The Goods and Services Tax
(GST) Council in its first meeting under the new chairman, Union Finance Minister Nirmala Sitharaman, on June 20 will consider the introduction of an electronic invoicing mechanism for large companies on a voluntary basis, with an aim to capture transactions on a real-time basis.
According to the interim report filed by a high-level panel on ‘Generation for E-invoice through GST
network portal’, the system will be first brought in for the firms with a turnover of over Rs 500 crore for easier compliance. The companies will be given an option to opt for this initially.
“The new system will cause disruption, but we do not want a complete disruption in the system, hence will start with large firms, based on their readiness. Small companies may not be ready for a big information technology change at this point as it will cause them huge discomfort. Hence, we are leaving them out” said a government official.
The government had constituted a committee of officers on the subject to study and examine the e-tax invoice system of South Korea, Latin American nations and other relevant countries, examine and suggest the target taxpayers and threshold limits, and examine the ease of return filing through auto-population and invoice-matching, among others.
As per the proposed system, companies’ systems will be linked to the GSTN portal, wherein the generated invoices will be passed on to the GSTN portal within 24 hours.
“The invoices will be passed on to the GSTN portal during a lean period during the day, so that it does not cause jamming of the portal during the peak filing hour,” said the official.
It will make compliance simpler for companies as the e-invoicing system will do away with the need for filing returns separately on a monthly basis. The GSTR 1, the seller return form, and GSTR 2, the buyer return form, will get automatically populated.
“Eventually, it will also do away with the need for electronic way bill requirement for those companies that opt for the system,” said the official.
According to industry consultations, officials point out that the goods sector, in particular, is comfortable with the idea, whereas the services sector isn’t very keen at the moment.
However, experts said, there may be some difficulties that the implantation may cause. “There could be rejections in order. What if the customer only accepts part quantity and rejects the remaining on account of quality issues,” pointed out one expert.
Abhishek Jain, tax partner, EY said, “With talks around doing away with the e-Way bill system in the long run for taxpayers using the e-invoicing system, various players in the goods industry may look forward to this new system. Also, with the system being made flexible in initial periods — it being optional and for taxpayers with higher turnover — this system should fare well with businesses.”