How has e-invoicing fared around the world?

After much anticipation, e-invoicing made its official entry under India’s indirect taxation system, the Goods and Services Tax in October 2020. And while e-invoicing might be a new term for India, it has already been adopted by several developed and developing countries across the globe.

E-invoicing refers to the electronic authentication of tax invoices through an invoice registration portal. Each invoice is issued a unique invoice reference number which is later used for invoice matching and auto populating tax return and waybill forms. This concept is pretty much the same in almost all countries that have implemented e-invoicing. However, there are significant differences in the mechanism in terms of technology used, data storage, data collection and data upload methods etc. Let’s what can be India’s key takeaways for the second phase of implementation if we were to learn by example.

Latin America

This region is one where India can learn the most about e-invoicing as some Latin American countries of Brazil, Argentina, Chile and Mexico can be rightfully called the pioneers of e-invoicing. Chile switched to e-invoicing back in 2003 and have a 17-year head start. Their e-invoicing systems are known to be mature and have probably faced all the issues that India is likely to face in its nascent stages of implementation.

Asia

Several Asian countries including Japan, Vietnam, South Korea, Philippines are all set to implement e-invoicing from 2021. As of now, Singapore is among the few Asian countries that has been practising e-invoicing for over a decade. Singapore was one of the first countries to implement e-invoicing for all business to government transactions. At present, India is making e-invoicing applicable only on business-to-business transactions but if we learn by example, we can vertically as well as horizontally expand the purview of e-invoicing to include several kinds of transactions.

Europe

E-invoicing on business to government transactions has been made mandatory in several countries under the European Union. More recently, countries in the EU including Finland, Italy and France have expanded the purview of e-invoicing to business-to-business transactions.

Is India different?

Under India’s newly implemented e-invoicing system, invoices of B2B transactions are mandatorily uploaded to an Invoice Registration Portal (IRP) which then issues an Invoice Recognition Number. The IRN becomes the identity of that particular invoice. This IRN can be used for fulfilling other GST compliances such as GST returns, ITC reconciliations, and generation of e-way bills. Through this system, the Centre has real time access to invoices raised and any fraudulent activity is caught and kept in check using AI tools.

As all B2B invoices need to be validated, a complete overhaul of the ERP systems would be required for a seamless transition to e-invoicing. This is where a GST Suvidha Provider like Avalara plays a key role by providing a connection between taxpayers and the IRP.

Because India is only a little over a month old in the implementation of e-invoicing, it is too soon to tell how it is faring in comparison with the rest of the world. But e-invoicing had had quite a positive response with close to 5 crore e-invoices being registered in October alone. India still has a long way to go and can learn from the mistakes of countries who have been in the game for quite some time. Apart from the fact the e-invoicing is all set to bring about a dynamic shift in the way India manages its indirect tax administration, it is also a reflection of how India is rapidly evolving as an adopter of technology to run its tax operations. India is following in the footsteps of several countries who have successfully adopted e-invoicing and it is safe to say that this move will prove to be highly beneficial in the long run.

Sales tax rates, rules, and regulations change frequently. Although we hope you'll find this information helpful, this blog is for informational purposes only and does not provide legal or tax advice.