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As per Notification No. 10/2023 – Central Tax, issued by CBIC on May 10, 2023, businesses with an annual aggregate turnover surpassing ₹5 crores in any financial year from 2017-18 onwards will be required to generate e-invoices starting August 2023. This measure has been introduced to curb revenue leakages and ensure better tax compliance.

Impacts/challenges to MSMEs

The e-Invoicing threshold in India is set to reduce to ₹5 crores from 1st August 2023, which is expected to have a significant impact on MSMEs. While e-Invoicing is a positive step towards a more transparent and efficient tax system, it may pose various challenges for MSMEs.

One major challenge is the initial transition to online invoicing, which could be difficult for MSMEs due to their limited technical resources and infrastructure. Furthermore, the implementation of the new system may lead to additional compliance costs and administrative burdens, potentially hindering their growth and competitiveness.

Another challenge is adapting to the new technology and processes involved in e-Invoicing, which may result in errors and delays. MSMEs may require additional training and resources to ensure compliance with the new mandate.

Therefore, it is crucial that MSMEs prepare for the upcoming e-Invoicing mandate and ensure they have the necessary infrastructure and technical resources in place to implement the new system effectively. By doing so, they can overcome potential challenges and ensure continued growth and success.

History of e-Invoicing in India

The e-Invoicing system has been introduced by the Indian government in a phased manner. The first phase, which began in October 2020, applied to large enterprises with a turnover above Rs. 500 crores. The second phase extended to businesses with a turnover of Rs. 100 crores from January 2021, and the third phase covered businesses with turnover exceeding Rs. 50 crores from April 2021. In the fourth phase, e-Invoicing was extended to those with a turnover of Rs. 20 crores from April 2022, which included several Micro, Small, and Medium Enterprises (MSMEs).

The fifth phase of e-Invoicing came into effect from October 2022 and extended to those with a turnover of Rs. 10 crores. However, the government has progressively reduced the threshold of e-Invoicing to cover MSMEs whose aggregate annual turnover has exceeded Rs. 5 crores in any of the financial year from 2017-18, with effect from August 2023, which is the sixth phase of e-Invoicing in India. The exemptions for banks, financial institutions, NBFC, GTA, SEZ units, and others will continue to apply.

Technology’s role in e-Invoicing

MSMEs that implement technology-enabled invoicing systems will have a competitive advantage and ensure long-term success.

To simplify the e-invoice generation process for small businesses, businesses can leverage Cygnet’s On-Cloud Billing solution. This solution enables businesses to achieve on-cloud GST compliance, with the added benefit of generating e-Invoices and e-Way bills with just one click. The user-friendly and intuitive interface eliminates the difficulties associated with generating online invoices, providing a seamless and efficient billing experience.

The reduction of the e-Invoicing threshold to ₹5 crores from 1st August 2023 marks a significant step in India’s journey towards a more transparent and efficient tax system. This move is expected to have a considerable impact on MSMEs. By leveraging technology-enabled invoicing systems, businesses can automate compliance checks and ensure long-term success. Take the first step towards a more efficient and compliant invoicing process by exploring Cygnet’s billing solution today.

Komal Vithalani

Komal Vithalani

Content Writer

Komal Vithalani, a Chartered Accountant and Commerce graduate, is a dedicated professional committed to delivering value with years of expertise in navigating the complexities of indirect tax laws. Her practical excellence includes managing perplexed litigations, dispensing tactical tax advice, conducting thorough compliance checks, supervising audits, and crafting articulate and insightful content. At Cygnet, Komal seamlessly blends her profound understanding of tax regulations with cutting-edge tax technology. Leveraging her competence, she adeptly transforms complex tax tech jargon into concise, impactful, and engaging content. This not only aids readers in comprehending tax-related topics with enlightening clarity but also ensures the delivery of narratives that resonate broadly.

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