The famous author Stewart Brand once said “Once a new technology rolls over you, if you are not a part of the steamroller you’re a part of the road.” Across the globe, organisations are quickly evolving. Significant progressions are being made in the field of technology; the tax function is also not left behind. With momentous developments in tax landscapes around the world, tax technology has come to the rescue of the taxpayers and tax administrations. This has led to organisations investing in tax technology and have also benefited from such investments.
One important leg in this journey is E-invoicing. Though E-invoicing has been around for a couple of years now, it has only gained popularity in the last 2-3 years. Over 65 countries have implemented E-invoicing and have shown wondrous results. India is new on the list but is catching up fast.
Journey Across The Globe
Countries around the world are slowly adopting E-invoicing in phases. EU or the European Union has also made noteworthy progress in E-invoicing. The idea to implement E-invoicing remains constant – to minimize tax frauds and to check the scams of fake invoices. However, all countries follow different approaches and demand different data for E-invoicing.
A map showing the prevalence of E-invoicing across the world is given below:
Source: Billentis report, 2019
How E-invoicing Will Make A Positive Difference
- E-invoicing makes the most fundamental function of accounting i.e. raising invoices digitized. This helps in curbing frauds and tax evasions.
- E-invoicing reduces the compliance burden significantly as it leads to auto-population of returns and other statutory documents.
- Data are archived more efficiently. With digitized invoices, the storage and retrieval of such invoices become super easy and saves time.
- The chances of committing an error go down as the E-invoicing system has various validations and checks in place which does not let users commit any errors.
- Account reconciliations and working capital flow become seamless as customers get invoices timely.
The Indian Journey
E-Invoice In India Is One Month Old!
With about 8.4 lakhs IRNs generated on the first day of the launch of E-invoicing, i.e. on 1 October 2020, and about 18.57 lakh E-invoices generated on 19th October 2020, the scheme is going strong. Though there have been certain practical difficulties being faced by India Inc., the transition can be said to be more or less harmonious.
Government officials have also expressed their intention to replace the E-way bill with E-invoicing gradually. It has also been proposed that returns shall be auto-generated basis E-invoicing and would only require verification and acceptance.
Recently, the Government has also announced the dates for implementation of E-invoicing for other taxpayers:
- For taxpayers with turnover > 100 crores: 1 January 2021
- For all other taxpayers (B2B supplies): 1 April 2021
Learning from the experiences of various countries, India has launched E-invoicing under the post-audit methodology as against the clearance method. Under the post-audit method, the invoices are checked after the transaction happens; and under the clearance method, the authorities approve the invoice before it is actually raised.
It is an exciting time for tax technology in India, as the Government is inclined to make tax functions completely automated. With multiple steps like E-office, Faceless Customs, E-way Bill, E-invoicing, the age of digitizing tax has arrived!