Ease of Doing Business for MSMEs: Mandating companies with more than Rs 50 crore turnover (midsize firms) to create e-invoices is a welcome move but it may be a dilemma for micro, and compact companies who do not invest a lot in technologies and lack digital literacy, according to Animesh Saxena, President, Federation of Indian Micro and Small & Medium Enterprises (FISME). E-invoicing was earlier created mandatory beneath Goods and Services Tax (GST) law for small business-to-small business (B2B) transactions by companies with a turnover of more than Rs 500 crore from October 1, 2020, and more than Rs one hundred crore from January 1, 2021. Earlier this month, the Central Board of Indirect Taxes and Customs (CBIC) had notified the similar for companies with more than Rs 50 crore turnover. As per the MSME definition revised final year, enterprises with turnover ranging from Rs 51 crore to Rs 250 crore are classified as medium units.
“Some level of preparedness will be required but we assume companies with over Rs 50 crore turnover to be digitally literate in managing their accounts. If the government extends the e-invoicing mandate in the future to micro and small enterprises, then it might be a problem as they don’t invest much in technology and most work is outsourced. It might become an additional cost burden for them. Also, broadband connectivity could be a problem for such firms in small towns and villages,” Saxena told TheSpuzz Online.
Importantly, e-invoicing will enable quick validation of the tax invoices, which is valuable for each the taxpayer and input tax credit recipient as the errors and reconciliation needs may perhaps get lowered considerably. However, “mid-sized businesses who do not have a well-equipped in-house IT team will have to incur CAPEX and OPEX costs for numerous activities such as modifying accounting systems to adhere to the e-invoicing, integrating their accounting systems with the IRP portal (either through APIs or third-party softwares), and undergoing detailed training for the staff to get accustomed to the e-invoicing norms and accounting infrastructure,” Saket Patawari, Executive Director – Indirect Tax, Senior Director – Nexdigm told TheSpuzz Online.
Also study: Govt eases filing of Industrial Entrepreneurs Memorandum move most likely to advantage midsize enterprises
Out of 6.33 crore MSMEs, more than 99 per cent are micro and compact companies in India, according to the MSME Ministry’s FY20 annual report. Medium enterprises are only 5,000 when compact companies are 3.31 lakh and micro enterprises are 6.30 crore in India. “There won’t be any impact on medium enterprises as their sphere is very less while micro and small are in majority. Micro and small owners do everything on their own in a small set-up and it might an additional responsibility for them if implemented ahead by the government. However, in contrast, this would also bring more transparency and make them more formal to benefit from government schemes. I think gradually the government will extend this to micro and small enterprises as well,” Sanjiv Layek, Executive Secretary, World Association For Small And Medium Enterprises (WASME) told TheSpuzz Online.
The e-invoicing program is also most likely to assistance enterprises access immediate loans as banks would be in a position to analyse requests based on the invoices even as the compliance requirement would be lowered as the GST program would populate the returns based on particulars obtainable in the e-invoice, TheSpuzz had reported earlier citing officials working on the program. Moreover, as per yet another official, e-invoicing would assistance to create invoice in a common format, which can be study by any program, and reporting of e-invoice to a central program becomes feasible.