e-Invoicing is the future of electronic billing, and numerous governments worldwide have embraced it. Since its first launch for B2B (business-to-business) transactions in 2020, it has seen a startling amount of implementation. The Goods and Services Tax Network (GSTN) implemented e-invoicing, which was gradually implemented for certain taxpayers registered under GST. The GSTN electronically authenticates all business-to-business (B2B) invoices under the new e-invoicing system. This article will walk you through the benefits of e-invoicing.
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What is e-Invoicing?
e-Invoicing is submitting GST document details to the government portal, the Invoice Registration Portal (IRP), to get a unique identification number for each invoice. The e-invoicing system reduces manual data entry by directly transferring the invoice data from IRP to both the GST and e-way bill systems. In the GST portal, the GSTR-1 form gets auto-populated, and in the e-way bill portal, part A of the e-way bill gets updated as per the e-way bill rules.
Benefits of e-Invoicing
The new e-invoicing system allows business-to-business (B2B) transactions to be electronically validated by GSTN before being used on the shared GSTN portal. A few advantages of e-invoicing are as follows:
- Transparency: Under the current invoicing system, there is no government proof of the exchange because the transaction between the supplier and the recipient is completed immediately. When an invoice is created via e-invoicing, it is posted to the GSTN site, pre-validated and assigned an IRN (Invoice Reference Number). The recipient will receive the tax invoice after the IRN has been issued.
- Real-time tracking: Real-time invoice tracking using e-invoicing helps to cut down on fraud and fake GST bills. Real-time tracking of supplier-prepared invoices is made possible by e-invoicing. This makes the input tax credit (ITC) available more quickly.
- Automation: The automation of filing GST returns is further enhanced via e-invoice. Currently, GSTR filing requires a lot of intensive, error-prone manual work. e-Invoicing can make this process simpler, faster, and more accurate. If an e-waybill needs to be issued, Part A will be updated. Annexe-1 of the Supplier will also be updated upon IRN issuance. The receiver’s Anx-2 will also be updated.
- Allows interoperability: All the e-invoices generated through the IRP follow a standard format, making it easy for different software to read, even if they are not generated from that software. This makes interoperability possible.
- Reduction in data entry errors: Under the e-invoicing system, the invoice will be uploaded to the common portal, allowing multifunctional reporting. All invoices will be instantly transferred to the GST and e-way bill portals after they have been verified. e-Way bills under the predefined e-way bill limit are generated using these details. When filing GST returns, this auto-population will remove the need for manual data entry and minimise data entry errors.
- Curbs tax evasion: Real-time data access will reduce the opportunity for invoice manipulation. As a result, there will be fewer opportunities for fraudulent GST invoices, and only legitimate ITC claims will be accepted. The availability of output tax and input tax credit details facilitates the ease with which tax authorities can track fraudulent input credits.
Conclusion
e-Invoicing contributes to the advancement of the digital economy. It may be possible to prevent future increases in GST rates by the government by reducing tax evasion and boosting tax revenues. Every type of invoice, including credit or debit notes and car invoices, can be converted into an electronic invoice. Data entry errors will be reduced, if not eliminated, improving the overall efficiency of the invoicing framework.
