How CA/tax consultants play a pivotal role in better e-invoicing for MSMEs

As India gears up for implementation of the sixth phase of e-Invoicing under GST from 1st August 2023, this article explores how the CA and tax consultant community play a pivotal role in its implementation for the MSME segment. 

Meaning of e-Invoicing & who must comply

Electronic Invoicing (e-Invoicing) is a GST system introduced in phases since October 2020. Under this, Business-to-Business (B2B) invoices and credit–debit notes are electronically reported by notified sellers to GST Network over Invoice Registration Portals (IRP) such as NIC, Clear IRP, etc. 

These documents are verified and authenticated by the IRP. After that, the IRP generates an Invoice Reference Number (IRN) and a signed QR code on the e-invoice for the further use of the seller. The e-Invoice details are passed on to the common GST portal by auto-filling the GSTR-1/IFF. 

Furthermore, the seller can generate e-way bills with the same e-invoice details.

In the latest phase, the e-Invoice limit of Rs.5 crore was newly notified via Notification No. 10/2023–Central Tax. 

Accordingly, the latest GST e-invoice limit is an annual turnover of more than Rs.5 crore in any financial year from 2017-18. All businesses (MSMEs) having past year's turnover between Rs.5-10 Crore must begin implementation from 1st August 2023.

How to set up e-Invoicing?

The applicable or notified MSMEs should note the following points for a smooth implementation before 1st August 2023.

• The Finance head or Tax head in the MSME organisation must spread awareness about e-Invoicing and its impact on raising invoices within the team ahead of its implementation.
• The billing team must use the standard format for e-invoice, also called the e-invoice schema. All the mandatory details should be reported, such as the billing name and address, GSTIN of the supplier, transaction value, item rate, GST rate, tax amount, etc.
• The Finance head or Tax head should explore modes for e-invoice generation available and choose the most appropriate suited to their business scale and operational setup. 
• The Finance/Tax head must also reconfigure the print settings on the billing system to include IRN and signed QR code in the tax invoices raised.
• Wherever e-way bills are needed for tax invoices, the finance head should arrange to generate such e-invoices along with e-way bills. Hence, there must be a system of sorting in place to segregate the tax invoices needing e-way bill-cum-e-invoice generation.
• The Finance head must ensure that the team maintains master data of validated GSTINs of buyers, addresses, bank details, payee details and the place of supply, including a master list of goods or services it deals with, if not earlier. Preparing this before the implementation can help avoid errors in e-invoices since correcting it later is a hassle.
• Finance teams must switch to a billing software or solution that lets them seamlessly generate e-invoices with minimal manual efforts and time, such as Clear e-Invoicing, backed by three IRPs such as NIC1, NIC2 and Clear IRP to ensure uninterrupted services to the users.

How to raise e-Invoices?

The e-Invoicing system does not need the finance teams to create tax invoices on the government portals. 

The following are broad steps to generate e-invoices for MSMEs-

• First of all, the billing team raises tax invoices or debit notes or credit notes on the billing solution.
• Secondly, they must report such tax invoices, debit notes or credit notes' details, individually or in bulk, with the IRP via the chosen generation mode.
• Next up, the IRP will validate the documents reported and generate IRN and signed QR code on the invoice. If an e-way bill were requested, that would also be generated.
• The finance/billing team can print or download these e-invoices and share them with customers or buyers.
• The details of the e-invoice generated will be auto-populated into GSTR-1/IFF of the relevant tax period for easier reporting by the tax teams.

t is pertinent to note that by using ASP-GSP, such as Clear e-Invoicing solution, the finance team of an MSME can avoid the hassles of manual reporting of documents for e-invoice generation. They can simply generate e-invoices and e-way bills while raising tax invoices.

Role of tax consultants in e-Invoicing for MSME

Tax consultants and practising professionals play a pivotal role in the implementation of e-invoicing for MSMEs and startups. With the turnover limit reduced further to Rs.5 crore and more for e-invoicing, the businesses falling in this category may mostly depend on conventional means for billing, which poses many challenges. They consult practising professionals for accounting throughout the year and financial statements at the year-end.

However, tax consultants have been at the forefront of accepting technology for finance transformation and spreading the word among their clients. They have also acted as support pillars for their MSME and startup clients in designing suitable systems for setting up billing, accounting, and auditing. 

There are many challenges for MSMEs and startups falling in the sixth phase of e-invoicing to set up the system and run it smoothly. Some of them include-

• e-Invoicing portals face frequent lags, go unresponsive, and experience a high downtime with many more businesses/GSTINs trying to generate e-invoices.
• Seamless bulk generation, cancellation, download, print, or modification and monitoring of the same is cumbersome without a functional/interactive dashboard.
• Poor and inconvenient user interfaces for e-invoicing in the billing solutions/portals lead to loss of time and efforts of teams.
• The lack of data archival in the billing/invoicing systems forces MSMEs to take conventional routes of data storage, putting business operations at risk.
• Lack of ready and insightful reports or filters for faster decision-making and actions.
• There is often a lack of an automatic retry function in case of failure of IRN generation.
• Lack of access to tools for reconciliation between e-Invoice and Sales Register.
• Most solutions or portals do not provide a customer support mechanism for a faster issue addressal.
• The lack of proactive error reporting and fewer validations puts businesses at risk of frequent corrections and regeneration of e-invoices.

Accordingly, the tax consultants, who are already looked up to by clients for smooth and accurate GST compliance, can extend a helping hand to all their applicable MSME and startup clients.

Tax consultants can extend access to an e-invoicing platform for their clients, such as Clear e-Invoicing. This platform allows tax consultants and their clients to securely raise e-invoices for the GSTIN on a single platform. The data can be further used for GSTR-1/IFF preparation by the tax consultants. 

It reduces the need for manual intervention while also reducing the time in coordination with clients for raising accurate e-invoices and GST return preparation. This way, tax consultants and their applicable MSME clients can stay compliant with GST and e-invoicing rules.