The new e-invoicing system will become mandatory for B2B companies with an annual turnover of up to Rs. 500 crores soon. Check out this post to know three of the most important things about this new invoicing system.
All the different types of accounting software solutions used by businesses across the country for generating invoices are not compatible with all the other accounting solutions. As a result, any business stakeholder that accesses the invoice through their accounting or auditing system is often required to translate the data manually through data entry.
For instance, an invoice generated by using the SAP software might not be read by Tally software. Even the GST Network is not able to read invoices generated by all the different accounting systems. Electronic invoicing was thus introduced by the GST Council to standardise the invoicing format. Take a look at some of the most important details about this new reform-
- When was e-Invoicing Introduced?
In December 2019, the Central Bureau of Indirect Taxes and Customs (CBIC) notified that a new electronic invoicing or e-invoicing system would be implemented from April 2020 on a voluntary basis for taxpayers with a turnover of more than Rs. 100 crores.
Over the months, the CBIC and the GST Council made several changes to the proposed system to make the transition easier for the taxpayers. For instance, the turnover threshold was increased to Rs. 500 crores and the number of mandatory fields in the invoice were reduced considerably.
- What is e-Invoicing?
In simple words, e-invoicing is a unified digital system for B2B entities to automatically report their invoices to the GST Network, making it easier for them to file their monthly returns. It has introduced a single invoicing format that has to be used by all the B2B taxpayers. The accounting and invoicing software solutions used by the businesses should comply with this new format.
This way, the accounting systems of all the businesses and their stakeholders, as well as the GST Network, would be able to read the invoices accurately. This will help eliminate the need for manual data entry, which is time-consuming and highly prone to errors. With this, all the businesses would ultimately come under the purview of the council, and the tax processes would be streamlined.
- Is e-Invoicing Mandatory?
E-invoicing under GST was supposed to be introduced in April 2020 on a voluntary basis. As most businesses were not prepared for the electronic invoice, the Honorable Finance Minister Nirmala Sitharaman deferred its implementation to 1st October 2020 during the 39th GST Council held on 14th March 2020.
From 1st October 2020, it would be mandatory for B2B entities with an annual turnover of up to Rs. 500 crores to follow the electronic invoicing format. After this deadline, all the invoices that have not been registered on the IRP (Invoice Registration Portal) platform would be treated invalid. All such invalid invoices will also attract a penalty of Rs. 10,000 each.
How Can an e-invoicing solution help?
An end-to-end automated e-invoice solution is the best way for any company to comply with this new invoicing reform as quickly as possible with minimum disruption to current business processes. These solutions support all the popular ERP/accounting systems and extract accurate data in the specified format to ensure complete transparency and efficiency.
As electronic invoicing would be made mandatory soon, an advanced e-invoicing software solution could help businesses prepare for this new reform and avoid getting penalised due to non-compliance.