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Come October, India Inc. all set to witness a digital revolution in the form of e-invoice

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(By Manjula Muthukrishnan) 

The implementation of e-invoicing has now reached a critical stage with almost a week left to the date of launch. The authorities are very clear of their intention to implement e-invoicing from October 1, 2020. Under such circumstances, it would be ill-advised of companies not to start preparing their internal business systems and tax management processes. It is highly unlikely that the implementation of this new system will be further deferred. Even in the rare scenario that it is pushed to a later date, it will only be so if it is crucial. This makes it urgent and imminent for industries to complete the first leg of integration viz. getting acquainted with the process of e-invoicing and selecting the right e-invoicing solution partner. But even before industry players begin this process, they should brush up on the basics and recent updates of e-invoicing.

No time to play trial and error

Once companies are all caught up on the critical updates around e-invoicing, the next goal is to familiarise with the factors that companies must consider before they implement e-invoicing solutions.

If we look at the options to generate an IRN, there will be a manual offline utility where the taxpayer can copy-paste the required field details, upload on the invoice registration portal, generate IRN and get the JSON file. But they will face challenges with the completely offline manual tool where there are multiple invoices and when they will need to write back the 64-digit IRN with invoice details to their ERP.

Whether the business has one invoice or one lakh invoices, this manual offline tool should be used when no other options are working from a business continuity standpoint. It is highly recommended that businesses should look for an integrated solution for e-invoicing which can help them send the generated JSON file from IRP to their ERP.

With e-invoicing drawing near, there is an urgent need to review the existing accounting systems or ERPs adapted by businesses and oversee a complete overhaul of related mechanisms to successfully integrate the newest reforms under the Goods and Services Tax (GST). Now that companies only have a limited number of days before e-invoicing is rolled out, they need to adopt an aggressive approach and modify their accounting and tax technology systems. Companies above the revenue threshold should finalise the integration plan with their e-invoicing solution provider and ensure that recent updates to the invoice schema are implemented. To avoid any glitches, companies need to test the new updates and ensure that all associated vendors have been identified and brought up to speed with the changes.

Amidst all the debates and discussions around how to be technologically ready for e-invoicing, an obvious question keeps cropping up – what are the consequences of not complying and meeting the deadline for e-invoicing? Come October 1, and companies are likely to face a penalty if they do not have an invoice reference number on each e-Invoice. This penalty will be a nominal one because the Government is expected to be lenient in the initial stages of implementing e-invoicing.

However, businesses need to be cautious because once they take a closer look at GST laws, they will realise that not complying will bring some unique challenges to light. If an invoice is not registered with the Invoice Registration Portal (IRP), then such an invoice would be deemed an invalid tax invoice, meaning it would attract a penalty of ₹10,000. But this is not a one-time penalty. Each instance of non-compliance will attract a penalty and with the threshold being set for businesses above an annual turnover of ₹500 crores, their volume of tax invoices generated every day is likely to be on the higher side. Furthermore, transportation of goods without a valid tax invoice may lead to goods and consignment vehicles being detained and the imposition of further penalties leading to significant losses in business. Let us say the goods are not detained. Even so, there is a possibility that customers refuse to accept a consignment of goods because of the absence of a valid tax invoice. GST authorities are planning to disable the e-way bill generation facility for taxpayers who are unable to provide a valid invoice registration number. Given such challenges arising due to non-compliance of e-invoicing reforms, it becomes necessary for businesses to ensure that their invoicing process is upgraded immediately.

Witness a digital revolution

E-invoicing is an initiative that was first introduced in January this year so that taxpayers could familiarise themselves with the system voluntarily. Now that it is all set to become mandatory from October 1, 2020, companies have barely few weeks to align themselves with the new system, choose a partner who can handhold them through the entire process to make the journey from e-invoices to GST compliance seamless. It is for now that companies over INR 500 crores will need to prepare for e-invoicing. Still, the new mechanism will gradually bring companies with lower turnovers also under its ambit. This means companies with annual revenue below INR 500 crores need to start finalising plans with their IT teams, upgrade and integrate their ERPs with e-invoicing solution. As these companies will have enough time, they should better utilise that to get acquainted with the system and even test the mechanism well in time for the next phase of the rollout.

(The author is the Managing Director of Avalara Technologies Private Limited, Indian operations of Avalara, Inc.)


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