For almost all tax laws in India, taxpayers can be bunched into three categories — those who follow the law diligently without complaints, those who don’t like the law very much but still follow it to the extent possible, and those that exist only to hoodwink the lawmakers. Ever since the GST was rolled out, there have been quite a few who are in the third category.
Their typical process involves taking credit on fake invoices, not subjecting all their sales to tax, and claiming a GST refund and vanishing. The bosses at CBIC (Central Board of Indirect Taxes and Customs) have had the thankless task of keeping up with a law that changes almost every week and keeping an eye out for those who thought of the GST as a source to generate cash flow than to expend it. One of the ways in which the CBIC thought of minimising loss of revenue was to introduce a system of e-invoicing.
Through Notification Nos 60 and 61 of 2020, the CBIC has introduced the system of e-invoicing that will come into effect from October 1, 2020. The threshold limit for those who have to mandatorily issue e-invoices has been generously increased from ₹100 crore to ₹500 crore. SEZ units, banking and insurance companies, goods transport agencies, passenger transport services and admissions to exhibition of cinematographic films have been exempted from e-invoicing. Notification No 60 has also made changes to the existing format of the e-invoice for GST INV-1.
GST INV -1
One look at Form GST INV-1 is sufficient to prompt companies to tweak their ERP systems to enable them generate e-invoices. The schema of the e-invoice has technical field names for basic details, document period, preceding document, receipt, supplier information, recipient, payee and delivery information and invoice item details, etc. There are totally 18 field names which have been further broken up into 130 sub-fields.
The scheme also uses terms which only software geeks can understand. Here’s a sample: Cardinality means whether reporting of the item(s) is mandatory or optional as explained below: 0..1: It means that reporting of item is optional and when reported, the same cannot be repeated. 1..1: It means that reporting of item is mandatory but cannot be repeated. 1..n: It means that reporting of item is mandatory and can be repeated more than once. 0..n: It means that reporting of item is optional but can be repeated more than once if reported. For example, previous invoice reference is optional but if required one can mention many previous invoice references.
To get the new system up and running before October 1 is going to be a hard task even for companies that have the resources to implement and budgets to spend. Due to the shortage of time, the ERP vendors will probably come up with a “ jugaad ” solution — the ERP system will dish out only what is mandatory as per the cardinality rule. The rest will be done in due course of time. The CBIC should give an option to these taxpayers to attempt a parallel system at least for three months and then move on the GST INV-1.
The e-invoicing system will not have much impact on the third category of taxpayers since their turnover would invariably be less than ₹500 crore.
However, the learning from this system can be useful for the CBIC when it decides to roll this out to all GST taxpayers later. It is only then that the menace of tax evasion and attempting to rip off the CBIC will reduce.
The writer is a chartered accountant