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Businesses with  ₹100 crore sales will have to compulsorily validate their transactions by way of e-invoice from Friday
Businesses with 100 crore sales will have to compulsorily validate their transactions by way of e-invoice from Friday

Small cos gear up for e-invoicing despite tech challenges

Experts said interruptions in internet access and power supply are key hurdles when the new system kicks in

Small businesses with sales of 100 crore or more are bracing for a new compliance requirement—electronic invoicing, or real-time validation of business-to-business transactions on a government portal—that kicks in on Friday, fearing it will test their technology capability, especially for those in small towns.

Beginning this New Year, businesses with 100 crore sales will have to compulsorily validate their transactions in real time on the portal run by the National Informatics Centre by way of electronic invoice (e-invoice), capturing details of buyer and seller, besides the technical description of the item sold, sale value and the tax payable. In October, the government mandated e-invoicing for businesses with sales of 500 crore or more, and wants to extend it to all businesses in April.

Representatives of small businesses said they are hoping for a smooth transition, but are keeping their fingers crossed, while industry watchers remained more cautious given the challenges involved. Experts said interruptions in internet access and power supply will be key challenges.

Chandrakant Salunkhe, founder and president of the SME Chamber of India, said small businesses are mostly prepared for the new compliance requirement which offers several advantages. “The system should work for them. E-invoicing will eliminate several hassles small businesses face after supply is made to large companies as the details captured cannot be disputed. Recording the transaction details will also help small firms build transaction history and access trade financing. Besides, the government can keep track of the transaction value of domestic supplies vis a vis imports," he added.

Greater oversight of economic activities will help the government in both stepping up tax compliance and in improving ease of doing business. Real-time validation of individual business-to-business transactions means authorities can have greater trust in the reported sales figures both for goods and services tax (GST) and income-tax returns.

Divakar Vijayasarathy, founder and managing partner of DVS Advisors LLP, a consultancy, said e-invoicing is still at a nascent stage and compulsory e-invoicing for businesses with 100 crore sales is bound to be chaotic. “Large players managed to comply on the strength of their in-house IT support and well-trained teams, which cannot be expected in the case of all the small and medium enterprises in the 100 crore bracket," he added.

Businesses might face certain challenges while integrating the e-invoicing process in their business, said Mohan D, director, product management, Tally Solutions Pvt. Ltd. “They need to be cautious while generating e-invoice as there are restrictions with the cancellation of the invoice, which must be carried out within the same day of the transaction." Small businesses in smaller markets may face some difficulties in embracing a technology-driven way of business, he added.

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