According to the “Ease of Doing Business Report 2020”, India currently ranks 63rd globally – a stride forward by 14 places from last year. This jump was made possible by an assortment of assistance programmes for MSMEs, borrower-friendly loan schemes, and digitalisation, all of which have significantly contributed to India’s business ecosystem.
To further fuel this trend, the 37th GST council introduced an e-invoicing system under GST that all MSMEs (Micro, Small & Medium Enterprises) must adopt from 1 October 2020.
Even though only a few MSMEs that fall into a specific category are required to follow this new system, it’s recommended that every entrepreneur becomes familiar with e-invoicing. So, here’s all about e-invoicing under GSTyou need to know.
What is e-invoicing?
Contrary to how it sounds, GST e-invoicing is not a way to generate invoices or bills electronically. Rather, it’s a new way of reporting your invoices under Part A and GSTR – 1 when filing your GST returns.
With this new system, all you have to do is upload your bills on the e-invoice portal. Every statement you upload will have a unique identification number, and the system will transport all your bills automatically to the GST and e-way bill portal in real-time.
In a nutshell, e-invoicing is essentially a system to authenticate B2B (Business-to-business) bills.
Which MSMEs need to follow e-invoicing?
All MSMEs with an annual turnover of at least Rs. 100 crores must authenticate their e-invoices through the GSTN portal.
Here are some businesses which are exempt from submitting e-invoices –
- Financial institutions, including NBFCs, banks, and insurance companies
- Goods transport agency
- Special Economic Zone (SEZ) units
- Supplier of cinematograph films in multiplexes
- Free Trade & Warehousing Zones (FTWZ)
Additional Read: Best Way to Get an MSME Business Loan
Benefits of e-invoicing
The main reason behind the implementation of e-invoicing is to reduce fraudulent invoicing and limit tax evasion. Other benefits of e-invoicing include:
• Easy invoice tracking
With the e-invoicing mechanism, it’ll be easy for MSMEs to monitor their invoices in real-time. Whether pending, denied, or approved by the client, you can easily track the status of your invoices.
• Enhanced business efficiency
Since all systems are integrated, your invoice-related information flows directly into the e-way bill and GSTN systems. This well-connected structure ensures that all your GST returns forms are auto-filled, thus reducing the room for human error and data mismatch due to manual data entry.
• Faster loan approvals
Getting a business loan can be very challenging for MSMEs due to the extensive paperwork requirement. However, with the new e-invoicing system in place, lenders can easily rate MSMEs based on their e-invoices, making it easier and faster for businesses to get loans.
Additional Read: Top 5 Challenges of MSME Loans
The digitalisation of business processes and tax payments has undoubtedly added substantial value to India’s MSME culture. E-invoicing under GST is another move that will help MSMEs foster better business connections, ease GSTR filing, and streamline business credit.
If you’re an MSME owner looking to expand your operations, Tata Capital can help you achieve your business goals. Choose from our slew of business finance options and get competitive business loan interest rates, flexible repayment schedules, and longer tenures.
Begin your loan application procedure by checking your business loan eligibility today!