Advantages and Disadvantages of E-Invoicing System Under GST

Under the new e-invoicing system, all business to business (B2B) invoices get electronically authenticated by GSTN. As done in the past, all businesses can continue to generate invoices on their respective ERP.

All ERP providers must make changes to their schema to adapt to the new standardised format. This new schema will ensure the standardisation of invoices. This article takes you through the advantages and disadvantages of the newly introduced e-invoicing system.

Latest Update

10th May 2023
CBIC notified the sixth phase of e-invoicing. Henceforth, taxpayers with INR 5 Crore+ turnover in any financial year from 2017-18 must issue e-invoices w.e.f 1st August 2023.

6th May 2023
The GST Network has deferred the implementation of rule to fix time limit of 7 days for reporting the old e-invoices on the IRP portals by three months. Further, the department is yet to announce the new implementation date.

13th April 2023
The GSTN released an advisory on 12th and 13th April 2023 stating that taxpayers with an annual turnover of Rs.100 crore and more must report tax invoices and credit-debit notes to the IRP within 7 days from the date of issue of the invoice/CDN from 1st May 2023.

1st August 2022 
The e-Invoicing system for B2B transactions has now been extended to those with an annual aggregate turnover of more than Rs.10 crore up to Rs.20 crore starting from 1st October 2022, vide notification no. 17/2022. 
 

Advantages of the e-invoicing system

1. Real-time tracking of invoices: e-Invoicing allows real-time tracking of invoices prepared by a supplier. This allows for faster availability of input tax credit (ITC).
2. One-time reporting of B2B invoices: Under e-invoicing, a taxpayer has to report the invoices just once, and get it authenticated by the Invoice Registration Portal (IRP), which validates the invoice and issued the Invoice Reference Number (IRN). Upon authentication, the details will be auto-populated to the GSTR-1 return. This reduces the manual reporting process that was previously carried out.
3. Easy creation of e-way bill: e-Invoicing facilitates the easy generation of the e-way bill as the taxpayer has to just update vehicle details. The details in Part-A of e-way bill will get auto-populated from e-invoice authenticated from the GST portal.
4. Helps the buyers: e-Invoice once uploaded on the GST portal for authentication will be shared with the buyer as well on his e-mail ID mentioned on the e-invoice. This will help the buyer to reconcile his purchase order with the e-invoice and also accept/reject the invoice on a real-time basis.
5. Reduction in frauds: Real-time availability of data with tax authorities will lead to a reduction in frauds.
6. Reduction in data entry errors: Under the e-invoicing system, the invoice will be uploaded on the common portal, which will facilitate multipurpose reporting. All invoices once authenticated will get transferred to the GST portal and e-way bill portal on a real-time basis. This auto-population will eliminate the need for manual data entry while filing GST returns, and reduce data entry errors.
7. Allows interoperability: As the e-invoices are generated in a standardised format, the invoice generated from one software can be read by different software as well. This allows interoperability.
8. Curb tax evasion: Real-time access to data will lessen the scope of manipulation of invoices as the invoices will get generated before carrying out a transaction. This will further reduce the scope of fake GST invoices, and similarly, only genuine ITC can be claimed. As the input tax credit and output tax details are readily available, it becomes easier for the tax officials to track fake input credit.
9. QR code: The GST invoices are essential for calculating the amount of ITC. An assessee may misplace an invoice that was issued or may require additional copies of the same invoice. In such cases, the QR code will be of great help. By scanning this code, the assessee can generate the invoice any number of times in a PDF format.

Disadvantages of e-invoicing system

The main purpose of the introduction of e-invoicing is the reduction of tax evasion. But, the new system only facilitates e-invoicing of B2B invoices and not B2C invoices. The maximum number of frauds happen in B2C invoices as no ITC is involved. Thus, such a system should come into force which allows customers to report non-compliant invoicing and thus help to curb tax evasion at its source.

Another disadvantage is that an archiving option is not available on IRP. It has no mandate to store invoices for more than 24 hours.  To know more about the disadvantages of the e-invoicing system, please read our article – ‘Issues under the e-invoicing system’