Why training your employees is the important while implementing e-invoicing?

It is being called the most significant tax reform system after the implementation of the Goods and Services Tax. After being successfully implemented in 100 countries, e-Invoicing was finally implemented in India in October 2020. This new tax reform system is expected to revolutionise India’s indirect tax administration. Let’s understand what e-Invoicing in a nutshell is.

E-invoicing involves the electronic authentication of a tax invoice. Once the tax invoice is validated, it is assigned a unique invoice reference number which is later used to track details furnished in the monthly tax returns and while generating essay bills. Learning from their past mistakes, the Centre has implemented invoicing in a phased manner so as to not overwhelm the bandwidth of the invoice registration portal. Presently, e-invoicing is only applicable on all business-to-business transactions and only to businesses with an annual turnover exceeding ₹500 crores. Companies falling under the annual turnover of ₹100 to ₹500 crore will be required to integrate e-invoicing into their business systems starting January 2021. This will later be extended to companies having an annual turnover under ₹100 crores from April 2021. e-Invoicing is also likely to expand its reach to all kinds of transactions moving forward viz. business to Government and business to customer.

This phased manner of implementation of e-Invoicing is an ideal mechanism to determine any glitches or pain points at all levels of operations including infrastructure, stakeholders and compliance. While infrastructure and compliance can be taken care of by technology, stakeholders who are working on generating e-invoices for their business also need to be actively trained to manage e-invoicing better.

What do employees need to know about e-invoicing?

It’s different from regular invoicing.

Under the previous traditional invoicing mechanism, employees had been tasked with creating and forwarding the tax invoice to their customers. However, after e-invoicing was implemented in October 2020, employees were required to deal with the additional tasks of uploading the data to the Invoice Registration Portal (IRP) and getting it authenticated or validated before forwarding the invoice to their customers.

There is a new standardised schema that must be followed.

In most cases, employees would have to deal with their Enterprise Resource Solutions Provider (this is keeping in mind that most of the companies have an annual turnover above ₹500 crore and as such require the services of an ERP) to ensure that an invoice was generated as per a prescribed format or invoice schema. But under e-invoicing, employees need to be aware of the standardised invoice schema prescribed by the Centre. It is also recommended that employees conduct random checks to ensure that the ERP is capturing all prescribed fields and furnishing accurate data as required by the Invoice Registration Portal. Employees must be made aware that any unresolved errors while carrying out e-invoicing can result in reconciliation issues while filing monthly tax returns.

There are significant new changes under the invoice cancellation process.

Unlike the previous invoicing system where invoices could be cancelled at the ERP level, things are significantly different under the e-invoicing regime. To cancel an invoice under e-invoicing, employees must be aware that e-invoice cancellation can only be done within 24 hours of e-invoice authentication. This is because the e-invoice data is auto populated while the business files its monthly returns. This means the data will be uploaded to the GST servers after 24 hours of issue of an invoice reference number. If an employee does have to cancel an e-invoice after 24 hours, they will be required to raise a credit note and furnish the same while filing GSTR-1.

Data will be auto populated while generating e-way bills.

Under the previous invoicing system, a business would have their ERP connect them to the e-way bill portal to generate e-way bills. But once the e-invoices are authenticated, that data will be auto populated on to the e-way bill portal. Obviously, employees will still need to manually provide transportation details and only then an e-way will be generated.

Why is training employees about e-invoicing important?

The new tax reform of e-invoicing is expected to bring about a paradigm shift in India’s indirect tax administration. e-Invoicing is not just going to bring about changes in the way invoicing happens but will also bring about significant changes to several aspects of GST compliance. As executors of tax operations for a business, an employee will play a key role in the successful integration of e-invoicing in the business systems which will further play a crucial role in the successful filing of GST returns and movement of goods for a business. This makes it very important for businesses to ensure that they set up a standardised protocol which will ensure that employees are well trained and well aware of the kinks of the e-invoicing mechanism. This will significantly reduce issues of reconciliation and streamline tax operations for the business.

E-invoicing is all set to be extended to businesses with an annual turnover under ₹100 crores starting January 2021 and now will be a good time for businesses to start training their employees so that they don’t hit the ground running on January 1, 2020.