How e-invoicing rules will impact MSMEs

E-invoicing, or electronic invoicing system, is bringing several small businesses online. However, the constant changes in the system might have some impact on the modest layers of business that MSMEs operate with.
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The e-invoicing, or electronic invoicing system, which came into existence in 2020, has successfully completed over a year and a half of its journey. Many firms, particularly micro, small, and medium-sized organisations (MSMEs) have had to deal with several regulations since then. It is still difficult for newly included small enterprises who've been pushed inside the penumbra of the compliance system. 

E-invoicing is a long-term endeavor of the Indian government to change the way companies engage with one another. Transparency, efficiency, and productivity are some of the envisioned objectives. 

However, the constant changes that are being brought into effect by the government might have some impact on the modest layers of business that MSMEs operate with. 

The new changes and how MSMEs are coping with it 

The e-invoicing system is now extended to more enterprises thanks to the CBIC's (Central Board of Indirect Taxes and Customs) CGST (Central Goods and Services Tax) notice 01/2022 dated February 24, 2022. 

Indian enterprises having an annual aggregate sale of more than Rs 20 crore to Rs 50 crore, as assessed in any previous fiscal year from 2017-18 to 2021-22, must begin producing e-invoices from April 1, 2022. 

Smaller businesses that are directly impacted by the news have less than a month to prepare for the new arrangement. They must now retrain their employees and determine how they will generate e-invoices for all of their business-to-business (B2B) transactions in the coming days. 

The integration of their invoicing systems with the government's Invoice Registration Portal (IRP) is essential for efficient e-invoicing. It's still possible for these enterprises to record their B2B invoices on the IRP using spreadsheets and other offline methods, as most of them still use traditional accounting ERPs.

Gauging the ramifications of the renewed regulations

Changes to the e-Invoicing rules might have the following effects on small businesses:

  • For compliance, small businesses now have to figure out which transactions need e-invoices and separate them from the rest of the paperwork.
  • Small companies should maintain source documents on their suppliers and customers to guarantee proper input of invoice information such as the GST identity number, bank account, and recipient details. This will now become paramount for small organizations.
  • Businesses operating on modest numbers are more vulnerable to delays if they are not conforming to a real-time invoice referencing system that can generate the IRN IRNs (Invoice Reference Numbers) in sync with the process. 
While a few smaller businesses can withstand significant delays, many others fall back on choreographed invoicing for numerous company procedures. Every day, a large number of B2B invoices are generated by relevant enterprises.

As a result, they are unable to keep their customers waiting. Such organizations may want to adopt SaaS softwares or third-party applications that can automate various compliance concerns for SMBs at the click of a button. These portals are mobile-first, which means they can be used on many different types of devices and also have tools for e-invoicing.

  • Small organisations typically do not have sophisticated enterprise resource planning systems. As a result, they will need to choose the best method of complying with e-invoicing. 

For real-time compliance, there are many options available, including direct API (Application Programming Interface) connectivity and integration via a GST Suvidha Provider (GSP). For small enterprises, offline utilities such as the GST e-Invoice Preparation and Printing (GePP) may be relied on to allow them to tolerate a little latency in service.

  • Smaller companies should familiarise themselves with the GST return preparation and filing procedure since the GSTR-1 will automatically fill in the B2B supply. Manual reporting is required for business to consumer (B2C) transactions and non-taxable supply, on the other hand.

The comfort and convenience gained through the new criterion of compliance 

The primary goal of lowering the e-invoicing threshold is to eliminate fraudulent invoicing as well as tax evasion and avoidance. 

Businesses must now synchronise their units with the e-invoicing site IRP in order to generate IRNs (Invoice Reference Numbers) for all B2B invoices in a quick and simple manner. They must ensure that their accounting systems are updated in order to comply with the e-invoice structural outline requirements. 

The positives of this impingement between smaller businesses and the compliance edict can be realised with some salient points: 

  • Accelerated loan approvals: Receiving a company loan is a significant undertaking for MSMEs owing to the excessive documentation required. Fortunately, lenders can now evaluate MSMEs based on their e-invoices, making it easier and faster for businesses to get loans.
  • Logging in the particulars: People who run businesses that are relevant should keep records of their customers and suppliers so that they can keep track of extra invoice details like GSTIN, payee information, and bank accounts for more accuracy.
  • Enhanced corporate maneuverability: The primary issue that MSMEs may encounter is engaging in real-time creation and IRN capture. Retailers with this annual revenue generate hundreds of B2B invoices on a daily basis. Additionally, they may not put consumers on hold for an extended period of time while the e-invoice is prepared. These MSMEs must make use of the GSP services to facilitate implementation and create improved corporate maneuverability. 

Vantage View 

E-invoicing is a positive move for the country's prosperity as it will boost compliance and income. As a part of the government's "Digital India" effort, it also offers an opportunity for digitisation. Although it will increase the burden on already overburdened enterprises, it will aid them in the long run in consolidating all their compliance needs and establishing their presence in the digital ecosystem.

Edited by Affirunisa Kankudti

(Disclaimer: The views and opinions expressed in this article are those of the author and do not necessarily reflect the views of YourStory.)

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