E-invoicing and ITC Claim: Positive Impact of E-invoicing on GST Reconciliation & ITC

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E-invoicing and ITC Claim Positive Impact of
E-invoicing on GST Reconciliation ITC
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E-invoicing and ITC Claim have got interconnected
since the introduction of the e-invoicing mandate
rolled out in October 2020. The present
e-invoicing turnover limit requires taxpayers
with turnover above Rs. 10 Cr to register their
sales invoices with Invoice Registration Portals
(like IRIS IRP) and obtain a unique Invoice
Reference Number (IRN) along with a QR code
before sharing it with the purchaser. And
purchaser has to ensure that the invoice received
has the QR Code printed on it, as now, invoices
with an IRP-authorized IRN and digitally signed
QR Code will only be considered as valid. As a
compliance task, the generation of invoice is
responsibility of the supplier and reconciliation
of the invoice with purchase data is recipients
responsibility for accurate ITC claim. Thus, the
underlying document for ITC claim is the invoice
generated and uploaded by the supplier on the GST
system.
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E-Invoicing and ITC Claim Positive Impact
With e-invoicing coming in play, it has a direct
impact on GST reconciliation and ITC claim as
henceforth, ITC will be available only on
IRP-generated invoices. Here are 5 ways in which
e-invoicing and ITC Claim will get interconnected
and e-invoicing will help in faster and better
GST reconciliation and hence efficient ITC claim
1. Real-time availability of e-invoice for ITC
Claim
Under the E-invoice mandate, e-invoice needs to
be generated before the document is shared with
the customer, thus making it a transactional
level compliance. Hence, suppliers need to send
the invoice data to IRP, get IRN and QR Code in
return and print this QR Code on the invoice
before it is issued. Hence, every invoice issued
under e-invoicing is available in system
real-time. This data is available for purchasers
to view.
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Thus businesses can define process to reconcile
their records with invoice data as soon as the
e-invoice is made rather than waiting for the
invoice data to be made available via GSTR 2B.
2. E-Invoice is not just document but
interoperable data set
E-invoice is a not only a process change but also
form change. The invoice which was previously
available as a physical copy or pdf has now
transformed to data set of relevant values. Thus,
one can start looking at invoice being available
as data rather than as a document. Once the
e-invoice is generated, the supplier can exchange
the complete e-invoice data with the recipient
digitally. This exchange can be completely
automated with IRP (Invoice Registration Portal)
acting as facilitator in between. Suppliers can
thus feed the e-invoice data directly into the
recipients systems. The purchase ledgers get
auto-populated and reconciliation activities can
be started earlier.
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3. Standardized information from all vendors
Everyone covered under the E-invoice mandate need
to follow the same e-invoice standard. The
structure of IRN and B2B QR code format is also
the same for any e-invoice. This standardization
will address the inefficiencies of extracting the
data from the vendor-specific documents before it
can be reconciled. Time and cost savings due to
the standard e-invoice processing can be
significant.
4. Better invoice matching in GST Reconciliation
Currently, matching the invoices in purchase
registers with GSTR 2A and GSTR 2B which also has
ITC related computations, is a critical activity
that taxpayers need to do for maximizing ITC
claim. Businesses usually use invoice number,
invoice date, and GSTIN of the counterparty as
the common factor between two data sets to
identify comparable invoices. The matching of
actual data is the next step once comparable
invoices are found.
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One of the biggest challenges in GST
reconciliation has been to identify the
comparable invoices because of manual or
recording errors in capturing invoice number etc
in 2 different data sources- supplier and
recipient. This will change with e-invoicing
coming into play. Under e-invoicing, once the
supplier generates e-invoice from any of the IRP,
IRPs need to send e-invoices generated by them to
the GST system. The auto-population of GSTR 1 for
supplier and GSTR 2A/2B for the recipient will be
done post receipt of data from IRPs by the GST
system. If this e-invoice data can be directly
pushed in purchase ledger, comparable invoices
can be found easily and scope of data
discrepancies get reduced. This is where Private
IRP like IRIS IRP can help.
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5. Proactive issue resolution leading to faster
turnaround time
The goal of GST reconciliation is to identify
gaps and resolve the issues so that ITC claim can
be maximized. With availability of e-invoice data
real-time, internal checks can be setup to
provide for faster processing of invoice
reconciliation. Thus any discrepancies which can
put ITC at risk such as mismatch in tax amount or
POS (place of supply) etc can be reported to the
supplier immediately. There is a window of 24
hours to cancel the e-invoice. Identifying and
communicating issues early enough will help to
take corrective actions and ensure ITC is claimed
in the same period.
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Thank You
Also Read This Full Article - E-invoicing and
ITC Claim Positive Impact of E-invoicing on GST
Reconciliation ITC