Fourth phase of e-invoicing implementation: business impact and readiness
The e-invoicing system is now applicable to more businesses via CBIC’s CGST notification from 1 April 2022. Indian small businesses must comply if their total annual turnover is above Rs.20 crore up to at Rs.50 crore in any previous financial year between 2017-18 and 2021-22.
How does the introduction of e-invoicing affect businesses?
The announcement gave affected small businesses less than a month to prepare for the new system. They must now set up staff training and decide how to generate electronic invoices for all Business to Business (B2B) transactions. For seamless e-invoicing, they should consider integrating their billing systems with the government’s Invoice Registration Portal (IRP). However, since most of these companies use conventional accounting ERPs or none at all, they may use spreadsheets and offline tools to report B2B invoices on the IRP.
Electronic invoicing impacts business processes as follows:
- Small businesses now need to find and separate transactions requiring electronic invoices from the rest of the documents to comply.
- Affected small businesses should maintain master data of vendors and customers to ensure accurate capture of invoice details such as GST ID, bank account and payee details.
- Small businesses should review the process for preparing and filing GST returns, as B2B supplies will be automatically populated in the GSTR-1. In contrast, business to consumer (B2C) and non-taxable supplies must be reported manually.
- Small businesses don’t have complex ERPs. They will have to choose the mode of compliance with electronic invoicing accordingly. There are modes such as direct API integration or integration via a GST Suvidha Provider (GSP) for real-time compliance. Small businesses can rely on offline utilities such as GST Electronic Invoice Preparation and Printing (GePP) to afford some time lag.
- Small businesses can face delays in their business operations if they do not opt for real-time Invoice Reference Number (IRN) generation. While a few small businesses can afford jet lag, many others have many business processes dependent on billing. The companies concerned generally generate several B2B invoices every day. Therefore, they cannot keep their buyers waiting. These companies may consider cloud-based software services accessible through multiple devices and also offer e-invoicing solutions.
How can companies prepare for the implementation of electronic invoicing?
Here are some steps to set up and implement an electronic invoicing system by their organizations. They might face challenges with limited time available for implementation.
- Organize ongoing training sessions for staff- Prior to the introduction of the electronic invoicing system, businesses issued invoices in the format in accordance with the invoicing rules under the GST Act. However, e-invoicing rules require organizations to follow the notified e-invoicing scheme. The format consists of three sections such as Scheme, Masters, and Template. Therefore, the financial manager of the company must organize regular sessions in order to sensitize his staff sufficiently so that they are prepared. They should provide training facilities before the e-invoicing system goes live.
- Select the most favorable mode for generating electronic invoices- The most convenient and widely accepted modes for generating e-invoices for businesses are API-based integration and SFTP-based integration. A small business can choose how to integrate by reviewing its existing ERP support, budget, and business or industry requirements. Choose a solution that supports IRN archiving and retrieval, currently unavailable on the IRP.
- Test and ensure the reconfiguration of the existing ERP- Small businesses using an ERP may need to contact their existing ERP service providers to enable smooth interaction with the IRP for e-Invoicing compliance. The print order must also be modified to include additional fields made mandatory such as the signed QR code. On the other hand, many small businesses outsource this operation. These businesses may not be able to effectively comply with e-invoicing if their invoicing and accounting tasks are outsourced. Implementation requires significant investment and time. It can become difficult for small businesses to implement these changes with the least impact on their day-to-day operations in a month.
The fourth phase of e-invoicing will be challenging as it involves over 1,80,000 small businesses joining the system in one month. Unlike large companies, MSMEs have smaller teams that control most business operations. They find this sufficient to ensure compliance and issue e-invoices to their customers on time. They may find it convenient to automatically populate their GSTR-1 with accurate e-invoice details. On the other hand, a typical large enterprise would see if corresponding business operations are affected involving multiple teams while mapping out an ideal internal e-invoicing solution.
Therefore, large companies already in the system and doing business with MSMEs need to provide essential support and resources to enable them to adopt digital invoicing practices. With the combined efforts, the e-invoicing system will be a huge success in Indian compliance history.
The opinions expressed above are those of the author.
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