e-Invoicing under GST has been implemented by the Government on large enterprises from October 1st, 2020.
Businesses are required to follow the SCHEMA format & get their invoices validated on the IRP before carrying out transactions.
There is a mixed response to e-Invoicing from the businesses currently, however, tax professionals have to say otherwise.
e-Invoicing may increase the compliance load but it will help businesses comply better with GST in various aspects.
Such as, e-Invoicing will make reconciliation better for businesses endorsing businesses to claim 100% accurate & eligible ITC under GST.
In this article, you will learn how e-Invoicing will impact your GSTR-2A Reconciliation & ITC claim.
By the end, we have also discussed which is the best e-Invoicing Tool & GSTR 2A reconciliation software.
e-Invoicing under GST- A Comprehensive scenario of implementation
e-Invoices or electronic invoices are electronically validated & signed documents that are generated in a standard format by accountants of businesses.
The process of converting an invoice into an e-Invoice is called e-Invoicing.
e-Invoicing will mostly apply to B2B invoices although businesses will also have to repost certain other documents on the official Invoice Registration Portal.
Earlier the Government had planned to generate QR Codes for B2C Invoices as well but the same is now postponed until the end of this year, which is December.
under e-Invoicing, businesses will have to generate e-Invoices in their billing system in the pre-defined SCHEMA Format, & then upload them on the IRP for validation.
The IRP will validate e-Invoices for errors such as the party details, invoice value, tax value, etc.
Upon successful validation, the IRP will digitally sign the e-Invoice & assign a unique IRN & QR Code for the e-Invoice.
Only then will the e-Invoice be considered valid & suitable to carry out transactions, and invoices generated in any other format or having no IRN & QR Code shall be considered void by the GSTN & the transactions will be considered unethical.
For now, e-Invoicing has been implemented only on large businesses having an annual aggregated turnover of more than Rs. 500 Crores.
Although the government is planning to extend the same to other large & medium enterprises as well, shortly.
However, the extension of e-Invoicing will depend severely on its acceptance & effect on large enterprises.
Businesses will also have to report the following documents to the IRP –
- B2B Invoices
- B2G Invoices
- RCM invoices
- Export Invoices
- Credit Notes
- Debit Notes
Note- The Government has given relief to the following businesses form generating e-Invoices even if they are eligible for it-
- SEZ Units & Developers
- Insurance companies
- Banking Companies
- Financial institutes
- Passenger transportation service, etc.
Impact of e-Invoicing on other aspects of GST!
e-Invoicing will impact multiple other aspects of GST & GST Compliance immensely.
As the same is connected directly to e-Way Bill Generation & GST Return filing.
The e-Invoicing data will auto-populate in the GSTR-1 of the supplier & eventually the same data will auto-populate as purchase data in GSTR-2A on the recipient’s end.
Additionally, there is a section to furnish the transporter details in the SCEMA Format, which will help the NIC to auto-generate e-Way Bills for the eligible e-Invoice.
Due to these two major features of e-Invoicing solution, it will directly impact all the other aspects of GST compliance.
Following are the field of the GST Regime that will feel the impact of e-Invoicing-
- e-Way Bill- The e-Invoicing data will auto-populate in the e-Way Bill System & auto-generate e-Way Bills for eligible e-Invoices.
- GST Return Filing- The e-Invoicing data may auto-populate in the supplier’s GSTR-1 while filing the return.
- Invoicing- e-Invoicing will impact mostly B2B Invoices that are the most crucial documents for any business & e-Invoicing will entirely revamp the current method of Invoicing & change it into a more organized and standardized process.
- Reconciliation- e-Invoicing will also impact the reconciliation of various documents under GST. As the e-Invoice data will auto-populate in the returns & will be used for making e-Way Bills, e-Invoices will be linked directly with both return filing as well as e-Way Bill Generation. Any reconciliation involving GST returns will automatically be impacted by e-Invoicing.
- Input Tax Credit- As e-Invoicing will impact ITC reconciliation as well, it will directly affect ITC & in a good way. Since the GSTR-1 data will mostly auto-populate form the e-Invoicing data, it will ensure that the filing is accurate & errorless. GSTR-2A of the recipient will auto-populate from the supplier’s GSTR-1 & hence the same will be precise too. With such accurate sales & purchase return filing, the ITC claim will automatically be errorfree & precise.
- Reverse Charge Mechanism- RCM invoices are also liable to e-Invoicing, which means that the recipient will have to generate e-Invoices for their inward supplies liable to ITC.
- Refunds- e-Invoicing will apply to export invoices as well, so claiming any GST Returns involving ITC, Exports, RCM, etc will be impacted by the e-Invoicing data auto-population in the GST returns.
- GST Audits- e-Invoices are the basis of any business transaction. It is the most initial step while doing business, and if the businesses keep the clarity of their transactions with the Government from such an initial level, there will be less to no chances or requirement of GST Audits. The e-Invoicing data will be available at the tax official’s end at any time to access that will eventually lead to fewer GST Audits.
Matching & Reconciling Purchase data under GST
Reconciliation of data is an essential practice in the GST Regime.
Reconciliation is nothing but matching two data to tally their final outcome that should be the same.
In GST there are multiple types of GST-
- GSTR-1 vs GSTR-3B
- GSTR-2A vs GSTR-3B
- GSTR-2A vs Books of Accounts
- GSTR-1 vs e-Way Bill Data
- Annual Reconciliation for filing GSTR-9
- GSTR-9 vs Annual Accounts Books
These are the most important reconciliations that businesses need to carry out on a regular basis, and that determines their final tax amount to be paid to the Government.
GSTR-2A Reconciliation also determines the amount of Input Tax to be claimed by the taxpayer.
In other words, these reconciliations directly influence the monetary flow of the business.
Businesses essentially ensure that these reconciliations are accurate in order to avoid monetary losses in tax.
More organized & accurate reconciliation with e-Invoicing to claim 100% ITC!
It is clear from the previous sections that e-Invoicing will not just impact the invoicing process of a business but will also impact the other aspects of GST.
e-Invoicing will have a direct effect on GST Filing and thus on the Reconciliation of various returns & data.
Most importantly, e-Invoicing will affect the GSTR-2A Reconciliation process making it easier & more accurate.
e-Invoicing will not just impact the supplier of the purchase process but also the recipient.
Recipients will receive the e-Invoices on their registered e-Mail IDs, making it easier for them to account for the transactions in their Purchase Account Books.
With automated & electronic-based accounting, the GSTR-2A reconciliation will become more organized & precise.
The accurate reconciliation of GSTR-2A & Purchase Books will ensure that the recipient can claim 100% accurate & eligible ITC.
ITC claiming before e-Invoicing was a tedious & time-consuming task. ITC claiming requires attention & work input from the accounts time & consumes a lot of time in multiple areas such as downloading GSTR-2A & matching each & every transaction with the Purchase data.
Even after consuming time & efforts, ITC reconciliation can be erroneous & you can end up claiming over or deficient ITC.
Either way, it is a monetary loss for the business, as claiming over ITC can end up legal disputes.
But with e-Invoicing in the picture, Businesses can claim the exact amount of ITC in lesser time & effort.
However, the Government has provided fewer resources & features in e-Invoicing.
e-Invoicing will reduce the overall GST Compliance but is itself an addition to the compliance load.
e-Invoicing will make reconciliation simpler but not in a drastic way.
So for both e-Invoicing & GSTR-2A Reconcitliion, businesses will need some help extra help.
The Government has appointed GSPs to help businesses comply better & easier with GST, which will enable the businesses to reconcile their purchase data & manage the e-Invoices with better features & utter ease.
GSTHero is the best GSP in the market currently that offers e-Invoicing & Reconciliation tools to make your work simpler.
Here is why GSTHero is the best fit for your business for r-Invoicing & GSTR-2A Reconciliation-
- Download GSTR-2A in a few seconds
- Store your e-Invoices for 8+ Years on GSTHero
- Advance Reconciliation with data configuration options
- Integration with top ERPs such as Tally, SAP, Marg, Oracle, Microsoft, etc.
- Desktop as well as Cloud-based Solution for Business Continuity
- Generate, Cancel, Edit, & Manage e-Invoices in the same dashboard
- Generate e-Way Bills along with e-Invoices
- Saves time & effort to enhance staff productivity.
- Auto-update the GST defaulting suppliers
About the Author– GSTHero– Making GST Simple! GSTHero is the best GST filing, e-Way Bill Generation & E Invoicing Software in India. GSTHero is a government authorized GST Suvidha Provider. Both Businesses and Tax Practitioners can file GSTR 1, GSTR 3B, GSTR 9 and GSTR 9C with all supporting reports. 1 Click Auto Reconciliation & report-matching feature helps you in claiming up to 100% ITC and finds your GST Defaulting Suppliers. GSTR2A vs GSTR-3B, GSTR-1 vs GSTR-3B, ‘GSTR-1, GSTR-2A & GSTR-3B’ annual report matching is also provided by GSTHero.
GSTHero ERP Plugins provide 1 Click e-Way Bill & E-Invoice, Generation, Operation & Printing from your own ERP like Tally, SAP, Marg, Busy, Microsoft Dynamics, Oracle & others itself with high data security