively start adapting to the practice of e-invoicing in everyday business operations, they will find that the entire tax function becomes a lot more efficient, open to automation along with a reduced scope for errors thereby delivering better compliance, making it a win-win for taxpayers in the long run