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Automated Return Scrutiny Module E-Invoice  

Context:

The Government has recently reduced the limit for businesses to generate e-Invoice for Business-to-Business (B2B) transactions from Rs 10 crore to Rs 5 crore. Additionally, the government has rolled out the Automated Return Scrutiny Module (ARSM).

Relevance:

GS III: Indian Economy

Dimensions of the Article:

  1. Automated Return Scrutiny Module (ARSM)
  2. e-Invoicing Under GST
  3. Significance of Lowering Thresholds for e-Invoice
  4. Concerns related to the Decision

Automated Return Scrutiny Module (ARSM)

  • ARSM is an integral component of the ACES-GST backend application.
  • It employs data analytics to identify risks and discrepancies in GST returns.

Key Features:

  • Enables tax officers to scrutinize the GST returns of Centre Administered Taxpayers.
  • Taxpayers are selected based on risks identified by the system.
  • Generates alerts in case of non-compliance detection.

Current Implementation:

  • The automated return scrutiny module is already in operation.
  • It has initiated the scrutiny of GST returns for the fiscal year 2019-20.
  • Tax officers already possess the necessary data for the scrutiny process.

e-Invoicing Under GST:

  • e-Invoicing is a system where B2B invoices and certain documents are electronically authenticated by the GSTN.
  • It involves submitting pre-generated standard invoices on a common e-invoice portal, streamlining reporting with one-time input of invoice details.

Process and Benefits:

  • Each invoice is assigned an identification number by the Invoice Registration Portal (IRP).
  • The invoice information is transmitted in real-time to the GST portal and e-Way Bill portal.
  • e-Way Bill is a digital compliance mechanism that enables faster movement of goods.
  • Manual data entry for return filing and e-way bill generation is eliminated.

Objectives:

  • The GST Council approved the standard of e-invoice to facilitate interoperability across the entire GST ecosystem.

Significance:

  • A uniform invoicing system allows tax authorities to pre-populate returns and minimize reconciliation issues.
  • Implementation of e-invoicing helps combat fake invoices, fraudulent input tax credit claims, and tax evasion.
  • Real-time access to data empowers tax authorities to detect and prevent fraudulent activities.

Significance of Lowering Thresholds for e-Invoice

  • Increased Compliance: By reducing the threshold, more businesses, including small and medium-sized enterprises, are mandated to adopt e-invoicing. This expansion of the compliance mandate ensures a wider coverage of businesses under the e-invoicing system.
  • Boost in GST Revenue: With a larger number of businesses generating e-invoices, there is a potential increase in GST revenue collections. By capturing transactions electronically, the government can track and monitor business activities more effectively, leading to improved tax compliance.
  • Curbing Tax Evasion: Lowering the threshold for e-invoicing helps combat tax evasion. The requirement for businesses to generate e-invoices provides a digital trail of transactions, reducing the possibility of underreporting or manipulation of sales figures.
  • Broadening the Tax Base: By bringing more businesses into the e-invoicing framework, the tax base is broadened. This means a larger number of businesses are accounted for in the tax system, contributing to a fair and inclusive tax environment.
  • Enhanced Data for Compliance: With increased adoption of e-invoicing, tax authorities have access to more comprehensive and accurate data. This enables them to identify mismatch errors, discrepancies, and potential instances of fraudulent activities, such as the generation of fake invoices.

Concerns related to the Decision

  • Challenges for SMEs: Small and medium enterprises may face difficulties in adapting to the new e-invoicing requirements. They may need to invest in technology and resources to comply, which can increase their compliance costs and put a strain on their cash flows.
  • Capacity and Preparedness of GSTN: The GST Network (GSTN) needs to be adequately prepared to handle the increased volume of e-invoices generated by a larger number of taxpayers. If the system is not capable of handling the load, it can result in technical glitches and delays in invoice generation, impacting business operations.
  • Exclusion of B2C Transactions: Currently, e-invoicing is not applicable to Business-to-Consumer (B2C) transactions. As a significant amount of fraud occurs in B2C invoices where Input Tax Credit (ITC) is not involved, excluding them from e-invoicing requirements may limit the effectiveness of the system in curbing fraudulent activities.

-Source: Down To Earth


February 2024
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