How new e-invoicing norm will affect MSME sector?

Updated : March 26, 2021 06:02:35 IST

E-Invoicing is a welcome step for the growth of the country as it will increase the compliance base and revenue.

E-Invoicing is a welcome step for the growth of the country as it will increase the compliance base and revenue. It is also an opportunity for digital transformation, one of the significant aspects of the government’s 'Digital India' campaign. While it will surely add burden for already burdened businessmen, it can be easily managed using accounting software that is seamlessly integrated with the GST portal.

Impact of E-Invoicing on Businesses and Processes

The new system of mandatory government-verified e-invoices for business-to-business (B2B) transactions of businesses with over Rs 50 crore turnover brings with it numerous benefits, for both the taxpayers and government and helps amplify the ease of doing business. E-invoicing involves a high-level integration between government portals such as GSTN portal, e-waybill & IRP and taxpayer ERP software.

Though it brings many challenges with respect to the way business processes are currently being followed by taxpayers, subsequently, businesses will benefit from this disruption. It will save efforts and time that goes into GST compliance as an automated system will ensure an error-free process.

Here are some key considerations from a business perspective:

Identifying the transactions attracting e-invoicing like imports, asset transfers, cross changes etc.
Grouping vendors into small and large categories to identify data collation requirements
Updating information about vendors and customers to match with the additional information required for invoices (like bank details, payee details, PIN codes etc.)
Accounting system customisation to make it compatible with the requirements by the government
Alteration in GST returns process so that B2C supplies can be manually uploaded and B2B supplies get auto-populated in the GST returns

E-Invoicing Will Likely Reduce Government’s Compliance Burden

With India adopting e-invoicing, it has adopted something similar to what is known as the ‘clearance model’ at the international level. In the clearance model, it is mandatory for businesses to get the invoices reported and cleared by the government on a designated portal before sharing them with the buyer. The focus is to move away from post-facto audit-based approach of monitoring and towards more real-time reporting and analysis.

Further, the move will likely push the fragmented MSME sector to adopt disruptive technology, which ultimately, will drive the economy faster. This may also make companies adaptable and malleable to technology as well as to newer ways of doing business. These benefits are the hallmark of the new system and also, of true value to the economy.

The developments in the system signify various benefits that the economy as well as the government. It will lead to a reduction in cases of dubious Input Tax Credit (ITC) which will help plug revenue leak. The new process also ensures real-time monitoring with the mandatory affixation of QR code on invoices which has invoice reference number (IRN) as well as 8 important parameters. This enables the buyer to check the validity of invoices through an app by the government.

Moreover, the integration of an e-invoicing system with GST returns eliminates the chance of human errors by reducing the need for reporting the same thing again and again. Before e-invoicing made its way, there were multiple manual reconciliations between GSTR 3B, GSTR 1 and the e-way bill but now, with the implementation of e-invoice, the details furnished on the Invoice Registration Portal get auto-populated in the e-way bill portal and GSTR 1. As a result, the liability of the supplier in GSTR 3B, as well as his ITC from GSTR2B, will be automatically computed.

Summing Up!

The new e-invoice move by the government is surely a win-win situation for businesses especially MSMEs as well as the government which will experience a significant fall in their compliance burden. MSMEs will get equipped with advanced technology, experience efficient functioning and move towards growth.

The author, Rajesh Gupta, is Co-Founder and Director at Busy Infotech. The views expressed are personal

Published : February 26, 2021 05:29 PM IST

How new e-invoicing norm will affect MSME sector?

You May Also Like

Panasonic to buy US supply-chain software firm Blue Yonder for $7.1 billion

Ind Ra revises down India's FY22 GDP growth forecast to 10.1%

Australia urges AstraZeneca to send 1 million COVID-19 vaccine doses to PNG after EU clearance

Trending on CNBC-TV18

recommended for you