MSMEs may face tech infra challenge in GST e-invoicing: Experts

From Rs 500 crore to 5 crore, this is the sixth and most significant phase of lowering of e-invoicing threshold in Goods and Services Tax (GST).

Tech infrastructure could soon be a pain point for micro, small and medium enterprises with a topline of up to Rs 5 crore as mandatory e-invoicing kicked in on August 1.

The lowering of cap for issuance of e-invoice from Rs 10 crore to Rs 5 crore means that any assessee whose turnover exceeded 5 crores in any of the previous year from July 2017 to March 2023 will mandatorily have to issue invoice, credit notes and debit notes using the e-invoicing portal for all business-to-business transactions.

“These small players do not have enough accounting as well as technological support and thus e-invoicing will be the biggest change for them. On the other side, buyers who procure goods or services from them are at risk of losing Input Tax Credit (ITC) if these suppliers do not issue correct e-invoices. Thus, this phase is most critical for small (as a supplier) as well as larger taxpayers (as a buyer),” Pune-based tax expert Pritam Mahure told Moneycontrol.

From Rs 500 crore to 5 crore, this is the sixth and most significant phase of lowering of e-invoicing threshold in Goods and Services Tax (GST) ambit. Numerous small taxpayers will now be covered in the Rs 5-crore threshold.

“Implementing e-invoicing for MSME businesses can come with its share of challenges. While e-invoicing offers numerous benefits, overcoming these challenges is essential for successful adoption and seamless integration into the business processes. Some of the challenges include lack of low-cost technological infrastructure, integration into existing accounting software, resistance to change, connectivity issues in tier 2, 3 cities and limited awareness,” Rajat Mohan, Senior Partner, AMRG & Associates, told Moneycontrol.

Overall, e-invoicing can significantly benefit MSME businesses by streamlining operations, reducing costs, improving cash flow, and fostering transparency. However, successful implementation requires adequate training, support, and collaboration between businesses, technology providers and relevant government agencies.

“While the use of technology may initially involve a change in business processes of small vendors, in the long run, e-invoicing would simplify preparation of GSTR-1 and ensure seamless flow of ITC across all levels in the supply chain,” Anchal Arora, Partner at Felix Advisory, told Moneycontrol.

Due to a reduction in the turnover limit, all MSMEs under GST will have to ensure that they are geared up to issue e-invoices, employee training, system upgrade and tie-up with service providers or directly connected with the Goods and Services Tax Network (GSTN) portal for the same, Parag Mehta, Partner, NA Shah Associates, told Moneycontrol.

“Reduction in the e-invoicing limit will ensure better compliance, increase in revenue and reduction in errors," Mehta said.