While one of the most significant reasons for the GST council to introduce e-invoice is to curb tax evasion, the new invoicing mechanism also offers several long-term benefits to the taxpayers. Take a look at how the new electronic invoicing mechanism can help businesses in the longer run.
According to a recent report, India loses an estimated $10.3 billion to tax evasion every year. The government has taken several measures in the last few years to reduce tax losses.
For instance, e-invoice was introduced for taxpayers on a voluntary basis in January 2020. From October 2020, electronic invoicing for B2B and export transactions has been made mandatory for taxpayers with an annual turnover of Rs. 500 crores and above. Similar invoicing mechanisms have been introduced in the USA and several European nations.
While the primary goal of e-invoicing is to reduce tax evasion, it has also simplified GST invoicing. In the longer run, the new invoicing mechanism is expected to provide businesses a number of valuable benefits, like-
1. Encouraging Automation
Filing GST returns is still a complicated and time-consuming process for the taxpayers. It involves a lot of manual entries, which are highly prone to errors. But electronic invoicing will encourage businesses to adopt automation solutions, leading to significant time and cost savings. As automation will minimize the amount of manual work, the speed and accuracy of creating invoices will also improve.
The electronic invoicing mechanism itself has been developed keeping automation in mind. For instance, if IRN is issued, the invoice data will be automatically updated in the supplier’s Annx-1. If an e-way bill is required, Part-A of the bill will be auto-populated based on the verified e-invoice. Even the recipient’s Annexe-2 will be automatically updated.
2. Seamless Interoperability
Another significant long-term benefit of implementing electronic invoicing is interoperability. With e-invoicing, all the invoices are created in a standardized format. This ensures that every invoice created by any software will have universal readability and can be read by every other invoicing software.
While the implementation of e-invoicing will require taxpayers to update their current invoicing software and also provide adequate training to their staff, it is a one-time requirement that will continue delivering several benefits for years to come.
3. Improved Account Reconciliation
Every invoice registered on the GST portal for verification is shared with the buyers on their registered email IDs mentioned on the invoice in real-time. As a result, it is easier for the buyers to reconcile their purchase orders with electronic B2B invoicing. They can also accept or reject invoices in real-time.
Apart from making account reconciliation easier, it also helps reduce the scope for errors at the time of filing GSTR.
Taking Advantage of E-Invoicing
Electronic invoicing offers a host of long-term benefits to the taxpayers. But to take advantage of this new invoicing mechanism, taxpayers should first successfully implement the same by updating their current infrastructure.
An end-to-end automated e-invoicing solution is highly recommended to businesses wanting to successfully implement the new invoicing mechanism and comply with all the GST regulations.
With features like automated compliance management, custom APIs, and reverse integration with ERP systems, such solutions can help every business take advantage of e-invoicing in the most secure and seamless manner.
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