Strategies to increase awareness about Invoices

End Term Report
Gaurav Singh
14th July 2013

2012 Rakshak Foundation. All Rights Reserved.

Contents
Project Overview
•Introduction
•Goals and Objectives
•Scope of the project

Research Methodology
for the project

Field visits and Mentor
Discussion

Key Findings

Results and
Discussions

Recommendations,
their scope and
Strategy for
Implementation

Time Line

References

Appendix


2

Project Overview
An invoice or a bill is a commercial document that is issued by a seller to a
buyer.
Pro
forma
Credit
Memo

Timesheet

Invoices
Debit
Memo

ERS
Selfbilling
Invoice


Commercial
Invoice

Taxes

Entertainment
Tax

Professional
Tax

Sales
Tax

Income Tax

Anti

Municipal Tax
Corporate
Tax

Direct
Taxes

Stamp
Duty

Wealth
Tax
Perquisite
Tax


Duty

Capital
Gains Tax

Registra
-tion Fee

Securities
Transacrion
Tax

Educatio
n Cess,
Surchar
ge

Service
Tax

Toll Tax
Dumping

Indirect
Taxes
Value
Added
Tax

Excise
Duty
Gift Tax

Dividen
d
Distribu
tion
Tax

Custom
Duty and
Octroi

Why Issue An Invoice???

Benefits

Organized Business
Client confidence develpment
Tax Collection
Guarantee/Warantee Assessment
Quality Assurance
Legal Owneship


Addressing Problems and Scope of the project
Lack of
Awareness
Fraudulent

Unorganized
Business
Sector

Ignorant
Behaviour

Invoice
Requirement at
Certain Places

Compliance
Issues

History of
Problems


No
Standardisation

Concerns

Devaluation of
Goods

Goals and Objectives

Identify
Root
Causes

Long Term
Behaviour
Change

Goals
and
Objective

New
Management System


Spreading
the
message

Eradicate
Fraudulent

7

Research Methodology

Methodology
Literature
Search

Books and
Articles

Internet


Newspaper

Field Visits

Journals
and
Reports

Jia Sarai
Market

8

Vyapar
Bhawan

Surveys

IIPA

Odisha

Meetings and
Interviews

Krishi
Bhawan

Field visits and Mentor Discussion

Sr.
No.

Date and time

Person or
Organization

Place

Aim

Findings

1.

29th May

Dr. Mrinalini
Darswal

Vyapar
Bhawan,
I.P. Estate

To get a lead on
the project

Found new contacts in Delhi
Department of Trade and
Taxes, to discuss the issues.

2.

29th May

Mr Tarun
Sharma

Vyapar
Bhawan,
I.P. Estate

Discuss the
issues
pertaining to
invoices

The cost to monitor the small
retailers in tax collection would
be greater than that paid by
them.

3.

29th May

Shri R. N.
Mangla

Vyapar
Bhawan,
I.P. Estate

The feasibility
and scope of
the project

There certainly are chances to
increase the compliance by
increasing the awareness about
invoices. Discussed the ideas
of e-invoicing system


9

Field visits and Mentor Discussion (cont…)
Sr.
No.

Date and time

Person or
Organization

Place

Aim

Findings

4.

18th May

Shri Manoj
Ahuja

Cuttack
(Over
Phone)

To get a lead on
the project and
general path to
be followed

The VAT Act of Odisha, 2005.
Research should be focussed
with primary data, so field visit
and talking to people is
required.

5.

4th June

Shri Manoj
Ahuja

Cuttack
(Over
Phone)

Discuss the
feasibility of
recommendatio
ns to be
mentioned in
report.

No need to worry about the
feasibility on first hand. All the
recommendations should be
considered and follow up
should be made keeping in
mind the time limit of the project

6.

5th June

Retailers

Jia Sarai
Market,
Beside IIT
Delhi

To know the
present status
of prevalent in
the market.

So many to be listed here.
Precisely, zero level awareness
about the laws and taxation
system. Not in the habit of
issuing invoices.


10

Field visits and Mentor Discussion (cont…)

Sr.
No.

Date and time

Person or
Organization

Place

Aim

Findings

7.

19th June

Retailers in
Chandni
Chowk Area

Chandni
Chowk,
Delhi

To know the
present status
of prevalent in
the market.

The dealers are aware of the
tax payment rules and
regulations by the government,
but most of them do not issue
any invoice.

8.

27th and 28th
June

Retailers in
Bhubaneswar
Range, Circle
IV

Bhubanes
war

Market survey
and interview
the retailers.

All the findings and relations
have been established in the
end term report. Honesty in
business is an important factor.

9.

26th and 29th
June 2013

Shri Manoj
Ahuja

Sales Tax
Office,
Cuttack

Discuss the
feasibility of the
models
developed.

The model developed is ideal,
but its implementation have to
be found out. Concluding the
results and project
presentation.


11

Key Findings and Discussions
Lack of resources (both technological
and human), it is currently very
tedious to monitor the tax compliance
at such low levels of retail sector.
Possibility of getting caught is very
low.

So many dealers who are not registered
with the sales tax department, and the
system has various loopholes which
help them in escaping the penalties.

There is no standardisation in the
invoice format in the country. Also at
regional level, the formats of the
invoices vary widely.


In small shops like, a tea stall, there is
even no record maintenance for
anything. Invoices cannot be thought
from his side.

12

Key Findings and Discussions (cont…)
Most of the dealers excuse by saying
that they do not find time for their
business, once they start maintaining
records on each and every sale that is
made. Technological override has
become mandatory.

Many retailers being unaware about the
taxation system, have employed
Chartered Accountants (C.A.) for filing
their tax returns to the state. They do not
see any discrepancy in the system and
taxation does not affect their business.

The efforts made by the government
do not reach at such low levels, the
incentives offered are still unknown to
them.

The top 1% of the dealers pay nearly,
about 80% of the total tax collected, so
the importance of the rest is not
realized. The cost of monitoring the rest
will account more than the taxes they
pay.


13



14


Kashoo

Invoicera
Xero
Quickbooks Online
Freshbooks
Harvest
FreeAgent
Yendo
Less Accounting

Wave Accounting


15


Should
be?


16

Should
be?

Recommendations, their scope and Strategy for
Implementation
Awareness Campaigns
Scope: Awareness in consumers as well as sellers about
the issuance of invoices

Issues: General ignorant behaviour and mutual fradulent
that exists among people.

Proposal: Various strategies like television and
newspaper advertisements, radios and posters,
hoardings etc. with street plays. Need to contact NSD,
National School of Drama (if feasible) to incorporate
this issue in their play.


17

Implementation
Moral Science Education
Scope: It is a good strategy to educate ourselves from the
beginning so that, in future there are no chances for
problems. Incorportion of this in the education system,
and that too in moral education would have an effect on
the behaviours of people.

Issues: The time at which this should be taught, as this
may require a higher knowledge as a prequisite.

Proposal: Apart from being taught in economics, at lower
level students should be taught on the tax payment and
importance of invoices. This would have an impact upon
their parents as well as they will be a better citizen when
they grow up.


18

Implementation
Technological Reforms
Scope: Electronic systems are more benefiacial than
manual ones, as they have better record maintenance
facilities and advantages.

Issues: The money spent on this will account to be too
much, as hardware installments and getting the records
digitized will have cost of education for the retailers as
well.
Proposal: Because it is a one time investment, this is
actually feasible by providing loans to the retailers to
help them install the required hardwares in theor shops.
Education may be made free for those who comply to
this policy.


19

Implementation
Innovative Methods of Advertisements
Scope: Reaching out public through various new channels
which other department have employed can influence
their minds. Innovative methods of advertisement may
target large and quality audience in interest.

Issues: These methods may vary from state to state and
also in different regions within the state, a pre-requisite
for this plan would be to set up a Public Relations
department before deploying this.

Proposal: Local TV actors, public transportation,
collaboration with National Consumer Helphline and
department of Consumer Affairs, stickers on passbooks
(banks and post offices), hordings at market places etc.


20

Implementation
Every sale to be monitored, Idealised model
Scope: For controlling the market and monitoring all the
sales and transactions that are made, we can ask the
retailers to use the model shown in figure.

Issues: The sellers may not agree for intervention by
government in their business, and might refuse to follow
the above model.

Proposal: The efficiency rest on the projection of the
model, realization of other benefits along with invoice
monitoring may incentivize the dealers to use this
model.


21

Implementation
Model #1


22

Implementation
Model #2


23

Implementation
Invoice Pooling Model
Scope: For controlling the market and monitoring all the
sales and transactions that are made, we can ask the
retailers to use the model shown in figure. Creating an
invoice pool can remove the behaviour issues all the
dealers in the nearby market shall be using this
technology, and market competition will be equal.

Issues: The sellers may not agree for intervention by
government in their business, and might refuse to follow
the above model.

Proposal: The efficiency rest on the projection of the
model, starting with a pilot testing with the willing
dealers and spread it gradually. It is important make the
dealers realize their part of benefits.


24

Implementation
Invoice Pool


25

Implementation
Need for Public Relations Department
Scope: To address the citizens about the happenings and
listen to the grievances of any common man, publicity
research and media and marketing and generating
awareness and answering to people.

Issues: Lack of resources and interests in the
department. People may start misusing this and the load
on the department is surely to increase.
Proposal: Setting up this section in the tax department is
important, and employing dedicated and talented people
who have been in public relations can efficiently manage
it. The after effect development after establishment of
this department is important and should not be
undermined.


26

Implementation
Lower threshold to Invoice Issuing
Scope: Putting a lower threshold ensures that invoices are
issued on a significant number of sales, though monitoring
every sale with every denomination is not possible
presently. Other states should also follow this strategy.
Issues:The key point here rests with the optimization,
the more close this value is to zero, higher shall be the
monitoring index. But also at the same time, the burden
of maintaining records and resource utilisation would be
more.
Proposal: This value must be dependent on various
variables and has to be different for different states in
the country. Along with this awareness about the laws
pertaining to these issues should be spread.


27

Implementation
New Place to issue invoices
Scope: Promoting new places for issuing invoice should
also improve behaviour issue for asking invoices on our
purchases.

Issues: Lack of knowledge and litereacy, also the small
dealers nonchalant attitude may not encourage buyers
to ask for invoices.

Proposal:The start can be flexible as to write on a piece
of paper and give the records of the purchase, but it
should begin in the market as soon as possible if we
have to keep track of the sales made within our state.


28

Timeline (Tasks Completed)
Week 1: Gained theoretical background on the
concepts of Invoices, taxation system in India, case
studies on Value Added Tax, tax collection reports
and CAG reports.
Week 2: Field Visit to Vyapar Bhawan, talked to
various Government Officials about the scope and
feasibility of project. Discussed various issues
pertaining to invoices in India.
Week 3: Field visit and sample survey in the Jia
Sarai Market beside IIT Delhi Campus. Researched
upon the government efforts to monitor tax
collection.

Week 4: Searched about various invoicing
techniques that are prevalent in different parts of
the globe. Methods like online database
management, filing returns through various
gateways etc.

Timeline (continued)
Week 5: Research on the Jaago Grahak Jaago
scheme of the government, and try to collaborate
the issues relevant to invoices. Go through various
reports and news articles on usage of invoices.
Week 6: Went to a field visit to Cuttack Odisha,
compared and contrasted the status of invoices
prevalent in that state with that of NCR region.
Developed a model to increase the compliance
towards invoice issuing.
Week 7: Researched on the option for strict penal
provisions, searched for better penalty systems that
can increase compliance.

Week 8: Decided final ideas and strategies of
public awareness so that people can be educated
about the usage of invoices and can escape
fraudulent.


Suggestions and Questions ????


APPENDIX


32

REFERENCES
Delhi Value Added Tax (DVAT) Act, 2004
Odisha Value Added Tax Act, 2005
Delhi Department of Trade and Taxes, Implementation of VAT,
Working Paper Number 218, Submitted by Rahul Garg to Centre for
Civil Society
Step 4E, World Bank Report on Public Awareness
Citizen’s Charter
National Portal of India (http://india.gov.in/)
Department of Revenue of India (http://dor.gov.in/)
Ministry of Finance, Government of India (http://mof.gov.in/)
Department of Trade and Taxes, Government of Delhi
(http://delhi.gov.in/wps/wcm/connect/doit_tradeandtaxes/Trade
AndTaxes/Home)
Commercial Tax Department (https://odishatax.gov.in/)
Mai H. and Meyer T. “E-Invoicing” Final Step Towards Efficient
Invoicing Process, Deutsche Bank Research, Economics 76 (2010)


THANK YOU


34

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