Limited roll-out of GST e-invoice system unlikely to serve purpose

The 'limited' implementation of e-invoicing system may not serve the purpose for which it is being implemented, feel experts. The government has decided to go ahead with the implementation of e-invoicing system for companies with turnover of Rs 500 crore or more from October 1, 2020.

The purpose of implementing e-invoices is to have invoices in a particular format, which can be read and accepted by different ERPs used across companies. Introduction of ERPs would result in elimination of multiple reporting by taxpayer in different formats, once for generating e-way bill and the second in the form of filing returns.  

What e-invoice will necessarily do is eliminate the need of data entry of purchase invoice by the buyer as that will be shared electronically and read by the accounting/billing system of the buyer even before the goods arrive. Reporting of e-invoice to GST portal, generated using prescribed standard, will lead to pre-filled sales and purchase returns.

However, in the first phase of implementation the government is making e-invoices mandatory only for businesses with turnover of Rs 500 crore or more. Earlier, it had planned to implement the system for companies with turnover of Rs 100 crore or more.  

The problem with a limited launch means that while large companies will have to implement it, their vendors who could be smaller companies with turnover less than Rs 500 crore may not implement it in the first phase, and hence the desired result of pre-filled sales and purchase returns may not be achieved.

Rajat Bose, Partner, Shardul Amarchand Mangaldas & Co, says: "Increasing the threshold to Rs 500 crore may not really serve the purpose of e-invoicing as many vendors and customers of such large companies may not have that kind of a turnover and will not be following this system of invoicing."

According to GST Network (GSTN), the company that provides IT infrastructure to GST portal, 70 per cent of the businesses registered with it has a turnover of less than Rs 5 core and only 7 per cent have a turnover of Rs 5 crore or more (based on 2018-19 GSTR-3B fillings).

The view among experts is that instead of implementing it half-heartedly at the time of a pandemic, the government could have deferred it by another few months and instead implemented it for a wider section of the registered businesses.  They think implementing it at the time of the pandemic could be a challenging task.

Gunjan Prabhakaran, Partner & Leader - Indirect Tax, BDO India, says: "Accurate ERP modifications as per the e-invoice Schema hold the key to successful implementation of e-invoicing. In the present pandemic situation, most businesses are struggling with short-term working capital crisis. Immediate steps to be undertaken by a company to go live on October 1, 2020 include ERP gap analysis, vendor and customer master validations and realigning of invoicing process from data entry to printing stage."

Archit Gupta, founder and CEO, ClearTax, says that to implement this e-invoice, companies should integrate their ERPs with the API of invoice reference portal (IRP) of GST System. "GSTN was working with large companies towards this, but the spread of Coronavirus may have held back this process."

E-invoice, if implemented across the board will drive automation among small and medium businesses, feels some. Rajesh Gupta, Co-Founder and Director, BUSY Accounting Software, says automating SMBs is not a small task, but e-invoicing can be a pool of solutions for them.

"E-invoicing can modify that by not only helping businesses to cut costs but also ensuring companies are paid faster and open up new financing options. The electronic capturing of invoices leads to the feeding of data directly into a business accounts payable system without room for error. It will definitely help businesses to be more productive and less prone to errors," he says.

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