GST E-invoicing: Gradual Roll-Out will Ease the Pain

The Goods and Services Tax regime, which was launched in July 2017, seemed to be settling down when the Covid-19 pandemic dealt a blow to the economy, bringing businesses to a standstill in April and May.

GST compliance also dipped in April and May, as seen in the adjacent graph, less than 10 per cent of GSTR 3B returns for March, April and May were filed until June.

Of the GSTR1 returns due for March, only around 50 lakh returns were filed up to June, compared with over 80 lakh returns filed at the end of every quarter.

It is quite clear that GST compliance has taken a knock during the lockdown as the movement restriction along with funds crunch made payment of tax difficult. The leeway given to businesses in tax filing also contributed to the lowered compliance.

Amidst all this businesses are questioning the need for the introduction of e-invoicing regime from October 1. E-invoicing involves reporting details about GST invoices, credit notes, debit notes for all B2B supplies and exports on a special government notified portal. This upload is besides the regular invoices created on their own accounting/billing/ERP systems.

That said, smaller businesses are unlikely to be hurt since only taxpayers with aggregate turnover exceeding ₹500 crore in a financial year have to generate e-invoices. There are almost 11 lakh entities with annual turnover under ₹5 lakh, that generate an average of just one invoice per day. At the other end of the spectrum are a handful of companies with turnover exceeding ₹500 crore, that generate over 5,000 invoices every day; these larger companies are the most affected as of now.

E-invoicing could, however, be introduced to all businesses, in a phased manner.

Not all are ready

So, are businesses ready for the e-invoicing regime? “Some of the taxpayers are ready; however, there are a few taxpayers who are still struggling due to lack of access to IT team and resources for implementing e-invoicing,” says Pritam Mahure, a Pune-based tax consultant.

He also points out that many countries had given around three years’ time for implementation of e-invoicing after the final format/schema was made available in public domain. In India, the final schema was made available on July 30 and thus taxpayers have got just less than 2 months for preparation during pandemic time.

“While the government has given time to businesses to prepare for the impending e-invoicing regime, the Covid pandemic has affected the readiness of businesses for the same,” concurs Tanushree Roy, Director, Nangia Andersen India. “Given the various annual deadlines (GST Audit and Annual return FY 2018-19 and last date for availing credits/ raising of invoices/ debit/ credit notes for FY 2019-20) falling in September/ October 2020, it appears a tough time ahead for the businesses. However most appear to be in implementation mode/ stage.”

Additional work

The tax payer has to generate QR code/ IRN for every invoice from hereon. This will increase the workload on businesses, says Mahure. He also points out that those businesses who are not yet ready with their software updates for the transition may prefer to not make any supplies for few days, in order to be compliant with the new rules.

“E-invoicing is expected to create additional work load for businesses at least initially,” says Roy. “Till date, invoices were being raised by the businesses internally. Now given that raising of invoices would depend on generation of IRN through government portal, any glitches may result into delay in raising of invoices. Also the lack of trained staff engaged in such activity may also create initial impediments, thereby creating additional work load for businesses. This would particularly be a concern for businesses generating numerous invoices daily.”

Beneficial in the long run

E-invoicing could eventually help in improving GST compliance as well as in checking evasion. This was the primary intention of the government in introducing the e-invoicing mechanism and linking the same with the e-way bill mechanisms. However, as e-invoicing is being made applicable to businesses having turnover exceeding ₹500 crore, matching/ verification of invoices raised by vendors not covered by e-invoicing provisions would have to be carried out in the present manner. So, a hybrid mechanism of matching/ reconciliation is likely to continue till e-invoicing is made applicable to all businesses.