Advantages and Disadvantages of E-Invoicing System Under GST

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

The ERP providers have to 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

30th June 2021
The CBIC has issued a notification seeking to waive the penalty imposed on non-compliance of dynamic QR code provisions for B2C invoices between 1st December 2020 and 30th September 2021.

1st June 2021
CBIC has notified vide Central Tax Notification no.23 dated 1st June 2021 that the e-invoicing system shall not apply to a government department and local authority.

30th March 2021
The CBIC has issued a notification seeking to waive the penalty imposed on non-compliance of dynamic QR code provisions for B2C invoices between 1st December 2020 and 30th June 2021, provided the said person complies with the provisions of the said notification from 1st July 2021.

8th March 2021
The CBIC has notified that e-Invoicing will be applicable from 1st April 2021 for businesses with an aggregate turnover of more than Rs.50 crores (in any financial year from FY 2017-18 onwards).

29th November 2020
The CBIC issued a notification seeking to waive the penalty imposed on non-compliance of dynamic QR code provisions for B2C invoices between 1st December 2020 and 31st March 2021, provided the eligible registered person complies with these provisions from 1st April 2021.

10th November 2020
The taxpayers having an aggregate turnover exceeding Rs.100 crore should implement e-invoicing from 1st January 2021.

1st October 2020
The applicable taxpayers have been given a grace period of 30 days for generating an Invoice Reference Number (IRN). However, this grace period is valid for the invoices issued between 1st October 2020 to 31st October 2020.

30th September 2020
Now, the aggregate turnover should be checked from FY 2017-18 till FY 2019-20, for checking the applicability of e-invoicing. Also, the date of implementation of the dynamic QR Code for B2C invoices has been extended until 1st December 2020.

30th July 2020
1. A new refined format of e-invoice has been notified by CBIC adding 20 new fields and removing 13 fields. Certain fields have undergone changes in character length as well.
2. e-Invoicing system shall apply to those taxpayers with an annual turnover exceeding Rs 500 crore instead of Rs 100 crore.
3. Special Economic Zones (SEZ) units shall also be exempted from issuing e-invoices.

23rd March 2020
The implementation of e-invoicing and the QR code has been deferred to 1st October 2020.
Exemption from e-Invoicing and QR code has been granted to sectors such as insurance, banking, financial institutions, NBFCs, GTA, passenger transportation service and movie tickets.

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’

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