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Contributed by CA. Manoj Mehta
In Common parlance the concept of E-invoicing (Electronic invoicing) is the exchange of the invoice document between a supplier and a buyer in an integrated electronic format. This is slightly different from the current Digital Invoice which is shared in a PDF/ Web or other formats. Infact traditional invoicing is heavily paper-based process and also manually intensive prone to human error resulting in increased costs and processing lifecycles for companies. Read on …
The true definition of an electronic invoice is that it should contain data from the supplier in a format that can be entered (integrated) into the buyer’s Account Payable (AP) system without requiring any data input from the buyer’s AP administrator other than Approval for posting. Each Country have defined a standard and adopted the same. Recent adoption in the Asia Country is by Singapore who has used Pan-European Public Procurement On-Line (PEPPOL) Standard. Globally accepted standard on e-Inovice, is Univeral Business Language (UBL). All these standards aim to having a common business language. These standards are aligned with the local laws by each country. After implementation of this standard all accounting application will generate same electronic version of the Invoice. In the current system India, each ERP has their database and the eVersion of the Invoice be it XML / JSON or any other format would have different header or nomenclature, which leaves no room for interoperability. The machine readability and uniform interpretation is the key objective of e-Invoice.
e-Invoice in India
In the 35th GST Council Meeting , the introduction of ‘E-invoicing’ or ‘Electronic invoicing’ has approved and planned in a phased manner for reporting of invoices to GST System before issuing to the customers. It was decided to start E-invoicing from 1st January, 2020, on voluntary basis and mandatory from 01st April, 2020. Since there is no standard for e-invoice, existing in the country, standard for the same has been finalised after consultation with trade/industry bodies as well as ICAI, after keeping the draft in public place.
implement E-invoicing
CBIC issued 5 notifications on 13th December 2019, bearing numbers 68/2019 – Central Tax to 70/2019 – Central Tax, to implement the provisions of E-invoicing. Notification No. 02/2020 – Central Tax has notified the Schema. Summary of these notifications are as follows.
Salient Features of E-Invoice
Workflow of E-invoice
The flow of the e-invoice generation, registration and receipt of confirmation can be logically divided into two major parts.
Process Flow
Generation of e-invoice will be the responsibility of the taxpayer who will be required to report the same to Invoice Registration Portal (IRP)
Amendment/cancellation of e-invoice
Challenges Ahead
Cost to businesses: The existing ERP system must be re-configured in view of requirement of seamlessly sync with IRP. It will have one- time cost, most as well recurring cost. A large group having different business verticals within the group, may have varying demands for invoice generation, which would require additional customisation of commonly maintained ERP systems Operational Challenges: The scheme issued for E-invoice is having many optional fields. Businesses will also have to look at the requirements for skill development and further upgradation for Staff concerned with invoice generation and accounts.
Additional technological upgradation can also be undertaken to automate processes such as payment, reconciliation with PO raised by buyer as well as bank statement to fully realise the benefits of the transition.
Way forward
The introduction of e-invoicing, promises to be the most significant step since the introduction of
the GST. The businesses must understand the proposed system at its very inception, so that adequate preparation can be taken care of.
In sum, this must be seen as a tax compliance tool evolved as a technological solution.
The data requirements as mentioned in the schema provided by GSTN, have to be understood thoroughly. This requires a high degree of standardisation of invoicing operations and will necessitate the involvement of various stakeholders including internal teams such as Accounts Receivable and Accounts Payable as well as external players such as customers, suppliers, etc.
In sum, this must be seen as a tax compliance tool evolved as a technological solution. E-invoicing is conceptualised to be a win-win situation; with digitisation resulting in ease of compliance for business, as well as real-time access to data, to tax administrators.
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