e-invoicing for Small Business in India: A complete guide

  • March 13, 2023
  • Reading Time: 5 minutes
Reading Time: 5 minutes

In a bid to simplify the tax system and curb tax evasion, the Indian government has reduced the electronic-Invoicing limit under GST and made it mandatory for businesses with an annual turnover of over INR 10 crores.

This mandate came into effect on October 1st, 2022, and requires these businesses to issue all invoices electronically through the government’s e-Invoicing system. 

Reducing the threshold for e-Invoicing requirement is expected to bring about greater transparency in the business ecosystem and make compliance easier for small businesses. 

In this blog, we will provide a step-by-step guide on how e-Invoicing works and what small businesses need to do to comply with this new regulation.

How does e-Invoicing impact small businesses?

The Indian government’s electronic-Invoicing mandate is poised to have significant implications for micro, small, and medium-sized enterprises (MSMEs) operating in India. 

These businesses represent a crucial part of the country’s economy and are being required to adopt new processes and systems to comply with the electronic invoicing requirements. 

However, the initial transition to online Invoicing could be difficult for MSMEs, given their limited technical resources and infrastructure, and implementing the new system could lead to additional compliance costs and administrative burdens for MSMEs, which may impede their growth and competitiveness. 

It is therefore critical for MSMEs to gain a comprehensive understanding of the e-invoicing process and take necessary steps to ensure compliance while minimizing the impact on their business operations.

Why small businesses should adopt e-invoicing

Micro, Small and Medium Enterprises (MSMEs) should take e-invoicing seriously as it offers numerous benefits. The government plans to expand the electronic-Invoicing mandate to all businesses in the future, regardless of their size. 

Thus, MSMEs that have not yet prepared for e-Invoicing need to be aware of the potential impact this change may have on their business. 

To avoid the risk of non-compliance with future government mandates, MSMEs should seriously consider getting ready to implement online Invoicing as soon as e-Invoicing for 5 crores turnover is made applicable. 

Failing to generate e-Invoices could result in penalties or fines, which could significantly impact their business.

Benefits of e-Invoicing for small businesses

The adoption of e-Invoicing by MSMEs has provided the Indian government with greater transparency in curbing tax evasion and input tax credit (ITC) fraud while also improving the ease of doing business. 

However, MSMEs can also benefit greatly from e-Invoicing. 

  • e-Invoicing enables the digitization of business processes and streamlines them through reliable software integration with billing systems.
  • Reduces human errors as invoices are generated electronically and uploaded directly on the e-Invoice registration portal.
  • Standardizes digital GST invoices, allowing interoperability between different software applications.
  • Real-time tracking and sharing of e-Invoices reduces compliance burdens and improves vendor on-boarding processes.
  • Minimizes chances of fraudulent transactions as all transactions are recorded and cannot be modified or cancelled.
  • Facilitates formal credit access with invoice financing and easy loan accessibility for MSMEs.
  • Banks and financial institutions can rate MSMEs based on their invoices, making loan sanctioning a faster and more seamless process.
  • Enables smooth ITC claims for customers, improving business prospects for large enterprise customers dealing with small businesses and ensuring timely payments from their customers.

The Indian government aims to change the way businesses interact through e-Invoicing, and MSMEs can greatly benefit from this transition. MSMEs must, therefore, proactively prepare for the transition, seeking guidance and assistance as needed to ensure a smooth and successful implementation of the e-Invoicing mandate.

Technology-enabled e-Invoicing

E-invoicing

In the modern business landscape, where efficiency and competitiveness are paramount, integrating technology into operations is crucial. 

Technological advancements have transformed the traditional business processes, and electronic-Invoicing is one such innovation that is gaining momentum in the market. 

It is becoming increasingly important for businesses, regardless of their size, to implement e-Invoicing technology to enhance their operational efficiency and competitiveness. 

Therefore, adopting e-Invoicing technology is not only a prudent decision but also a necessary step towards business growth and sustainability.

Businesses can simplify their e-Invoice generation process by leveraging Cygnet’s e-Invoicing platform. The platform is a game-changer in this space, offering a user-friendly and intuitive interface that eliminates the hassles associated with generating online Invoices. This ensures a seamless and efficient billing experience for businesses. 

By embracing technology and switching to e-Invoicing, businesses can take their invoicing process to the next level and experience the benefits of modern technology. 

CTA on E-invoicing

How to register e-Invoicing on the government portal

How to create an invoice for small businesses, here’s a step-by-step guide on how to register and generate electronic-Invoices in India.

Step 1: Register on the e-Invoice portal

Once you have registered on the GST portal, you need to register on the e-invoice portal as well. Fill in all the necessary details and submit the application. You will receive an OTP on your registered mobile number for verification.

Step 2: Generate IRN/e-Invoice

To generate an e-Invoice, you need to first generate an Invoice Reference Number (IRN). You can do this either by integrating your ERP system with the government’s Invoice Registration Portal (IRP) using APIs or by directly logging in to the government’s IRP portal at https://einvoice3.gst.gov.in/

a) API Integration with ERP

API stands for Application Programming Interface. Businesses can integrate their accounting software or ERP with the government’s e-Invoicing system via APIs to generate e-Invoices directly from their accounting software. Here’s how to do it:

  1. Check with your accounting software provider whether they have integrated their software with the e-Invoicing system.
  2. If yes, you need to configure your accounting software to generate e-Invoices via APIs.
  3. Once configured, you can generate e-Invoices directly from your accounting software.

b) Directly via Government IRP Portal

Businesses can also generate e-Invoices directly from the government’s Invoice Registration Portal (IRP) without the need for API integration. Here’s how to do it:

  1. Log in to the IRP portal using your GST credentials.
  2. Click on the ‘E-invoice’ tab and select ‘Generate IRN.’
  3. Enter the necessary details such as invoice number, date, value, and GSTIN of the recipient.
  4. Verify the details and click on ‘Generate IRN.’
  5. The IRN and QR code will be generated, and the e-Invoice will be registered on the IRP portal.

By following the above steps, businesses can easily register and generate e-Invoices directly via the government’s IRP portal or through API integration with their accounting software.

Furthermore, MSMEs can cancel e-Invoices generated within 24 hours by logging in to the IRP and selecting the ‘Cancel Invoice’ option. 

Additionally, it is mandatory for them to store the e-Invoices for a period of 7 years, and they can retrieve them from the IRP at any time during this period.

Conclusion

In summary, the implementation of the e-Invoicing mandate by the Indian government is set to enhance transparency within the business environment and streamline compliance for small enterprises. 

Although there may be initial hurdles for MSMEs in adopting online Invoicing, the advantages of digitization, standardization, prevention of fraud, and improved credit accessibility make it a prudent and necessary move for business sustainability and expansion. 

Therefore, it is crucial for MSMEs to prepare adequately for this transition by seeking expert guidance and support as required to ensure a smooth and successful implementation. 

To simplify the e-Invoicing process, businesses can take advantage of technologies like Cygnet’s e-Invoicing platform, which offers a range of solutions tailored to diverse business needs. 

Cygnet Cloud Billing, Desktop-Based Invoicing Tool, and Accounting Software are among the solutions available, providing comprehensive e-Invoicing and e-Way Bill generation capabilities, automated Journal Voucher creation, and GST reconciliation functionality. 

Additionally, businesses using Tally, SAP, Oracle, or any ERP can avail benefit from real-time integration through APIs, further streamlining the invoicing process. By utilizing such solutions, MSMEs can comply with the e-Invoicing mandate more easily and enjoy the benefits of e-Invoicing.

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