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Issues and Concerns surrounding e-Invoicing System

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A new concept of e-invoicing has been introduced under GST. It has come into practice on a voluntary basis from 1 January 2020 for taxpayers with turnover over Rs 500 crore. It has been made available to those taxpayers having more than Rs 100 crore turnover from 1 February 2020 onwards.

Earlier, all taxpayers with an annual aggregate turnover of over Rs 100 crore had to begin generating e-invoices from 1 April 2020 compulsorily. However, this requirement has been made mandatory from 1 October 2020 for the taxpayers whose turnover in the financial year 2019-20 was Rs 500 crore or above.

Latest Update as on 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 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.

Latest Update as on 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 the insurance, banking, financial institutions, NBFCs, GTA, and passenger transportation service, etc.

Some of the issues which will be faced by the taxpayer on the implementation of new provisions of e-invoicing are discussed below: 

Crucial changes to the ERP System and Integration:

Businesses must integrate their ERP systems with that of IRP/GSP/ASP to allow a smooth flow of invoice data to IRP and e-invoices back to the ERP system. The GSTN has released APIs for the purpose. As most of the ERPs’ used by various enterprises can be customized, it provides leeway for making changes as per the standard invoice schema. Also, the printing of the QR code (scanning this QR code identifies the IRN)  on the current invoice format is necessary.

Sorting of B2B and B2C Invoice:

E-invoice applies only to B2B invoices and not B2C invoices. Thus, B2B requires both the e-way bill and e-invoice, whereas B2C only requires an e-way bill. In most of the cases, the transporter ID will need to be mentioned at the source in cases where e-way bill generation is required. Hence, sorting of invoices will be required and needs automation to some extent, without which a lot of time and effort gets invested.

Cancellation and amendment of e-invoice:

An e-invoice cannot be partially cancelled. Even for a small change, it needs to be entirely cancelled. Cancellation of e-invoice is allowed on the IRP within 24 hours. After 24 hours, the cancellation cannot be made on the IRP; it needs to be done in the GST portal. A taxpayer will then have to revise the invoice number in addition to fixing the errors and raise an e-invoice on IRP.

An alternate arrangement for storage of data:

On the IRP, the data will remain for only 24 hours. Thus, an alternate arrangement for archiving needs to be set up.

Implementation issues:

The capacity for the upload of e-invoices is based on the GSTR-1 data submitted over the last two years.. Hence, if the GSTN expects a higher number of users, it should also be prepared with up-to-date technology to ensure minimum downtime as the same will impact the compliance negatively.

Reconciliation of e-invoice data on GSTR-1 and e-way bill site:

In case the GSTR-1 is updated after the invoice has been uploaded into the IRP, both versions will be kept available in the GST system. Thus, a reconciliation of both is required to be done separately by the taxpayer, with the support of tools or utility.

Non-applicability of e-invoicing to B2C transactions:

The maximum amount of fraud happens 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.

Questions that remain unanswered: 

Also, there are certain questions which remain unanswered like- Will the auto-populated data in the e-way bill be revoked when an e-invoice is cancelled due to incorrect details?

GSTN has proactively been answering FAQs, and we can only expect increased awareness programmes in the coming weeks.

Workflow changes to process other types of documents:

As mentioned earlier, e-invoicing applies only to B2B invoices. Thus, a separate workflow must be in place for delivery challans, bill of supply, job work and other similar transactions. Creating a different workflow for various types of transactions requires a lot of time and effort.