India takes a step towards digitalization as e-invoicing systems get implemented from 2020 in which B2B invoices are authenticated electronically by GSTN for further use on the common GST portal.

Fremont, CA: In the 37th GST Council meeting held in September, the decision to implement e-invoicing on a voluntary basis from January 2020 was taken. After consulting with relevant trade and industry bodies, as well as the Institute of Chartered Accountants of India (ICAI), the GST Council approved the standard for e-invoicing. The new e-invoicing system aims to make invoice reporting an integral part of a business process. Further, the implementation eliminates the laborious task of invoice-compilation at the end of a return period.  One of the biggest challenges faced by tax authorities is claiming fictitious Input Tax Credit (ITC) by raising fake invoices. The e-invoicing system will help reduce such fraud cases as the tax authorities will have access to real-time data.

GST Network (GSTN) has clarified that the adoption of e-invoicing standards will merely impact the standardization of invoices for easy data access and retrieval, without affecting its physical or printed appearance. Taxpayers will continue to use the existing ERP systems. However, the new standard with particular software in place makes data sharing and readability easier.  

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The implementation of e-invoicing makes the reporting of the invoices generated as per the standard in a central system called the Invoice Registration Portal (IRP) easier. The IRP produces a unique invoice reference number (IRN), and later the invoice is signed digitally, generating a QR code. The QR code consists of the essential criteria of the invoice, and it is sent back to the original taxpayer who created the invoice.   

The aim of this process is to pre-populate data in the relevant GST returns and reduce the reconciliation process. Approximately 60 countries have adopted invoice generation, and the population process and India is next in line. For e-invoicing to be successful in India, the government needs to consider B2C invoices.  E-invoicing will only apply to B2B invoices, thought the maximum frauds take place in B2C sales. One of the goals of the system is to lay down a mechanism so that customers can report non-compliant invoicing, which can help in tax evasion at its source. E-invoicing can turn India's economy into a digital and transparent system; however, it is a time-consuming process.

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