E-invoicing as a significant part of the GST regime has undergone significant changes ever since its introduction. One such major change is with the e-invoicing turnover limit for businesses. When e-invoicing was first implemented in October 2020, the e-invoicing limit was INR 500 crore and above. But, ever since, this threshold has experienced a significant reduction, now standing at INR 5 crore and above for businesses as per the sixth phase of e-invoicing implementation. This e-invoice limit came into effect from August 1, 2023. The announcement for the same was made via Notification No. 10/2023–Central Tax.
For businesses who are new to the concept of e-invoicing and have recently fallen under the GST e-invoice limit, this blog will briefly discuss the concept below.
Impact of Lower Limit on Small Businesses
The significant reduction of the e-invoicing turnover limit directly impacted certain types of businesses. This includes a few small businesses, shop owners, or local traders. Industries most affected by this reduced e-Invoice limit are manufacturing, retail and wholesale trade, IT and services, construction and real estate, and healthcare and pharma. Many of these entities that were earlier outside the e-Invoice system, now need to comply with e-Invoicing rules and regulations.
For small business owners, the challenge is the lack of advanced accounting software or digital infrastructure. On the similar lines, shop owners or local traders, especially in rural areas will struggle to understand the basic concept of e-Invoicing. Hence, the new compliance rules might seem overwhelming and even raise the need to acquire additional training or invest in certain tools and software.
However, once managed properly, e-Invoicing can present several opportunities for small businesses. It will streamline their operations and make them more tax-compliant, eventually adding to their credibility and ease of operating the business.
Key Expectations with the Next e-Invoicing Limit Update
It is believed that the reduction of e-invoicing turnover limit to INR 5 crore aims to streamline the invoicing process, enhance transparency, and reduce tax evasion. Moving forward, we can expect the GST e-invoice limit to be INR 1 crore or INR 1.5 crore. This will aim to include Small and Medium Enterprises (SMEs) in the e-invoicing system as well. That way, businesses will achieve quicker and more accurate GST return filing.
The government is set on making e-invoicing a common practice in India for all businesses so as to prevent tax leakage. In fact, in an attempt to do so, as per the 54th GST Council Meeting, the government has also announced the rolling out of a voluntary e-invoicing system for Business to Customer (B2C) transactions as well. So, we can expect e-invoicing to be a common practice for all businesses in the near future.
Why is e-Invoicing Beneficial for Businesses?
The government is set on reducing e-invoicing turnover limit and making e-invoicing mandatory for all businesses soon because of the many benefits that this process offers. Here are a few of such e-invoicing benefits:
1. Enhanced Accuracy: e-invoicing minimizes errors by automating the invoicing process.
2. Improved Compliance: It ensures that all invoices are reported in real-time, making it easier for businesses to comply with GST regulations.
3. Reduced Fraud: The system helps in curbing tax evasion by providing a transparent and traceable invoicing process.
4. Operational Efficiency: Businesses can save time and resources by automating the invoicing process, leading to faster invoice processing and payment cycles.
5. Streamlined Procure-to-Pay (P2P) Process: One of the biggest challenges that organizations of all sizes faced with P2P was the time-intensive and critical invoicing process. Now, with digitalization of the invoicing process and leading digital solutions for e-Invoicing, this problem is well dealt with. Teams no longer need to tally all purchases manually, which has also accounted for reduced errors.
Challenges with Many Businesses Joining the e-Invoicing System
It is crucial to understand how inclusion of many more businesses into the e-Invoicing system will pose some undeniable challenges for both government and concerned businesses. These challenges are as follows:
Technical Readiness: Small businesses do not already have an existing digital infrastructure that can seamlessly integrate e-invoicing. In fact, in most cases many small businesses do not even have complex accounting software. Given such circumstances, it is time-consuming, expensive, and technically difficult for businesses to adapt to e-Invoicing right away.
Data Management: With more businesses reporting their invoices to the official IRP, the number of invoices flowing into the system will naturally increase. This raises a huge concern for data security, storage, and retrieval of invoices.
Compliance Training: Besides the lack of technical readiness in terms of software or digital infrastructure, employee training is another issue to consider with more businesses adapting to e-Invoicing. Given that most of these businesses carried on with traditional invoicing methods, it can be challenging for their employees to understand the nuances of e-Invoicing process.
Let us discuss how to overcome these challenges in the next section.
Feasible Solutions to e-Invoicing Challenges
E-Invoicing could seem a bit overwhelming in the beginning, but certain technologies make it easier to comply with all the prescribed rules and regulations. Such technologies include leveraging the new Invoice Management System and using E-Invoicing software like GSTrobo®.
Invoice Management System
The government’s latest initiative- a new Invoice Management System dashboard is aimed to tackle the core challenges that businesses face while trying to adopt e-Invoicing into their systems. This system specifically solves the problems with reconciliation of invoices and claiming Input Tax Credit (ITC) based on them.
For SMEs, in particular, the IMS simplifies tax compliance by automating the process of accepting or rejecting invoices saved/ filed by the suppliers in real time. The system reduces manual intervention in reconciling invoices, meaning reduced mismatches and other common manual errors. It helps businesses stay compliant without investing additionally in human or other infrastructural resources. With automatic invoice population into GSTR-2B and GSTR-3B, it also speeds up the tax filing process, significantly reducing the time spent on manual corrections.
Additionally, the system’s capability to consider invoices “deemed accepted” in case of no action also helps small businesses who may not have enough human resources to handle each invoice individually. So, this directly helps reduce the burden of e-Invoicing compliance for businesses.
E-Invoicing Software
With the reduced E-Invoicing mandatory limit, small businesses will look to manage the new compliance requirements with the limited human and financial resources that they have. To their rescue, there exists multiple E-Invoicing software in the market that provides end-to-end assistance with e-invoices from generation to validation on the IRP. GSTrobo® is one such E-Invoicing software that aims to simplify the E-Invoicing compliance for organizations, small or large!
Here is how an E-Invoicing software like GSTrobo® can help with easy transition to E-Invoicing for businesses:
1. Seamless Integration with Existing ERPs: GSTrobo® integrates with a company’s existing ERP system, so businesses don’t need to overhaul their infrastructure. This is particularly useful for smaller businesses that may not have the budget to implement a complex new system.
2. Auto-generation and Reporting: GSTrobo® automates invoice generation and submission to the Invoice Registration Portal (IRP). This feature helps businesses avoid the common errors of manual entry and ensures compliance with GST requirements without additional effort.
3. Real-time Compliance Checks: The software provides real-time checks for errors or mismatches, allowing businesses to address any issues before invoices are sent to the IRP. This reduces the likelihood of rejections and penalties.
4. Enhanced Data Security: Given the concerns about managing large volumes of invoices, GSTrobo® ensures that all invoice data is secure and easily accessible. This feature also aids in retrieval during audits and reduces the time spent on tax-related queries.
By adopting GSTrobo®, businesses can make the transition to e-invoicing smoother, reducing the need for additional resources while ensuring full compliance.
Conclusion
The evolving e-invoicing turnover limit is a sign that Goods and Services Network (GSTN) is looking to introduce multiple changes in the coming future. All these changes will significantly transition the way businesses work. But, once businesses get familiar with these changes, they will undoubtedly bring a positive change within business and in the tax regime of the country as well. So, keep reading our blogs and stay updated on all GST-related changes!
