A unified tax system, GST was introduced to promote the ease of doing business in India. Small and medium sized businesses (SMBs) have been impacted by this destination-based tax system in more than one way. GST is transforming the Indian businesses from their traditional ways to a more digital first approach.
In its latest tweaks to the GST law, the Indian government has introduced an e-invoicing system for businesses. A step that will allow:
- Buyers and sellers to access the realtime information of invoices,
- Takeover the physical invoices,
- Replace the existing e-way bill system
Currently, the e-invoicing is mandatory for businesses and taxpayers with an annual turnover of over Rs.100 crore.
The Finance Secretary, Ajay Bhushan Pandey has announced that from 1st April 2021, the government will roll out and mandate the e-invoicing system for all business-to-business (B2B) transactions under the Goods and Services Tax (GST) regime.
What is e-invoicing?
A B2B invoice reported by the GST-registered businesses on the e-invoice portal (GSTN), an e-invoice should follow the standard format given by CBIC.
Under the e-invoicing system, the SMEs are expected to use the generated invoice reference number (IRN). IRN is a number (also known as hash) created by the Invoice Registration Portal (IRP) to tag and indicate every valid invoice generated in India.
A 64 character unique number will be generated for every invoice raised in a financial year by a GSTIN. Hence, the system will cover all the invoices sent to recipients, credit note, or a debit note in relation to the B2B supplies and exports, while ensuring that it contains the IRN.
E-invoicing is about reporting details of mentioned GST document to the portal, therefore, the SMEs have to continue to use external software or tool to create GST invoices.
Know that, business entities will have to generate invoices using an efficient online tool, like Refrens.com which helps generate GST compliant invoices that conform to the clarified standard and parameters.
The purpose of e-invoicing
E-invoicing was rolled-out to introduce a system that allows creating a standard for all e-invoices generated. For SMEs, e-invoicing makes it easier to improve B2B communication. Just like sending/receiving emails, now suppliers and buyers have simplified documents to exchange.
Mainly, the GST reporting for SMEs is easier with the presence of this system and it helps them reduce the cost involved and transcription errors, and eliminates data re-entry. Mandatory e-invoicing for all the B2B communication ensures digitization and paperless mode.
For SMEs, they will see an improvement in their payment cycles and witness reduced disputes amongst the transacting parties. Overall, it makes generating invoice and reporting it as a part of the business process improving the business efficiency.
How are startups leveraging this?
Several startups are making good use of this opportunity. With an online invoicing software, Refrens helps SMEs do business efficiently by currently providing the facility of generating free GST compliant invoices to SMEs. From 1st April onwards, Refrens.com will directly integrate with the e-invoice portal/IRP to report all the invoices created by you to generate a unique IRN for each of them.
The tool adheres to the prescribed format of reporting of invoice data generated so that it is seamlessly understood by the Invoice Reporting Portal to get IRN and the buyers. You can directly issue or send this GST invoice with a valid IRN to the receiver through the platform.
Given the fast adoption of technology by Indian SMEs post GST and the pandemic, compliance management solutions like Proactly have also seen a boost to their business. The space will only heat up further with e-invoicing.
