E-invoicing mandatory for businesses having turnover of Rs 100 cr or more from April 1

The Finance Ministry has said that ‘e-invoicing’ will be mandatory for businesses having turnover of Rs 100 crore or more from April 1.

‘E-invoicing’ is a system in which B2B (Business-to-Business) invoices are authenticated electronically by GSTN (GST Network, the IT backbone for new indirect system) for further use on the common GST portal. This system will prescribe an identification number will be issued against every invoice by the Invoice Registration Portal (IRP) to be managed by the GSTN. All invoice information will be transferred from this portal to both the GST portal and e-way bill portal in real-time. Therefore, it will eliminate the need for manual data entry while filing ANX-1 (Annexure 1, part of new return mechanism going to be implemented from April 1)/GST returns as well as generation of part-A of the e-way bills, as the information is passed directly by the IRP to GST portal.

The GST Council, in its 35th meeting decided to implement the new system while standard was adopted during 37th meeting. The plan is that businesses having a turnover of Rs 500 crore or more would take up e-invoicing from January 1, 2020 on voluntary and trial basis while the businesses with turnover of Rs 100 crore or more would start e-invoicing on voluntary and trial basis from February 1, 2020. However, it will be mandatory for both the categories from April 1, 2020 while for businesses having turnover less than Rs 100 crore, it would remain voluntary and on trial basis from April 1.

Boon for MSME

Finance Ministry officials claimed that the new system will be a boon to MSMEs (Micro, Small and Medium Enterprises) as it will open the facility of instant bank loans for MSMEs. With the new system of e-invoicing, banks may not require a plethora of physical documents and their validation processes rather they can do MSMEs’ ratings for the loan on the basis of their e-invoicing. Also, the E-invoicing will bring in ease of doing business as it will pre-populate the GST returns besides reducing the reconciliation problems.

The basic aim behind adoption of e-invoice system is to facilitate convenience to the taxpayers by further simplifying the GST return system. Through e-invoicing the tax department would help the businesses and taxpayers by pre-populating the returns and this would also result in reducing the reconciliation problems. Actually the fundamental principle behind introducing the e-invoicing is to put the technology at the service of the people to create ease of living and ease of doing business.

Billing software

As of now businesses use various software for issuance of invoices. Invoice generated by each software may look more or less same, however, they can’t be understood by another computer system even though business users understand them fully. For example, an invoice generated by SAP system cannot be read by a machine which is using ‘Tally’ system. Likewise there are hundreds of accounting/billing software which generate invoices but they all use their own formats to store information electronically and data on such invoices can’t be understood by the GST System if reported in their respective formats.

Hence a need was felt to standardise the format in which electronic data of an invoice will be shared with others to ensure there is interoperability of the data and this could be possible through e-invoicing standard. All these software would adopt the new e-invoice standard wherein they would re-align their data access and retrieval in the standard format.