Demystifying E-Invoicing and its Benefits Under GST

Your Guide to E-Invoicing and GST Compliance  

Financial transactions are an important part of supply chain operations. From procurement to product delivery, sustainable and digital payments have paved the way for smooth supply chain operations.   

What is E-Invoicing under GST?  

According to Cleartax, e-invoicing, also called electronic invoicing is a system used by B2B businesses to create invoices that are verified electronically by GST Network (GSTN).   

What is the Purpose of E-Invoicing?  

In simple terms, the purpose of e-invoicing is to assist organizations transition to seamless invoice generation processes, eventually reducing human errors and time consumed in tracking and processing financial transactions. Efficient e-invoicing solutions can result in faster turnaround time, increase business efficiency and productivity.   

Considering the impact of sustainable supply chain management and the rise of digital business operations for payment tracking, generating e-invoices is the need of the hour.  

Below are some of the key benefits of e-invoicing.   

1. Transparency and Accessibility   

 It is important that small and medium-sized businesses invest in transparent and responsive billing solutions. For example, electronic invoicing can promote digital payments, result in ease in creating purchase orders and reduce human errors.   

Furthermore, businesses and suppliers using end-to-end mobile applications can track invoices in real-time.   

2. Invest in Accuracy   

Handling B2B transactions must be accurate. Manual management of purchase orders and supplier tracking can invite inaccuracy, which is not ideal.   

Creating electronic invoices can help businesses streamline supply chain operations, track invoice approvals, and reduce errors. Also, settling business to supplier transactions becomes seamless when e-invoices are generated.   

3. Legal Compliance  

Generating e-invoices in the B2B space requires approvals around tax regulations such as Goods and Services Tax (GST). Especially when it comes to legally compliant supply chain operations, the idea of e-invoicing is extremely important as it can pave the way for hassle-free approvals.   

4. Optimize Risk Management  

For an organization to reduce risks in financial transactions, digitizing business operations is a big win-win. The concept of creating e-invoices for goods trade and transactions can mitigate fraud, human discrepancies and duplication.    

Furthermore, in product and supplier processing, e-invoices can result in order, responsive supply chain systems and business transformation.   

5. Green Solutions  

For the last few years, global enterprises have shifted to sustainable and eco-friendly supply chain solutions. E-invoicing can get rid of paper-based invoices, reduce wastages and most importantly, conserve the planet.   

FAQs – E-Invoicing Under GST  

To whom does e-invoicing apply?  

Small and medium-scale businesses who rely heavily on their supply chain operations must understand the meaning of GST compliance. According to Zoho, the GST compliance rating is a score given by the government to businesses who comply with the regulations set by the tax department.   

Based on a report by Cleartax, the first phase of e-invoicing was implemented from 1st October 2020 for tax payers with an aggregate turnover of more than Rs.500 Crore. Consequently, the next phase involved tax payers with a turnover exceeding Rs.100 Crore.   

Who is exempted from e-invoicing?  

On the other hand, there are exceptions to e-invoicing under GST, which involve:  

1. Special economic zones (SEZs)  

2. Insurance  

3. Banking   

4. Financial institutions  

5. Non-bank financial companies (NBFCs)  

6. Goods transport agency (GTA)  

7. Passenger transportation service  

8. Sale of movie tickets.  

Is there a way to terminate an e-invoice?  

As per the law, an e-invoice cannot be terminated partially, but can be cancelled wholly. However, once cancelled, the same must be reported to the Invoice Reference Number (IRN) department within 24 hours.   

Can a business generate an e-invoice on the GST portal?  

Currently, there is no option of generating an invoice on the GST portal. All small, medium and large-scale businesses will continue to generate electronic invoices with their own ERP software.  

However, the invoice generated must comply with e-invoice standards.  

What are the types of documents required to be uploaded into the Invoice Registration Portal (IRP)?  

The required documents involve:  

1. Invoice by the supplier.  

2. Credit notes by the supplier.  

3. Debit notes by the business.  

How can e-invoicing under GST reduce tax fraud?  

Here are the ways generating e-invoices under GST can curb tax frauds:  

1. Legal tax authorities will have complete access to transactions in real-time.  

2. Since electronic invoices are generated before the transaction, there is limited or no scope for invoice duplication or alteration.  

3. Significantly reduces the chances of generation of fake GST invoices.  

Considering the benefits of e-invoicing under GST and the impact of resilient supply chains, small and medium-sized enterprises can invest in accessibility, speed and growth.    

SAP, a leading software and enterprise solutions provider, has pioneered a wide-range of products that can digitize your supply chain operations and streamline B2B transactions. For more on e-invoicing and ERP solutions for your business, click here