How New E-Invoicing Rules Will Impact MSME Sector in India?

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Recent Updates on e-Invoicing:

11 October 2022

As per new guidelines, the central board of indirect taxes may apply the next phase of e-invoicing for businesses whoose turnover is more than 5 crores from January 1, 2023. Also, By the end of the following fiscal year, it may extend to the companies whose revenue is more than 1core or more.

16 August 2022

An important announcement has been made by CBIC (Cebtral board of indirect taxes & customs) on 16 August 2022, that If a taxpayer’s annual revenue is greater than Rs. 10 crores, they are allowed to use the e-invoicing system.

In e-invoicing system, the GST-registered individuals are required to upload all B2B invoices to the invoice registration portal in order to use this e-invoicing system (IRP). A unique Invoice Reference Number (IRN), an electronic invoice that has been digitally signed, and a QR code are all generated by the IRP and given to the user.

4th July 2022

According to a government official, in order to lower the barrier from the existing Rs 20 crore, the government intends to make GST e-invoicing mandatory for businesses with a turnover of Rs 10 crore and higher from 1-10-2022.

24th February 2022

According to Notification No. 1/2022, the e-Invoicing system will be made available to businesses with an annual turnover of more than Rs. 20 crore and up to Rs. 50 crore as of April 1, 2022.

30th June 2021

The CBIC has issued a notification proposing to waive the penalty imposed for non-compliance with dynamic QR code regulations for B2C invoices between December 1, 2020, and September 30, 2021.

1st June 2021

A government department and local authority are exempt from the e-invoicing system, according to CBIC’s Central Tax Notification No. 23, dated June 1, 2021.

30th March 2021

The CBIC has published a notification to waive the fine for failing to follow the rules for dynamic QR codes for B2C invoicing between 1 December 2020 and 30 June 2021, provided that the person in question complies with the notification’s requirements starting on 1 July 2021.

Introduction

E-Invoicing is an initiative for the development of the country as it will expand the compliance base and income as revenue. It is likewise a chance for advanced opportunities, one of the huge parts of the government’s ‘Digital India’ program. While it will most likely add a burden on businessmen if done manually, but it can be easily done using accounting software that is integrated with the GST portal.

Know the Impact of E-Invoicing Update on MSMEs

The new norms issued by the government to verify e-invoices for business-to-business (B2B) transactions of businesses with an annual turnover of or above Rs 50 crore bring with it numerous benefits, for both the government & the taxpayers. It will help is creating the ease of doing business. E-invoicing includes a high-level integration between all government GST portals such as GSTN portal, e-waybill & IRP, and taxpayer accounting/ERP software.

Though e-invoicing has bought many challenges with its implementation for business & processes that are currently being followed by taxpayers, subsequently, in the long run, businesses will be benefited from this implementation. It will save the efforts and time that is utilized into GST reconciliation & compliance management. As an automated system e-invoicing will ensure an error-free process & hassle-free tax compliance.

Here are Some Key Points to Consider for Businesses

  • Categorizing the transactions with e-invoicing like imports, asset transfers, cross changes, etc.
  • Suppliers can be grouped into small and large categories to identify data collation requirements
  • Updating information about the customer & the supplier to reconcile with the additional information required for e-invoices (like bank details, GSTN details, PIN codes, etc.)]
  • The accounting system can be customized to make it compatible as per the changes from the government
  • Simplifying the GST returns process so that B2B supplies get auto-populated & B2C supplies can be manually uploaded

E-Invoicing in India

With India embracing e-invoicing, it has received something like what is known as the ‘clearance model’ at the worldwide level. In the clearance model, it is obligatory for organizations to get the invoices reported and cleared by the government on a designated portal prior to imparting them to the purchaser. The focus is to move away from the post-facto review-based process of checking and towards more real-time reporting & analysis.

Further, the move will probably push the divided MSME area to embrace new innovation & technology, which eventually, will drive the economy quicker. This may likewise make organizations versatile and adoptable to innovation & the latest ways of doing business. These advantages are the sign of the new system and furthermore, of true value to the economy.

The improvement in the system signifies different advantages for the economy as well as the government. It will prompt a decrease in instances of questionable Input Tax Credit (ITC) which will help in reducing revenue leakage. The new process also ensures real-time monitoring with the mandatory affixation of QR code on invoices which has invoice reference number (IRN) & all important parameters. This empowers the buyer to check the validity of e-invoices through an application provided by the government of India.

In addition, the integration of e-invoicing with GST returns eliminates the chances of human mistakes by decreasing the need of reporting similar details again & again. Before e-invoicing was introduced, there were numerous manual reconciliations between GSTR 3B, GSTR 1, and the e-way bill but now, with the execution of e-invoice, the details uploaded on the Invoice Registration Portal get auto-populated in the e-way bill and GSTR 1. Thus, the liability of the provider in GSTR 3B & ITC from GSTR 2B, will be automatically calculated.

How MSME Can Simplify E-Invoicing Challenges?

Looking at the current trend the solution to face e-invoicing challenges is to get equipped with a latest and advanced technology. MSME need to digitize their businesses & implement accounting software ready with e-invoicing. As this will be mandatory, the MSME business owners have no time left for doing researches now. Here I would like to suggest Marg ERP 9+ as the best suitable e-invoicing software for MSMEs. Marg e-invoicing software is updated with latest features for e-invoicing & audit trail.

Summing Up

The introduction of e-invoice & the latest update in e-invoicing by the Ministry of Finance is certainly a mutually beneficial opportunity for businesses particularly MSMEs. With e-invoicing getting mandatory for businesses with an annual turnover of or above Rs. 50 crore will significantly reduce the tax compliance burden. MSMEs will get equipped with innovative technology; they will experience proficient working and move towards business growth.

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