E-Invoicing System- An Introduction. e invoicing under gst – implementation date has been extended from April 2020 to late this year i.e. October 2020 by the 39th GST Council Meeting.
e-Invoicing is the evolution of the Invoicing process into an automated & standard version. All Businesses having an annual turnover of Rs. 100 Crore & above are eligible mandatorily for e-Invoicing.
Under e-Invoicing, Businesses need to upload & authenticate their B2B Invoices on a unified Invoice Registration Portal (IRP). Post-authentication the Portal shall allot a unique Invoice Reference Number (IRN) & a QR Code.
E-invoicing under GST
Businesses with a turnover of Rs. 500 Crore & above, additionally must generate QR Code for their B2C Invoices as well. The Taxpayer also needs to upload their B2G invoices, Credit Notes, Debit Notes, Reverse charge Invoices & Export Invoices to the IRP.
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A pilot test run has already begun in Karnataka & a pilot website (IRP) has also been opened by the Government.
e-Invoicing is for sure an addition to the long GST process & may increase the work but on the other hand, it is an efficient way to make reconciliation better & smoother.
e-Invoices are anticipated to be highly useful for Businesses in terms of Reconciliation, Compliance, ITC claiming & for GSTR Filing.
Reconciliation is only one of the many benefits of e-Invoices but is directly linked with the other aspects & affects them in a way or the other. Hence better the Reconciliation smoother the other aspect of the Business.
Reconciliation under GST
The term Reconciliation in general means harmony, balance or matching. Under GST, its meaning doesn’t change much, Reconciliation under GST means nothing but the precise reporting of transactions by both the Suppliers as well as the Buyer to ensure that no transactions are missed or wrongly filed in the GST Returns.
In other words, Reconciliation is the matching of the records of transactions in a Business to make sure no transactions miss out or are wrongly mentioned.
This helps to keep the GST system clear & fair for both the parties the Buyer & the Supplier, & ensure that none of them gain undeserved profits or losses.
This leads to accurate ITC claiming & makes sure the compliance is inline.
An example to understand Reconciliation better would be-
A supplier, Mr. Adesh has reported a sale of Rs. 5000 to Mr. Jain, in their GSTR-1 (Sale). This transaction shall be auto-populated in Mr. Jain’s GSTR-2A (Purchase). Now, Mr. Jain must reconcile their GSTR-2A with their Book of Purchase to see if the values match.
Since Mr. Jain has not filed their GSTR-2A & it was auto-populated from Mr. Adesh’s GSTR-1 so Mr. Jain needs to match the entry made by Mr. Adesh & their own Book of Purchase.
In any such similar case, reconciliation or matching of reports becomes essential. There are 3 major types of Reconciliations- GSTR-2A & Purchase Book, GSTR-1 Annual Reconciliation & GSTR-1 & E-Way Bill Reconciliation. Other than these, Businesses also reconcile their, GSTR-2A & GSTR-3B, GSTR-1 & GSTR-3B, etc, but these are only additional features.
Currently, the Matching of GSTR-1 data & E-Way Bill data is trending in the GST Regime. The GSTN is focused on clearing off the defaulter taxpayers, & to do the same they are matching the Invoices against which E-Way Bills are missing & vice versa.
The Power of Reconciliation in Businesses
Thorough Reconciliation can lead to 100% accurate claim of ITC & ITC is an indirect cash inflow for Businesses. ITC may not be direct profit but it saves the Businesses from loss of funds, through double or undesired taxpaying.
Hence Businesses focus more on Reconciliation. Yet another benefit of reconciliation is compliance. Neat Reconciliation means a Taxpayer is sincere in compliance.
Accurate Reconciliation also saves the taxpayer from Notices & Penalties, since the GSTN is highly serious with the reconciliation due to tax evasion reasons & tend to send Notices even for mismatches of negligible values.
Nonetheless, accurate Reconciliation is majorly significant for ITC claiming purposes. Since no businesses want to bear the loss of paying the same tax twice.
In case a supplier doesn’t list a certain transaction in their GSTR-1, through Reconciliation the Buyer will know of the default & can coordinate with the supplier to mention the missing transactions.
Yet another important feature of Reconciliation is, it plays a vital role in finding the defaulter taxpayer & helps the Government in restraining the tax evasion.
The Role of E-Invoicing for precise Reconciliation
The significance of Reconciliation is high & affects the Businesses directly. Taxpayers understand the seriousness of it & spend time & efforts on Reconciliation to make sure that it is perfect.
e-Invoicing in this context is a blessing for Businesses. e-Invoices are authenticated in real-time & hence less or no transactions can be hidden from the GSTN.
With each Invoice being validated & the information being stored on a unified portal, there are least chances of Taxpayers defaulting the Reconciliation process.
Each Supplier eligible to e-Invoices must validate their Invoices & create e-Invoices. These e-Invoices are going to be used to auto-generate the required data to file their GSTRs.
Accurate GSTR-1 by the Suppliers means accurate GSTR-2A for the Buyers. If all details are auto-populated & transparent in an authorized System, then there are fewer chances of wrong or missing data entry.
This ultimately leads to accurate & thorough Reconciliation. And a thorough Reconciliation eliminates 3 issues at a time – Wrong ITC claiming, Compliance issues & Notices, & tax evasion by defaulter taxpayers.
e-Invoicing here plays a key role as it makes the process automated & more accurate at a micro-level if the initial steps of the process are precise & error-free then the further steps tend to become perfect automatically.
e-Invoicing brings the Government into the loop of Business Transactions which is beneficial both for the Government as well as for the Businesses.
Make E-Invoicing an effective Reconciliation Tool
e-Invoices are generated through the IRP, by following a long process & the storage of the same is again a problem for the tax filers.
However, e-Invoices can also be created in one single click from the ERP itself, using the GSTHero e-Invoicing Software Solution & Plug-ins.
GSTHero is a Government authorized GST Suvidha Provider & has a perfect solution for making e-Invoicing the blessing that it actually is for Businesses.
GSTHero enables the user to validate the e-Invoices form their ERP itself without having to go to the IRP & downloading the JSON File.
In one single click, the Invoices can be authenticated, converted into e-Invoices & allotted with the IRN & QR Code, from within the ERP.
The user can perform bulk e-Invoice operations from the ERP & generate multiple e-Invoices in a click. GSTHero has the ability to handle large volumes of data seamlessly.
GSTHero also offers the ISO promise of data security & confidentiality. The user data is sensitive & is in safe hands with GSTHero.
The software solution is easy to use & user-friendly. The integration of the IRP & ERP Systems is simple yet robust & efficiently delivers results.
The after-sales support & training is done by a dedicated team that cares about the clients & the user experience.
Additionally, with GSTHero the data for GSTR Filings & E-Way Bills is auto-filled, meaning the user only needs to transfer the data from ERP & file their GSTR on the GST Portal. This added feature makes Reconciliation & filing even better, more precise & automated.
GSTHero also provides the Report matching & Reconciliation facilities so the clients’ reconciliation is more accurate, helps the user identify the defaulter Supplier & enables actions on the mismatch of the reports.
All these facilities eliminate the extra steps, efforts & time that are invested by the user in Reconciliation as well as the GSTR filing & make the Process easier to operate & makes Business more compliant.
e-Invoicing will play the role of a lubricant in reconciliation to overcome the frictions caused due to the manual process, by automating & simplifying it. On the other hand, GSTHero plays the same role in the GSTR filing process.