The new GST electronic invoice system is aimed at reducing GST manipulations through fake invoices, but the changes that the government is bringing to the system are posing challenges to businesses on the technology and cost front.
The government first made the GST e-invoice mandatory from April 1 this year for taxpayers with annual aggregate turnover of over ₹100 crore. These invoices will be authenticated electronically by GSTN for further use on the common GST portal. However, last month it decided to not only extend the date of execution of the new system to October 1 but also changed the threshold of the annual turnover for generating e-invoice to ₹500 crore.
The e-invoicing will be done from Enterprise Resource Planning software that organisations use to manage daily business activities like accounting, procurement, supply chain operations, project management, risk management and compliance.
With the implementation of e-invoicing under way, businesses continue to have concerns and face uncertainties about the process, Deloitte said in a report.
Some companies falling in the ₹100 crore to ₹500 crore bracket that started planning the new implementation with their technology partners and updating their system with the required changes, suddenly found themselves out of the e-invoice system.
“We have a group of nine companies and already planned for testing the new system with our technology partner but now as we have to exclude the companies with annual turnover below ₹500 crore, there is a lot of rework that is needed to be done,” said Soumik Roy, tax head of Goodricke group. The cost structure for availing the vendor’s services will also change, he said.
“It is a big dilemma for the companies nearing turnover of ₹500 crore as they still don’t know if in future the government falls back to the ₹100 crore mark,” said Narendra Venugopal, national sales head, WeP Solutions Ltd., a software solution provider that facilitates the e-invoice system. It also has cost implications as these companies have already paid a part of the Installation cost, he said.
Although the software providers have made provisions to accommodate such changes in the future, automation will take time. “Implementing the automation part takes four to five weeks,” said Mr. Venugopal.
Even companies with an annual turnover of ₹500 crore and above which are eligible to start the new process have to rework with their technology partners as the government continues to bring changes in the new system.
“It takes time to implement a change depending on the magnitude of the change,” said Mr. Venugopal. “It took us around 45 days to develop the software solution based on the API changes,” he said. The government had released new API specifications for e-invoicing in May.
The Central Board of Indirect taxes and Customs (CBIC) has also notified a new refined format of e-invoice last week. It has added 20 new fields, removed 13 fields and even changed the character length in certain fields.
Integration of the new QR code requirements for corporate tax with GST, implementing of a robust technological structure with minimal problems, treatment of industry-specific exemptions under e-invoicing are the other concerns, Deloitte said in a report.
The new step will also have its impact on the way companies select their vendors.
Companies would prefer doing business with the big vendors who fall in the category of those required to generate e-invoice rather than those vendors below an annual turnover of ₹500 crore who can do without the new invoicing, said Mr. Roy of Goodricke group
“We will have to think before doing business with a vendor who is not required to generate e-invoice as the risk of fraud transactions can be there and we might have to return the GST input tax credit in such cases,” he said. “This will hamper our cash flow”.
How the e-invoice system works
As companies start generating e-invoices whenever they sell products or services to their business clients, these invoices will be authenticated electronically by GSTN for further use on the common GST portal.
This live tracking of each transaction reduces the risk of fraud, denying extra time to the sellers to manipulate their sales bills unlike in the previous system where audit teams would visit them at a later stage.
It will also eliminate the need for manual data entry while filing GST returns as the information is passed directly to the GST portal.
Under the proposed e-invoicing system, an identification number will be issued against every invoice by the Invoice Registration Portal (IRP) to be managed by the GSTN. All invoice information will be transferred from this portal to both the GST portal and e-way bill portal in real time.
E-invoicing is intended to streamline tax payments, enhance tax collections in the longer term and self-regulate the system for claiming GST input tax credit, Deloitte said.
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