THE SMALL AND THE VULNERABLE

Small and very small businesses have at last been brought within the ambit of mandatory e-invoicing for GST payments. Has the axe fallen too soon on this growing and vital segment of the economy? 

- Abhishek Sharma

BEGINNING 1 AUGUST even micro, small and medium enterprises (MSMEs) need to begin the process of e-invoicing for paying Goods and Services Tax (GST). The lowering of the compliance threshold will bring many more firms within the e-invoicing regime for the first time. It is estimated that almost 30 per cent of MSMEs fall within the Rs 5 - Rs 10 crore annual turnover bracket.

For these companies, details of every invoice must be submitted to the GST portal so that information may be shared in real time with the GST system. “Larger SMEs with established technological capabilities might adapt more smoothly, whereas smaller ones could face initial challenges in adopting the necessary e-invoicing systems. The degree of impact will depend on how prepared SMEs are for this transition,” points out Sanjay Kaushik, Managing Director (MD), Netrika Consulting.

The turnover threshold for mandatory e-invoicing has been progressively brought down from an annual turnover of above Rs 500 crore to Rs 10 crore and effective 1 August this year, Rs 5 crore, thus bringing MSMEs within its ambit. The measure aims to simultaneously boost GST collections and improve tax compliance. The phased implementation of the process was intended to allow industry and businesses and particularly SMEs (small and medium enterprises), time to prepare for the process.

A report by Global Alliance for Mass Entrepreneurship (GAME) with Dun & Bradstreet and Omidyar Network India revealed that an estimated 5.9 per cent of the gross value added (GVA) in the Indian economy i.e. Rs 10.7 lakh crore is locked up in delayed payments from buyers to MSME suppliers. So, the mandatory e-invoicing may solve the perennial problem of funds stuck in the pipeline for small and medium businesses.