The new framework for invoice clearance in India is a hot topic that concerns many companies. This is not unexpected considering the size of the Indian economy and the number of companies that will be obliged to comply with the new framework.
As outlined and confirmed in the Notification numbered 68/2019 published in the Indian Official Gazette on 13 December 2019, the legal base for the upcoming reform is set. That being said, the Notification regulates only the taxpayer scope, mandatory date and the Invoice Reference Number (IRN) requirement for the invoices. Even though these are the essential components of the reform, there are many other points that remain unclear and lack a legal basis.
Whilst the details published in December were welcomed, many questions remain. To begin with, what constitutes a legally valid invoice and at what point in the proposed workflow process will an invoice be considered as valid? The answers to these questions will have a huge impact on company strategies, processes and planning but more importantly on their compliance, as this will affect their issuing, signing and archiving processes. Therefore, an urgent clarification by the relevant authorities is needed for companies to be ready before the 1 April 2020 deadline.
In addition, most of the information regarding the workflow is provided in the Goods and Services Tax Network (GSTN) white paper and FAQs. Even though these documents are published by the relevant authority, they are not legally binding. Furthermore, they sometimes contain contradictory information. The legal definitions and the fully documented scope remain uncertain.
Another question is whether there will be an automated validation process in the workflow for the receivers of invoices. Currently, it doesn’t seem so. However, a validation mechanism is a part of the process in countries where e-invoicing is possible and sometimes validation is also mandatory for the receiver of the e-invoices. It’s therefore quite surprising that so far there has been no mention of an automated validation process proposed in the workflow by the Indian authorities which leads us to question is this yet to come.
In the FAQs provided on the GSTN’s official website, it’s been stated there will be further regulatory changes and communication to clarify some points which should address the areas highlighted above. The market expectation is to have these clarifications well in advance of the mandate deadline which is currently set for 1 April 2020. Until this time and in their absence however businesses are understandably preparing and building their solutions based on assumptions rather than solid legal data.
There’s no doubt the new system will be beneficial for the Indian government and business alike but if the necessary clarifications aren’t published soon the compliance of the companies affected by this new mandate will be at risk.
With more countries across Asia and beyond set to introduce mandatory electronic invoicing, the tax landscape is being transformed beyond recognition with far reaching implications for multinational companies. Keeping abreast of tax regulation changes, as and wherever they occur is essential for businesses to continue trading across borders without fear of penalty.
Sovos has more than a decade of experience helping customers around the world deal with e-invoicing compliance. Learn how Sovos helps companies stay compliant with e-invoicing mandates in India and around the world.