Role of CTC and Hybrid CTC in Malaysia e-Invoicing

The concept of real-time transfer of invoice data to the government, popularly called e-invoicing, has transformed the way businesses are operating in Malaysia. The key components of this transformation are Centralized Continuous Transactions (CTC) and Hybrid Centralized Continuous Transaction Systems (Hybrid CTC).

What is the Centralized Continuous Transactions model?

A CTC model is a system that provides centralized processing and recording of data. Due to the single point of data creation and collection, there is accuracy and consistency in transactions recorded by the business.

In the case of e-invoicing, CTC plays a crucial role in streamlining the data by performing the real-time processing of invoice data. This helps in reducing the time taken between invoice generation to its processing by the customer as well. Further, the CTC model provides timely and accurate information to the tax administration to help avoid tax loss to the Malaysian government.

The e-invoicing system in Malaysia with planned implementation starting June 2024 will operate on the CTC model. The CTC model works through a real-time validation of e-invoices by the Inland Revenue Board of Malaysia (IRBM).

 How does the CTC model function?

 The functioning of the CTC model is detailed below -

• Issue of e-invoice - When a sale is undertaken, the seller fills the data in the e-invoice template and generates an e-invoice for verification with the IRBM.
• Validation - The IRBM validates the e-invoice on a real-time basis and provides a Unique Identifier Number for traceability.
• Notifications - Once validated, the details are informed to both buyer and seller by IRBM.
• Sharing - The supplier sends the validated invoice with the QR code to the buyer.
• Rejection or cancellation - Once issued, the buyer has a specified time frame to request for rejection of the e-invoice. Similarly, the supplier also has the time frame to perform cancellation of the e-invoice.
• MyInvois portal - A summary of the e-invoice transactions can be accessed from the MyInvois portal.
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What is a Hybrid Centralized Continuous Transaction?

While the CTC has several benefits, it also has its limitations. This is more evident in terms of scalability and flexibility. This is where Hybrid Centralized Continuous Transaction systems come into the picture.

A Hybrid Centralized Continuous Transactions System combines the benefits of CTC with the flexibility of having decentralized systems. It allows for centralized processing of transactions while also providing flexibility for businesses to maintain their transaction records.

For CTC e-invoicing in Malaysia, a Hybrid CTC model allows businesses to adapt to changing business needs. For instance, if a business expands or diversifies, it can easily adjust its invoicing processes without disrupting the entire system. While the centralized system ensures consistency and accuracy of data, the decentralized system allows for customization based on the individual needs of the business.

How does a Hybrid CTC model function?

The Hybrid CTC model of Malaysia is a combination of the Centralized CTC model and the Peppol network. The function of the model is detailed below:

• E-Invoice issuance - Supplier generates e-invoice and sends it to IRBM.
• Validation - The IRBM validates the e-invoice in real-time and generates a Unique Identifier Number to allow document traceability.
• Transmission to Buyers - The validated e-invoice is sent to the buyer.
• QR Code Verification: A QR code mentioned on the invoice that contains a URL link provided by the IRBM.
• Peppol Network - The Peppol network is an open network that allows organizations to exchange standards-based electronic documents, such as e-invoices, and is a part of the hybrid model adopted by Malaysia.
   

How ClearTax can help the business in the CTC or Hybrid CTC model?

ClearTax is an intermediary that seamlessly connects the ERP system of the business with the IRBM cloud. ClearTax can help businesses with the following:

• Easy Integration - ClearTax can integrate with more than 50 existing ERP systems across the world. This ensures smooth data flow and ease of working with continuous data flow.
• Real-time check - The system of ClearTax verifies the invoice in real-time, ensuring that they comply with the e-invoice requirements of IRBM.
• Audit trail - After validation, the Unique Identifier Number generated by the system acts as an audit trail for the future.
• Compliance - ClearTax ensures that the business is 100 percent compliant with the e-invoicing requirements of IRBM. 

Conclusion

Both CTC and Hybrid CTC systems will play a pivotal role in the success of e-invoicing in Malaysia. By creating a balance between efficiency, accuracy, and flexibility, the two systems will enable businesses to streamline their operations and adapt to changing business environments.

As Malaysia continues to digitize its tax administration, it will be interesting to see how the CTC and Hybrid CTC model develops with time and the impact they will have on businesses and the Malaysian economy.