GST e-invoicing can be seen as a part of India’s Digital India campaign. It promotes the digitization of the invoicing process, which is expected to increase the government’s tax revenue and increase the compliance base. Many MSMEs may have to generate e-invoices under this new rule. Interestingly, this can improve their business loan eligibility! We will look at e-invoicing and the various ways MSMEs are affected by it, apart from the improved SME loan eligibility.
Applicability of E-invoicing of GST?
From 1 April 2021, e-invoicing has been made mandatory to the applicable businesses. Earlier it was compulsory for companies with a turnover of Rs 500 crores from October 2020 and Rs 100 crores since January 2021.
The e-invoicing will not apply to registered entities like insurers, banking companies, NBFCs, other financial institutions, goods transport agencies, passenger transport service providers, theaters, SEZ, government departments, and local authorities.
Who Will Need to Generate an E-invoice?
Government-verified e-invoicing has been made mandatory for all B2B business transactions with a turnover of over Rs 50 crores. E-invoicing will see the integration of taxpayer’s accounting software with the GSTN portal, e-waybill, and invoice registration portal.
How to Generate an E-invoice?
- To generate an e-invoice for GST, the registered person has to integrate the e-invoicing standards in the accounting software as per the parameters set by the CBIC.
- The taxpayer can safelist the IP address in the e-invoice portal for the invoice reference number generation or download the bulk generation tool.
- Once done, the taxpayer can raise invoices on the software and provide all necessary fields. This includes billing name and address, supplier GST number, transaction value, GST rate, etc.
- The details of the generated invoice can be uploaded into the IRP, and the IRP will act as the central registrar and authenticate the invoices.
- The IRP validates the B2B invoice and generates IRN after checking for duplications and errors. The IRP digitally signs the invoice and creates a QR code. The supplier is also notified of the invoice generation through email.
- For the GST return filing, the IRN will upload the authenticated invoices. It will also forward the information to the e-way bill portal.
Effect on MSME
Digitization is a step towards the future, and e-invoicing will steer MSMEs in the right direction. However, small businesses may not be prepared to adopt the digital transition required to generate e-invoices. Lack of investment in digital technology and a general lack of digital awareness may be an initial hindrance for the MSMEs. In the longer run, the e-invoice move will equip MSMEs with these digital technologies and make their invoice processing more efficient.
Efficiency and technology are not the only benefits of e-invoicing for MSMEs. E-invoicing will ensure a smooth information flow from the GST system to the e-way bill portal. Once the invoicing data is built into the system, auto-populating will also ease the efforts of the MSMEs.
MSMEs also face hardship in securing any business loan. Due to documentation issues, MSMEs struggling to secure loans may be better placed to have a business loan approved and even get attractive business loan interest rates. However, e-invoicing will bring many MSMEs into the digital database, and banks will intensively assess these businesses.
If you are an MSME planning for a business loan, look at a business loan EMI calculator to check for your suitable EMI. Besides, if you fall under the GST e-invoicing requirement, make sure you prepare your business processes to abide by its rules.