In 2017, the Government of India launched the Goods And Services Tax (GST) system for Indian Taxpayers' betterment. As the earlier Indirect Tax regime was a little bit tough for the taxpayers to operate with it. And since GST's commencement in 2017, the GST Council and the Government are taking many steps to make this tax regime burden-free for taxpayers. The measures like GST E-Invoicing, E-way Bills, and Quarterly filings for SMEs with respective turnovers are of great help. And one of the Government's initiatives is to provide accounting and billing software to small businesses with a turnover of less than Rs.5 crores for free to help them in GST Invoice preparations, Return filing, and accounting needs.
So you all know that GST Invoice and E-Invoicing are some necessary things for businesses. Now let's discuss them and what problems SMEs face with them.
What is a GST Invoice?
GST Invoice is a commercial document, invoice, or bill showing the details of goods or services offered by the seller to the buyer, which comprises quantity, cost, and tax amount-related information. It's the same as other invoices that businesses were using before the GST Act implementation.
What is GST E-Invoicing?
GST E-Invoicing is a tool through which electronic authentication of pre-generated GST Invoice, which is uploaded on Invoice Registration Portal (IRP), is done by the GST department. The E-Invoicing does not involve new Invoices preparation on any Government portal that generates them electronically. But it involves the old GST invoices generated by any software or other utility which businesses use to be uploaded on IRP Portal.
The purpose of uploading invoices on the IRP portal is to get a report on details of Business to Business (B2B) and export invoices. Through the IRP portal upload action, invoices get a unique identification number for every invoice called Invoice Reference Number (IRN). Further, invoices get digitally signed QR codes which provides a standardized look to all invoices generated by different businesses. GST E-Invoicing is only applicable to those taxpayers' companies with Rs.50 Crores and above aggregate turnover.
Benefits of GST E-Invoicing
In the 37th meeting of the GST Council, they introduced the concept of Electronic invoice or E-invoice for GST taxpayers. The purpose behind this step is to curb fake invoicing. Tax leakage and fraud by using Fake invoices were a concern of the Government much before the GST law introduction.
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Problems SMEs face with GST Invoice and E-Invoicing.
Now after, knowing about GST Invoice and E-Invoicing, that is what it meant. Let's understand what problems all businesses face with them.
1. GST Bill Format Issues.
It is one of the issues that small businesses face when managing their business operations manually. So SME owners many times are seen to use Excel or traditional methods of pre-printed paper-based invoices. And then this problem arises because they don't know what details go in the invoice and are also unable to design it.
So the answer to their first problem with regards to details of the information that goes in GST Invoices are as follows -
- Invoice number and Date.
- Customer name.
- Customer and Taxpayers GSTIN (if registered).*
- Shipping and billing address.
- Place of supply.
- HSN code/ SAC code.
- Item details like description, quantity, unit (meter, kg, etc.), total value.
- Taxable value and discounts.
- Rate and amount of taxes of CGST/ SGST/ IGST.
- Whether GST is payable on a reverse charge basis.
- Signature of the supplier.
If the recipient is not registered and the value is more than Rs. 50,000 then the invoice should carry:
- Name and Address of the Recipient.
- Address of delivery.
- State name and code.
And for the second problem of professional GST Invoice design and other issues, the business should digitize themselves using a software solution. Because by adopting the software for their business operations, SMEs should not worry about Invoice format problems. As the software will provide for it. And it will reduce the chance of any Human Error which was coming when invoices got generated in Excel or other manual forms.
2. Customer's GSTIN Verification.
Like the first problem, this one also arises when businesses perform their invoicing activity manually or on Excel. There is no method of matching the GSTIN of the recipient with the GST Portal's database on Excel. And that's why if the wrong GSTIN gets a mention on the bill, it can also affect the GST Returns. Also, the recipient will not get the Input Tax Credit on its purchase.
So this problem is only happening because of one issue that is all business processes are conducted manually. And the solution to it is that companies should automate and digitalize their whole business activities. For this problem companies, can use business management software solutions enabled with GST features. And then, organizations can automatically verify their customers' GSTIN while entering their details in the software only.
3. HSN Code and GST Rate determination.
The subsequent problem businesses face determining that in which HSN code category does their product falls. And also with the regular change in GST rates on products and services which one applies to them.
So like the other problems, if businesses use software solutions, then this can get solve efficiently. As these software solutions get new updates regularly, which carry the current GST Rates changes. And also with large data backups on HSN Codes and Chapters help businesses identifying their particular HSN categories.
4. Sorting B2B and B2C Invoices.
The GST E-Invoicing is only applicable to Business to Business (B2B) transactions of the registered taxpayers and not to Business to Consumer (B2C) transactions. So companies need to know and sort all the B2B transactions separately for IRP portal uploading purposes. And if the firms are maintaining them manually on Excel, then the process becomes complex and lengthy prone to errors.
So like the other problems, the solution to this one is also the same. Companies should use software to automate their core business activities. And with this automation process, the invoicing process will also get digitalized. And then, the sorting and selection of B2B invoices will become easy and error-free.
5. Reconciliation of GST E-Invoices
The main problem is with the matching of E-Invoice data and E-way bill data with GSTR-1 B2B transaction data. That all these data match with each other, and there are no discrepancies.
This reconciliation process, if done manually for massive data, becomes a difficult task. And if the ERPs or Business management solution has integration with IRP/GSP/ASP data, this process becomes a lot easier for SMEs.
So from the problem statement above, it is clear that SMEs principally face the problem with GST Invoicing and E-Invoicing because of its manual style of working. And the solution for this problem is only when the business will digitize their core business activities using suitable software.
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The companies should choose a software solution which is best for them and satisfies all their needs. And should not select the software just because big market players are using it. TranZact is a digital transformation tool and platform for SMEs to digitize business processes right, from customer inquiry to dispatch. It provides GST services that will help SMEs in their GST invoicing problems. TranZact team believes in a Freemium policy. As they want every Indian SME to use their software without worrying about silly amounts of money. And firms should choose this software or any other software only if they provide for their nature and size of businesses. Otherwise, go for other solutions available in the market if it suits them.