The new invoicing system under GST would be made mandatory from 1st October 2020 for B2B companies with an annual turnover of up to Rs. 500 crores. Read this post to know how this new e-invoicing system works and what are its top benefits.
Since the introduction of GST, a major problem for businesses, stakeholders, and even the GST Network was processing invoices generated through the various invoicing systems. Even the invoices generated by automated invoicing systems required manual data entry to make them eligible for other invoicing systems.
This made the whole process of invoicing highly time-consuming and prone to errors. It also provided businesses with loopholes to evade taxes. The Central Bureau of Indirect Taxes and Customs (CBIC) and the GST Council introduced electronic invoicing or e-invoicing to eliminate this problem. Take a look at how this new invoicing system works and what are its top benefits-
Working of the New e-Invoicing System
The e-invoicing system introduced a unified invoicing format. All B2B companies should use this single format for generating and reporting their invoices. The accounting and invoicing systems used by the companies should comply with this e-invoicing format to ensure that the software solutions and the GST Network accurately read all the invoices without any manual interference.
Once the e-invoicing system is implemented by the GST Council on 1st October 2020, all the eligible businesses will have to report their invoices and documents, like supplier invoices, credit notes, debit notes, etc. in the prescribed format on the official Invoice Registration Portal (IRP). A signature and a QR code will be added to every invoice on successful validation.
Benefits of e-invoicing
- Improved Business Relationship
As businesses will use a single invoicing format, it will help improve their relationship with other businesses, stakeholders, banks, investors, and auditors. There will no longer be a need to first convert the invoice into a different format for accessing the invoice details.
Moreover, small GST-registered businesses that do not use accounting solutions are provided free ERP/accounting systems by the government for boosting the ‘Digital India’ initiative.
- Transparent and Accurate Invoicing
With the new electronic invoicing system, the whole process of generating invoices for monthly GST filing will be automated. This will help avoid manual data entry errors, reduce costs, and accelerate the invoicing process.
While it might take some time for businesses to comply with this new reform and will also require investment and training, it will ultimately make invoicing more transparent and accurate.
- Prevent Tax Evasion
We regularly come across cases involving tax evasion through fake invoicing. But with the new invoice management system under GST, every invoice needs to be validated on the IRP. The automated system will make it easier for the council to prevent tax evasion through fake invoices.
This makes e-invoicing a significant step by the GST Council towards curbing tax evasion, which results in losses amounting to hundreds of crores every year.
Ensure e-invoicing compliance with an automated e-invoicing solution
The most hassle-free and efficient way to comply with the new electronic invoicing norms is through an automated e-invoicing solution. No matter what industry you are involved in or what type of accounting software you use, the e-invoicing software will ensure seamless and secure compliance.
Once the new invoice management system is implemented, non-compliance could result in legal and financial consequences for your business. Look for a reputed e-invoicing solution to add more transparency and efficiency to your invoicing process, while also positively contributing towards nation-building.