What is GST E-Invoicing Phase 2? What to Expect in 2021

The second phase of e-invoicing is finally rolled out. 2021 is supposed to be promising for businesses having an annual turnover of Rs. 100 Cr. to Rs. 500 Cr. This New Year has made the most talked-about e-invoicing mandatory. The implementation of GST e invoice has its set of limitations and benefits. E-invoicing under GST is known to be profitable for businesses with turnover above Rs. 500 Cr. The system is growing strong over time, considering the number of IRNs that have been generated on monthly basis.

In the first phase of GST e-invoicing, it was applicable only to large organizations that had bespoke ERP systems and a full in-house IT staff. It brought an easier and quicker transition. But for businesses having turnover exceeding Rs. 100 Cr, it was not that easier. All businesses don’t have fully tailored ERP software and a strong IT team. Hence, there were challenges for such organizations in the first phase.

Considering such problems, the government has brought a GST E-Invoicing Preparing and Printing (GePP) tool, which is user-friendly and intuitive for organizations that don’t have an ERP system. In addition, this tool comes with a unique set of features like communication with taxpayers, helpdesk, calls, and emails support to resolve issues.

E-Invoicing GST Applicability

As of October 1, 2020, e-invoicing has been applicable for all businesses with turnover above Rs. 500 Cr in any of the three previous fiscal years, i.e. from 2017-18 to 2019-20. The turnover limit has been prescribed under Notification 61/2020 – Central Tax to implement e-invoicing and the period to determine eligibility.

From January 1, 2021, businesses with turnover above Rs. 100 Cr. in one of the previous FYs will be applicable. But entities and organizations under the following categories are exempted from e-invoicing, despite the turnover, as per CBIC Notification 13/2020 – Central Tax –

• A bank, financial institution, or an insurance company, even the NBFCs
• A registered individual who provides passenger transportation
• A GTA (Goods Transport Agency)
• A registered individual providing services to multiplex chains with the running of films
• SEZ unit (vide CBIC 61/2020 – Central Tax)

E-Invoicing and its impact

• Change in Compliance Cost and Time required – According to the GSTN, the data in E Way Bill-E-invoice and GST returns will be populated automatically after getting the e-invoicing implemented. It would save a lot of time and compliance expenses. However, it would also add up the cost of having IT infrastructure to implement e-invoicing.
• Software Integration – Even after having the smooth and user-friendly excel tool provided by the government to upload e-invoices, the organizations still need to do a lot of manual work. So, it is still not sufficient considering the cost and time involved. Ultimately, the businesses have no other option but to integrate their ERP so that the invoice can be uploaded directly to the portal once it is generated. Then, the IRN is generated and sent to the ERP. This way, organizations have to add their systems for e-invoicing, which would be convenient in the long run.
• Standardization – It is another tremendous impact of e-invoicing. As a result, invoices would be easy to read by machines. There would be control over invoice scams. The government can employ a new level of AI and digitization to avoid tax evasion in India.
• Staff Training – GST E-Invoicing phase 2 is the first format of its type. Hence, staff training is recommended in relevant departments like Sales, Finance, Taxation, and Accounts.
• Improved Security – E-Invoicing would curb organizational scams and frauds and also put an end to revenue leakage in the country’s economy. It would dampen any cheating or fraudulent activities in an organization. In fact, it would save manual intervention and prevent human errors by integrating ERP into the organization.

Benefits of E-Invoicing for the businesses

Here are some of the benefits of e-invoicing for businesses –

• E-invoicing can fix and bridge a huge data reconciliation gap to avoid mismatch issues under GST.
• If a software program creates e-invoices, another program can easily read it. Hence, it helps avoid manual data errors.
• E-invoice enables real-time tracking of supplier’s invoices.
• Automation and backward integration of the process for filing tax returns. The software automatically populates the invoice data in several returns, especially when it comes to generating the e-way bill’s part A.
• Tax authorities can quickly get the details they need for each transaction. Hence, they don’t have to do surveys/audits more often.
• One can easily access input tax credit.

Future Outlook

E-invoicing has great potential to improve the way tax is controlled and compiled in the nation. When GST invoicing Phase 2 is running successfully, the government would indeed look forward to Phase 3 for all businesses for all B2B supplies anticipated on April 1, 2021. The e-invoicing rollout would definitely bring real-time assessments and self-governance at the national level. Taxpayers no longer have to deal with the traditional ways of late assessments and constant audits/surveys by tax authorities.

In addition, delayed credit cycles would be resolved at the grass-root level in the economy. Hence, all sectors would get relief with lesser time spent on processing and preparing invoices and quickly reach the customers, and the whole process can be made easier. It is also true that the invoice would be rejected if any small error is found. It will ensure that all the invoices will be raised with accurate details to avoid double efforts.

If e-invoicing is implemented completely, it goes without a doubt that it could bring surprising results. Any temporary solution cannot do anything much. Hence, it is not enough to choose the right GST Suvidha Provider (GSP). They can comply with regulatory needs and security standards for a smooth transition. When it comes to convenience in doing business and paying taxes, e-invoicing has excellent potential to keep India ahead in the world.