Unlike the introduction of GST & GST Returns in 2017, or E-Way Bill in 2018, E-invoice promises to be a different ball-game to individual businesses. In simple terms, non-compliance to E-invoice could impact a crucial aspect of business – timely delivery.
Would you want to be an early-bird catching the opportunity or prefer to complain about the challenges and hope for extensions?
QR code printing in existing invoices
IRN and EWB generation together
Automation and integration
Traceability between IRN, EWB and ANX1.
But the challenges in 2017 were more on transactional readiness and correctness of master data.
There was no direct impact on dispatch of goods once the billing was done.
During transit, there was no risk of the Invoice document coming under legal scrutiny from a statutory perspective.
Even in case of any error in the document print, the dispatch could continue and the document corrections (revised invoice / credit note) could be done post-dispatch.
In other words, the risk was more in compliance and less in terms of ongoing dispatch.
All it required was to ensure that the tax liability be paid within the timelines set, which often gave a 15 – 20 calendar days of time to the taxpayer after the month-end to make necessary corrections and computing of tax-liability.
GST Returns timelines were extended multiple times in 2017 and even later.
This gave business enough time to prepare document-wise GSTR 1 returns.
The risk of non-compliance was more in terms of monetary fine – an amount of Rs.50/- per day per registration. That too it was waived off for most of 2017 and even later.
Most importantly, the GST Returns was one-way traffic. There was data flowing from ERP/billing software to the Government portal by way of returns, but there was no mandatory data being captured back from the statutory portal into the transactional document.
This meant that the GST Returns filing could be done offline, and even out-sourced – subject to the security risks and inherent redundancy / inconsistency with such offline processing.
As long as the customer was getting supplies in time and the turnover was not getting impacted, compliance was more of a taxation matter rather than a business show-stopper.
Things were well under control after the initial challenges in GST-readiness.
Vendor GST Reconciliation
In 2019-20, the GST reconciliation became more important for businesses because of the impact on Input Tax Credit and cash-flow. However, here also the ITC impact could be offset by stringent controls on vendor payment. In any case, the impact was on payments/collections, not on delivery or turnover.
The important difference in Vendor reconciliation (as compared to GSTR1 returns) was that it was no longer about compliance but about cash-flow. Integrated controls in posting vendor invoice and in vendor payments required smart solutions instead of manual processing or outsourcing. Yet, integration was optional.
Traceability of Invoice number with EWayBill number was handled in the EWayBill itself as well as in reports.
During transit, there was a risk of the EWayBill coming under legal scrutiny from a statutory perspective, but there was no need to modify the existing invoice to handle compliance. This meant that the customer did not have to worry about the legal validity of the invoice document once it reaches the customer.
And it is exactly this comfort factor that is now being challenged under e-invoicing.
- E-invoice is not a separate document as was the case with E-Waybill. ERP/Billing software has to generate and capture the IRN/QR code before the supply is done.
This requires online real-time integration between three components: the ERP, the e-invoicing software and the statutory portal (IRP). Further, the existing invoice layouts have to be modified to accommodate QR code received from IRP.
An offline solution (or a solution with one-way integration) would not meet the challenges involved in automation and validations.
And it is just a beginning. There are additional restrictions on when an E-invoice (IRN) can be generated/cancelled and when not. Errors in E-invoice generation may require cancellation/reversal of ERP documents (if it is already posted). This was not the case with EWayBill or GST Returns. There is no amendment option or extension of validity for E-invoice (unlike EWayBill).
We may see Invoice documents with QR code moving out of the supplier’s premise only to get cancelled later due to trivial errors (say, incorrect pin code in master data) – assuming that the cancellation time-limit has not expired. It is not enough to correct the master data and take a reprint or re-generate the e-invoice, we may have to cancel the billing document and/or the accounting document.
We may also see quite a few credit notes to offset the erroneous invoice documents just because the IRN cancellation time-limit has expired. All this even before the customer has received the original invoice.
While the Indian customers are aware of the transition period in E-Invoice, and may even accept minor delays and confusion over the rising number of credit notes, the overseas customers may not be as accommodating. The exports business is often linked to specific mutually-agreed invoice formats that may also include imports-authorization (benefit scheme) details or letter-of-credit terms. The exporter is expected to retain these formats (often in excess of 10 different formats for exports) and incorporate the QR code in each of these formats.
- Whether it is domestic business or exports, the ultimate purpose of any supply is to meet/exceed the customer expectations in terms of timely delivery and fitness to use. Under e-invoicing, timely delivery becomes a key question mark. A non-compliant invoice would be considered to be an invalid supply under the rules, whether the non-compliance is found out during transit or even later. There is no margin for correcting the document by the supplier after the error is identified. Such changes have to be managed by way of cancellations/credit notes and revised document. The customer has to wait. Will they?
If you think this is a common challenge for all enterprises in India, nothing could be farther from the truth.
Every challenge throws an opportunity. E-invoice has opened a level playing field to every business.
Some of the businesses have already embraced the changes/challenges and have gone ahead of the pack in implementing OptiE-invoice.
It is not just about generating or cancelling IRN.
It is also about:-
QR code printing in existing invoices– no matter how many formats.
Information security – unlike EWaybill and GSTR1, e-invoice contains the unit price of selling.
Automation and integration.
Bundling IRN and EWB generation together where it is applicable and ready.
Traceability between IRN, EWB and ANX1.
Prevention of errors/cancellations to the extent possible.
Your customers are in their business waiting to cash in on this opportunity and go forward. If the compliance (or the lack of it) in your dispatch and documentation are perceived to be a challenge by your customers, they may not wait. They may have choices – there could be some early-birds in your competition who have got a taste of the e-invoicing opportunities and solutions.
Would you want to be an early-bird catching the opportunity or prefer to complain about the challenges and hope for extensions? After all, your customers may not take the same chance.
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