What Is E-Invoice System under GST, Its Benefits and Significance in Business
The CBIC has made e-invoicing mandatory for the taxpayers who are having more than 50 crores of turnover from the 1st of April 2021. According to the report, 75,000 GSTINs (belonging to 25000+ units /PANs) with more than Rs 100 crore turnover have reported invoices on the Invoice Registration Portal (IRP) so far. The report says, about 7.3 crore IRNs (invoice reference numbers) are being generated every month (since January 2021). Now, from 1 April 2021, businesses with a turnover of 50 to 100 crores will also be able to take advantage of the new e-invoicing system.
E-invoices are digital forms of invoices featuring reporting of the invoice details on the notified government portal and generating unique reference numbers. In simple terms, it is a uniform standard of invoices that is recorded at the government portal. The standard e-invoicing is mainly based on the Universal Business Language (UBL), which is highly compatible with the functioning of Indian business. The new e-invoice standard paves the way for 'machine readability of invoices and urgent 'interoperability between businesses. That means, by allowing direct broadcast of invoices digitally from one accounting / ERP system to another, E-invoices can be obtained/downloaded by enabling the recipient or Recipient Business to download the signed invoice JSON directly from the GST system.
Benefits of e-Invoicing and its Significance in Businesses
The new standard of E-invoicing has several advantages. Precisely, because of this, tax compliance is becoming a part of the business process. In fact, many other vital things like GST returns pre-file, auto-generation of the e-way bill (where required), reduction in frauds and tax evasion, etc. are becoming possible due to the new standards of e-invoicing. This will become more significant when E-invoicing would replace the e-way bill system and the existing methods of filing GST returns, as indicated by the Government. While e-invoicing has some immediate benefits, it will have many far-reaching benefits for the entire business ecosystem.
Eliminate Data Entry Error
As E-invoices is paperless, it eliminates data entry errors, reduces reconciliation issues and disputes between transactions, accelerates payment cycles, reduced processing costs, and improves internal control. With all such facilities, it will help to boost the efficiency of businesses. These networks don’t only support the exchange of invoices, but also will be helpful in the process of other documents such as purchase orders and payments. Thus, it eliminates data entry errors in other processes too.
Help Businessmen Get Loan Easily
With the new standard of e-invoicing system, banks and financial institutions (FIs) can easily examine the financial health and compliance profiles of loan-seeking businesses. Banks will have access to relevant data to the settlement of tax proposals of SMEs. Banks, NBFCs, and other fintech players are adopting innovative digital technologies to streamline the collection and processing of financial information from various sources. Thus, they can better examine the financial health of businesses and offer loans based on their financial scores.
Enable System to Share data with Banks In Real-time
The new e-invoicing system is helping Banks and FIs in the country move from traditional asset-based/rating-based lending to cash flow-based lending. This is very beneficial for MSMEs. 'Slow paying' invoices were one of the major factors that were affecting the ability of MSMEs to convert trade receivables into liquid funds. As an account aggregator framework, e-invoicing will make it possible to share real-time invoice data with banks and FIs thereby enabling them to benefit businesses with easy financial assistance.
Integration with other platforms
E-invoicing has been introduced with many vital features including Integration with other platforms like existing ERP. Trade Receivables E-Discounting System (TReDS) established by RBI as a secure digital platform allows MSMEs to 'trade' their invoices and access finance at competitive rates. For this, suppliers will have to enter invoice details on TReDS portals. Once e-invoicing will be extended to medium and small businesses, the details of reported e-invoices can be obtained securely by TReDS digital platforms. This reduces the need for re-entry of invoice data on those portals
E-invoicing will be proved a game-changer in the coming times
The way e-invoicing is changing the transactional landscape and the pace of innovations being done with it, especially in the fintech partners, e-invoicing can play a major role in tax collections and offering ease in businesses. In view of this, it is very much possible that e-invoicing is going to be a game-changer in boosting the country’s economy.
