While the GST council is all set to bring in a new feature of e-invoicing to enable machines to read electronic invoices, it will also be important for the government to modernize and automate its back office for processing and refunds. The new legislation requires businesses to use software that automatically obtains a unique identifier from a registration body. “Adopting software that has been upgraded for this purpose won’t be painless, but it isn’t transformational,” Christiaan van der Valk, vice-chair, commission on the digital economy at the International Chambers of Commerce, told Samrat Sharma of Financial Express Online in an interview. Christiaan, who is also vice president of strategy, Sovos, said that most experts consider the remaining challenges with GST in India to revolve around complex filing and timely tax refunds. Here are the excerpts of the interview:
How has the implementation of GST in India gone so far?
While the road to GST was bumpy, it was by international comparison very quick. The challenge was, of course, monumental, considering country size, economic and societal stakes. Rolling out a program of this magnitude in such a short time was never going to be easy but it is widely considered to have been successful.
With increasing cases of fraud related to input tax credit, how can e-invoicing help to curb it?
Fraud often causes governments to collect significantly less VAT. To reduce this gap, countries across the globe are adopting continuous transaction controls (CTCs). E-invoicing with real-time tax approvals is a form of CTC that successfully reduced fraud in Mexico, Brazil, and Turkey. The proposal that India has outlined has the same core concepts and can be expected to show similar results.
Can e-invoicing reduce compliance pressures felt by companies?
Uncertainty of interpretation – simply knowing what tax rules mean – has historically been problematic for bona fide companies trying to avoid fines, protracted audits and other consequences of non-compliance. By contrast, CTCs are based on comprehensive technology specifications, which make compliance a more binary proposition. However, complying with the continuous change of specifications and considerable variation among countries can be challenging – that’s where always-on e-invoicing compliance software comes in.
How easy or difficult is implementing e-invoicing?
The new legislation requires businesses to use software that automatically obtains a unique identifier from a registration body. Adopting software that has been upgraded for this purpose won’t be painless, but it isn’t transformational. This identifier must then be incorporated in every invoice a supplier sends, whether electronic or on paper. In that sense, the new rules aren’t really about e-invoicing – which has been an option in India for years – but rather about real-time online reporting of invoice data.
GST was brought-in to reduce complexity in the tax structure, but it further increased the confusion in the market. Do you have any recommendations on improving GST in India?
Most experts consider the remaining challenges with GST in India to revolve around complex filing and timely tax refunds. One stated objective of the new e-invoicing rules is to replace reporting processes by an automated procedure that has the potential of considerably alleviating the burden of filing. It is important that the tax administration continues to modernize and automate its back office for processing and refunds. Outside of tax, India could generate vast economic gains by using the new e-invoicing rules to eliminate paper bills and foster automation of business transactions.