E-invoicing - A probable masterstroke to apply brakes on tax evasion?

'Did GST succeed in curbing the tax evasion? I don’t think so', Akshay put forward his point of view, while having a healthy debate with Anamika, her best friend and a tax consultant.

'Not everything sets right in the first place, Akshay. The tax compliance has improved since the inception of GST', Anamika replied firmly.

'To curb the bigger E (Evasion of tax), Government implemented the 2Es (E-registration and e-way bills), which have shown positive results', Anamika further defended her point of view with a strong logic.

'However, people have discovered loopholes in these 2Es to increase the 3rd E (Evasion of tax) multifold. Tax avoidance is still rising', Akshay opposed Anamika.

'I already told that not everything could go right immediately. A masterstroke is on the cards as Government is planning to launch a more competitive E soon', Anamika informed Akshay about the recent news which left him dumbfounded.

Like Akshay, are you also excited to know about this new E? Read till the last to understand everything related to E and its aftereffects.

To ensure the elimination of tax evasion, Govt. is planning to launch a more effective E, i.e. Electronic Invoicing model under GST.

What is Electronic Invoicing model?

All the taxpayers will create, issue and distribute invoices directly through the GST network.

Right now, the businesses issue the invoices through their accounting or billing software. Later, at the time of filing returns, they upload the details and invoices on GST portal.

In the electronic invoicing model, the invoices will be issued directly through the GST network. All the information will be transferred to the GST portal in real time, eliminating the requirement of a manual transmission.

Is the e-invoicing system prevalent elsewhere?

Few countries in Europe and Latin America and nations such as South Korea have already implemented the electronic invoicing model. It has shown positive results in reducing the compliance cost and improving the monitoring by the tax authorities.

In the present system of issuing invoices, the authorities can review the sales documents during inspection or audit only. However, e-invoicing provides real-time controlling opportunity, allowing the authorities to clamp down on tax avoidance.

How is it going to implement in India?

The GST council has set up a committee to analyse the feasibility of e-invoicing. The committee will study the models already set up in South Korea, Brazil and parts of Latin America and Europe and accordingly decide the future steps.

Will all the businesses come under the ambit of e-invoicing?

Probably, not. The businesses with turnover higher than the specified limit will have to issue the e-invoices initially.

How will invoices match with GST returns?

On the generation of each e-invoice, the taxpayer will get a unique number, which will also be mentioned against each invoice reported in the GST returns.

How is e-invoicing implemented in South Korea?

Korea introduced the electronic tax invoice system (e-tax) in 2011. E-tax reduces the compliance cost through online issuance and distribution of tax invoices. Also, the data is transmitted to the National Tax Service (NTS).

For issuing an invoice, a taxpayer needs authenticated digital certificate to sign the invoices. Also, the client’s tax registration certificate and his email address are stored to send the tax invoice correctly.  

Bottomline

E-invoicing is not only desirable for the Government, but it will also bring immense benefits to the taxpayers. The overall compliance expenses will come down. Also, the automatic transmission of data will ensure filing of error-free returns resulting in faster assessments too.

SahiGST, your GST friend, will play an indispensable role in setting up the e-invoicing mechanism when the Government implements it. Are any concerns over e-invoicing still bothering you? Call or mail us and we’ll be happy to solve your tax problems.