As per CGST Notification 01/2022 released on 24th Feb 2022, GST e-invoice was made mandatory for entities with turnover of Rs. 20 Cr and above. The Government now plans to extend the scope of e-Invoicing to taxpayers below Rs. 20 Cr. and the process has begun. Taxpayers with turnover between Rs. 5 Cr. and Rs. 20 Cr. are enabled for testing on Sandbox. As per GST Notification 10/2023 dated 10-05-2023 mandates e-invoicing for taxpayers having AATO above Rs. 5 crores in any financial year since FY 2017-18 w.e.f. 1st August, 2023
If you are wondering if all taxpayers can come in that bracket then we cannot even deny the possibility. The government has brought about this reform to promote digitization, bring transparency, reduce tax frauds and streamline the overall compliance process by automating it.
With e-invoicing tax leakage and frauds using fake invoices are expected to reduce considerably due to the authorization of every invoice from the government portal. More than this, the e-invoicing mandate will prove to be highly beneficial to small businesses. Let us understand the e-invoicing benefits for small businesses…
E-invoicing is not a reason to worry
Smaller companies may soon come under the e-invoicing threshold and thus need to be ready. However, this does not give small businesses a reason to worry. There are numerous benefits of e-invoicing and SMEs must accept the e-invoice revolution with open arms. At the outset, e-invoicing under GST can appear to be a big overhaul and humongous task but if handled well, it can serve you well. It does not require heavy investment to start e-invoicing or it is not necessary for your company to have a huge IT department to handle it. Just partnering with the right GSP and getting an e-invoicing software is enough!
E-invoicing in a nutshell
E-invoicing is changing the way Indian business markets operate. It is important for each one of us to understand it in and out in order to stay on par with the changing scenario. Even if you have received an e-invoice or are anticipating soon fall under the threshold, understanding the basics can take you a long way. Let’s break down the e-invoicing process in simple terms.
E-invoicing is an electronic authentication mechanism under GST. Under the mechanism, all the B2B invoices and Export invoices generated by a business need to be registered with the Government system i.e. the Invoice Registration Portal (IRP), and obtain a unique identification number for every invoice called Invoice Reference Number (IRN). Along with the Invoice Reference Number or IRN, the IRP will also create a digitally signed QR code with select details from the invoice and digitally sign the uploaded invoice data. Thus, an e-invoice is a document that has an IRN associated with it and a digitally signed QR code printed on it.
Once an IRN is generated and an invoice has been authenticated, its details shall be made available on the GST portal and EWB portal in real-time.
What does e-invoicing mean for the businesses?
Sales Side: On the sales side, the business cycle and invoice processing continue as being done currently with an additional step being introduced of getting the invoice registered on the Government Portal.
Purchase Side: On the purchase side, the incoming invoices should have been successfully registered with the Government, for claiming Input Tax Credit (ITC). As the mandate covers only notified list of entities, the recipients need to keep a check on the vendors who are impacted by the mandate and if the invoices received from such entities include valid IRN.
Accounting /Billing systems: Accounting /Billing systems of businesses will need an upgrade to enable obtaining of IRN from the Government, generating invoice output with IRN details, and automated data capturing for incoming purchase invoices which have IRN.
What are the advantages of e-invoicing for MSMEs?
An opportunity to digitize: E-invoicing will not just give MSMEs an opportunity to digitize but also make the processes transparent. Usually, small or mid-size companies are juggling between multiple aspects of business and a proper billing and administrative system is a dream far-fetched which leads to chaos. With e-invoicing, streamlining administrative work can really become convenient with the help of a reliable e-invoicing software like IRIS Onyx. Onyx is a one-stop e-invoicing solution that can integrate with billing systems seamlessly in multiple ways and generate IRN with zero disruption to the businesses.
Reduced Compliance Burden: The GST compliance gets lightened because of auto-population and streamlined processes. There will be a reduced effort for GST compliance as e-invoicing details will be auto-populated to prepare GST Returns and other e-way bill actions. As the scope of e-invoicing is limited to certain transaction types, there could be cases where the businesses will need to take care of the balance compliance needs.
Easier Integration with Supply Chain: When all the parties slowly and steadily were getting covered under e-invoicing, everyone eventually will be following the same standard, the same process, and the same data fields in their invoices. Hence, it offers an opportunity to better integrate with your large customers who want their purchase data /ask you to fill in the information on some vendor platform.
The compelling reason for internalizing e-invoicing standards should be to bring efficiency in the processes. E-invoice at large will help to automate data input of purchase invoices and sharing of self-invoices with counterparties. More the adherence to standard by all the parties in the supply chain better is scope for all the participants to gain efficiency.
Opens up doors for cash flow financing: Due to its standardized nature and availability of data in a real-time and technologically consumable fashion, e-invoicing also has caught the interest of banks and financial institutions. What erstwhile might have taken days to obtain and verify, now can be done in a matter of minutes, thus making cash flow and trade financing the next big wave?
To the underserved MSME market, opening up financing options based on e-invoices is a direct blessing with apparently no disguise.
How can small businesses get started with E-invoicing?
Awareness of what the mandate is all about: Awareness is key if you want to stay ahead in life and the business world is no different. It is important that MSMEs are fully aware of what the e-invoicing mandate is all about. It not just includes knowing about generating IRNs via the e-invoice portal but it also includes knowing about the e-invoicing and e-way bill system, who needs to generate and who need not generate IRN, documents to be reported to GST System, transactions covered, data points required, the process of generating IRNs, e-invoicing software and lots more. You can read all about e-invoicing in detail here: E-invoicing under GST
Being cognizant of challenges in implementation: E-invoice implementation requires integration with external systems i.e. solution providers and Government systems. It also includes educating all stakeholders and departments within the organization. While these could be one-time processes, you need to ensure that there is a system in place to keep everyone updated about the new developments and changes within the organization. Being aware of the challenges, it is required to take the necessary steps to overcome them and find relevant solutions promptly. This will also help in avoiding any upcoming problems beforehand.
Handling Specific Business Scenarios: There are certain business-specific scenarios where value validations fail. For example, there is TCS on sales for which no separate data point is available to record the same and hence need to be adjusted in other charges fields. There are many other specific business scenarios for which you can find the workarounds here: Handling Specific Business Scenarios.
Along with that, there are several challenges at various stages of e-invoice implementation. Read all the challenges here: Practical challenges at different stages in e-invoicing.
Selecting the right solution provider
GST Suvidha Providers (GSP) are conduits through which taxpayers can connect to IRP. IRIS GST, a business line of IRIS Business Services Limited is one of the few authorized GSPs chosen in the first round of selection by GSTN in 2017. At IRISGST, we believe that the implementation of GST and now e-invoicing will play a pivotal role in crafting the technological advancement of any business.
As opposed to the contemporary belief that an E-invoice has to be generated on the common portal, an E-invoice can be generated through any software/tool that supports the given e-Invoicing format. It is important to prepare the system to send and receive invoice data.
It is important to note that invoice generation will continue to be done by taxpayers. For generating IRN, taxpayers can opt for solutions that can be embedded in their current invoicing processes or use manual generation options. However, there are many tasks post-IRN generation i.e. getting invoices printed with QR code, checking its auto-population in GSTR 1, etc. and hence it is recommended to choose a solution that can provide for all needs around e-invoicing and GST compliance.
IRIS Onyx – is a complete e-invoicing software solution that can help you make your e-invoicing journey a smooth ride. It is a cloud-based advanced e-invoicing solution that can integrate with your billing systems in multiple ways and help you generate IRN seamlessly without disrupting your current business processes.