The government's Digital India campaign has taken a good initiative in transforming businesses digitally. It gives companies a new approach that comes with many benefits and challenges. Let us examine the impact of electronic billing system on Indian SME owners in detail.


Now earlier e-invoicing was made mandatory for those taxpayers whose total turnover in the last financial year is more than Rs 500 crore.

The current (currently effective (from April 20, 2021) limit is Rs 50 crore. This applies to business to business (B2B), credit notes (B2G), debit notes, and export supplies.

E-invoicing does not apply to invoices for Business to Consumer (B2C). Taxpayers with a turnover of more than Rs 500 crores must have generated dynamic QR for B2C invoices. 1. July 2021 No announcement or notification has been made about the regenerated dynamic QR codes on B2C invoices for a turnover exceeding Rs 50 crores and up to 500 crores.

The Government waived the penalty for non-compliance during the period between December 1, 2020, and June 30, 2021, subject to the condition that compliance is achieved by the person starting July 1, 2021.
What are the challenges of e-invoicing?

E-invoicing, a new tax reform, is being implemented when many issues under GST are still looming significant in businesses' minds. It is, therefore, inevitable that companies will encounter numerous difficulties while

implementing e-invoicing.

One of the biggest challenges is the implementation of electronic invoicing. This will increase the compliance burden for SMEs, who would have to perform this task manually. They also need to train employees on how to use the portal. Second, reconciliation will take more time than the current. Businesses need to make sure that invoices are reconciled with records, GSTR-1 files, invoice details are filled in e-way bills, and the actual IRN generated. The invoice generation portal will not save e-invoice data for more than 24 hours. An alternative method of archiving data must be established. Taxpayers are also required to update their e-invoicing system constantly due to frequent changes to the invoice schema.

E-invoice Infrastructure: Current Issues

Many technical issues prevent the smooth implementation of the current e-invoicing infrastructure.
Significant issues are not being addressed, such as generated electronic invoices not automatically populated to the appropriate tables under GSTR-1 of the GST portal. There is no way to modify an e-invoice that has been developed to correct any clerical mistakes. Unexpected GST server downtime has also hampered the generation of invoices.

What was the impact on Indian SMEs?

It is often said that reforms will not be implemented until they reach the heart of society. The e-invoicing process is a significant step forward in the traditional method of small business operations.
Although internet coverage has improved in India, rural areas still lack consistent power supply and internet access. SME owners with factories in remote areas with insufficient data coverage still worry about completing the e-invoicing process.

The integration of ERPs and IRPs and the necessary technological enhancements may cause initial difficulties for smaller market players to meet the reform's expectations.

The entire process of electronic invoices is based on real-time data reporting. This means that the initial phase of daily operational invoicing may require some expertise and knowledge.

Traditional methods to dispose of

For small-scale industries, it may be necessary to overhaul the manual bill books, traditional accounting software, and existing invoicing systems.
E-invoicing is a way to streamline critical business functions such as inventory management, supplier management, receivables, and payables processing. However, it also eliminates the need for manual intervention in the invoice processing chain.
This would allow for additional transparency throughout the entire process.

Time and cost involved

SME's will need to consider the time and costs involved in navigating the technology-driven world of e-invoicing.

Transparency and uniformity

Before e-invoicing, invoices were available in multiple formats, and there was not a standard system. E-invoicing allows for uniformity in invoice templates, and small sellers can report numbers to the Government. This would enable them to receive policy benefits when they are implemented.

Transparency in reporting transactions by SME sectors to Government will allow authorities to keep an eye on the economic picture.

Robust IT infrastructure is required.

We know that there is a direct correlation between the strength and efficiency of large-scale tax compliances. The new digital invoicing reform requires taxpayers to have a strong IT network and well-defined processes.
This will encourage the fragmented SME sector, which is expected to drive the economy forward and adopt transformative tech, which will help accelerate the economy's growth. This could also be seen as an effort to adapt companies to technology and new business ways.

Reconciliation process enhancements

Integration of invoicing system with GST return and the-way portal minimizes duplicate reporting and eliminates human errors.

The GST compliance process eliminates the need to reconcile GSTR-1, GSTR-3B, and e-way bills manually. It allows a holistic approach to corrective actions by the evaluators whenever required.

This would further increase the Government's benefits in the regular audit and assessment process and reduce time and effort involved in GST audits related scrutinizes.
Digital Now is the Road Ahead

In short, businesses would be the ones paying for the massive reform, despite the difficulties they faced in the initial phase, including the integration or upgrading of their IT systems, overhauling their invoicing practices, and training their staff.

This digital step has many benefits, including reduced government intervention, financial stakeholder reliability, lower commercial disputes, and standardization of business processes.

The Government should create a solid IT backendsystem capable of handling the growing number of taxpayer-generated e-invoices.

The invoice generation portal that supports SMEs should also have user-friendly features. Seamless integration is essential with the e-way bill and GST portal to prevent tax leakages and track fraudulent transactions.
We must welcome the Government's efforts to increase transparency and reduce tax evasion as we move closer to becoming a digital economy.
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Author's Bio: 

Ashish Jain is a content writer expert for SWIL. A reader, an avid researcher, and a tech enthusiast. She loves to read and write about the latest technologies that are shaping the retail and wholesale business sector. She helps boost sales using the best technology has to offer for trade and commerce. In her free time, she loves to travel to new historical places and listen to light music.