We have stepped in the 3rd year of GST and the 35th GST Council meeting under the chairmanship of the newly elected FM has paved way for many initiatives that will take the GST compliances to the next level of ease, simplicity and digitization.
The recent decisions by the government clearly indicate the intent of the government to make as many processes digital and one of them is e-invoicing. This decision has been recommended to be introduced in a phased manner for B2B. Phase 1 is proposed to be rolled out from January 2020.
IRN and e-invoicing
The Rule 138 (2) of the CGST rules has provided for the generation of the Invoice reference number from the GST portal by filling in the form GST INV-01. Invoice reference number – IRN is way to digitize the invoices under GST where a taxpayer can generate an IRN on the e-way bill portal and this is valid for a period of 30 days. The IRN can replace the physical copy of the invoice and reduce the burden of carrying a physical invoice by transporters especially when they are carrying huge values and quantities of goods frequently. It also takes away the hassle of maintaining physical copies, helps better tracking of goods being transported by tax authorities, reduces the waiting time at the check posts and reduces the risk of losses.
IRN generation requires uploading of GST INV-01 on the portal which requires details of the receiver of the goods and the consignee like name, address, state, state code and GSTIN / unique id. Other details required are description of goods, HSN, quantity, discount, amount of tax and taxable value.
Under the new system of e-invoicing, the government intends to generate an IRN for every e-invoice that is generated on the portal to provide authentication to the e-invoice generated. This IRN will then need to be quoted for the invoices and every related transaction involving mention of the invoice reference. The IRN generation would be possible across different platforms and the integration with ERP will make sure that the taxpayer is freed from the hassle of multiple data entries and even generation of e-way bills since the IRN will eventually replace the E-way bill system. Businesses would also be able to transport goods based on the IRN since the e-invoices will help do away with the need to maintain physical invoices as well as generation of E-way bills. IRN can be quoted in place of the e-way bills when goods/cargo are transported. This will enable the authorities to track the goods being transported, their value and other details that are captured in the e-invoice, through the IRN.
The implementation of e-invoices although delayed has been now approved by the GST Council in the 35th Council meeting and thereby the system will start for B2B from January 2020. This can be taken as another step towards automation of tax processes. The government has been bringing along technology solutions in the tax compliances in a bid to make tax digital.
IRN to reduce frauds, tax evasion and false ITC claims
E-invoicing is basically aimed at curbing tax evasion in the system and make sure that all the transactions for sale that happen in businesses get recorded in the GSTN system in real time. This will make sure that fraud transactions do not happen and that false ITC claims that result out of inflated sales are difficult to pull off. The IRN generation linked to e-invoices will also make sure that bills that are not backed by a valid IRN are not considered for ITC claims at all thereby reducing fake invoices. Moreover, the integration of the IRN generation with the ERP systems will make sure that it gets generated easily and wherever the systems are not sophisticated enough there would be offline utility available.
The government has set up different committees to handle the aspects of e-invoicing systems on the legal aspects and the technical aspects of its working. The system will soon be operational in 2020 and e-invoicing will be a reality with the GST council paving the way for it.