India is the next country on the docket to implement electronic invoicing (eInvoicing) requirements, and like so many other markets, the regulatory focus is on streamlining tax payments and combatting tax fraud.
With the regulation's initial rollouts focusing on larger enterprises and their B2B transactions, India can not only bolster its own economy through accurate and efficient tax collections. Niraj Hutheesing, founder and director at India-based Cygnet Infotech, said there are valuable and tangible benefits for businesses themselves, too.
Speaking with PYMNTS, Hutheesing said the government's eInvoicing mandate goes beyond helping organizations avoid tax non-compliance — although, he said, that is indeed important. Rather, state officials have the potential to drive significant efficiencies in company back offices, with additional opportunities for companies themselves to wield eInvoicing for their own cash flow benefits as well.
Combatting Tax Fraud
As of Oct. 1, 2020, corporates with turnover of more than 100 crores (about $13.5 million) will be required to adopt eInvoicing processes and to submit invoices for tax purposes via the nation's Invoice Registration Portal (IRP). Organizations with turnover greater than 500 crores (about $67.4 million) must be in compliance with the eInvoice mandate for their B2B transactions, explained Hutheesing.
To address this compliance requirement for corporate customers, Cygnet recently rolled out its eInvoicing solution for firms with more than 500 crores in annual turnover, to tackle multiple requirements of the regulation.
Through the use of an Invoice Registration Number (IRN), which must be added to an invoice before it is sent to a customer, as well as the use of static QR codes on B2B invoices that contain summary information about the document, the digitization of the invoicing and tax collection process can promote heightened efficiencies for officials.
Tax fraud is a particularly large focus of the regulation, he said, noting that through the eInvoicing portal, transaction information "will be promptly available with the authorities even before the transaction has taken place."
"It is without doubt that this would help fraud mitigation and achieve higher secured environment," he added. "Overall, the incentive to commit fraud will go down due to the instant and online nature of the eInvoicing process. Businesses will be able to operate in a cleaner business environment — at least, that is the vision right now."
Yet as Hutheesing highlighted, the value here is not solely for the purpose of the government.
Indeed, tax non-compliance can be an expensive problem for businesses and may not always be intentional. In addition to monetary fines, businesses risk reputational losses with their B2B partners and customers as well.
Further, he said, the benefits go beyond the tax landscape.
Enabling Back-Office Efficiency
"If you hear the government's narrative on eInvoicing, it asks the industry to look at eInvoicing not from a reporting perspective, but [from a perspective of] how businesses interact with each other," Hutheesing explained.
As such, the mandate also requires integration with back-office platforms including enterprise resource planning (ERP) solutions that generate eInvoicing and ingest invoice data. Through that connectivity, synergies and efficiencies can be gained, with Hutheesing pointing to manual processes like register maintenance, or traditional invoice generation, scanning and storing, as processes that can be "eliminated altogether" through the eInvoice mandate.
Overall, electronic invoicing promotes enhanced security and automation of back-office workflows. But the framework that the government requires from corporates to remain compliant has the potential to add even more value.
Dynamic QR codes, for instance, can support integrated and digital payment acceptance directly from an invoice as it's generated and submitted to a customer. Electronic invoicing also prevents duplicate invoice generation — another opportunity for fraud as well as accidental payments and bookkeeping headaches. And at the bird's eye level, adoption of eInvoicing can act as a catalyst for further back-office digitization and automation because just as the government sees value in digitizing the invoice, organizations can also recognize heightened efficiencies and security by digitizing other aspects of their operations.
India is far from the only nation to adopt an eInvoice mandate, and it won't be the last as other markets, including the U.S. and Europe, continue their own migration toward similar requirements. And as India's example shows, while governments can elevate revenues through accurate and seamless tax collection and fraud mitigation efforts, the value for governments and businesses alike can carry far beyond the tax realm.