E-Invoicing Phase III: The Challenges That Lay Ahead!

E-Invoicing Phase III The Challenges That Lay Ahead

The country is all geared up for its final phase of the rollout of E-invoicing. With effect from 1 April 2021, the E-invoicing storm shall reach its final stage wherein the businesses with turnover less than Rs. 100 crores shall be liable to raise E-invoices for all B2B supplies made by them.

As a recap, in its first phase, the Government launched E-invoices for businesses whose turnover exceeded Rs. 500 crores from 1 October 2020. This phase was relatively simpler because the large organisations had the necessary IT infrastructure in place and even those who did not have it, had the capabilities to elevate their infrastructure to a level that they could smoothly raise E-invoices. Thus, this phase turned out to be smooth and fairly problem-free.

In the next phase, the businesses with turnover exceeding Rs. 100 crore were included in the club. This phase covered a much larger base and hence was a little complicated than the earlier one. However, almost 2 months down the line, all seems settled and well, apart from some technical glitches.

Next, small businesses with turnover less than Rs. 100 crore would feel the heat of the transformation as all B2B supplies would get covered in the transition. As per media reports, it is believed that only businesses with a turnover of less than Rs. 5 crores would be exempted from generating E-invoicing. Thus, all businesses with turnover exceeding Rs. 5 crores would be generating E-invoices starting 1 April 2021.

This shall mean that even small enterprises would be required to generate E-invoices henceforth. This can prove to be challenging for multiple reasons.

Anticipated Challenges

  • The size of the organisations in this phase would be majorly micro and small enterprises. An inherent problem with such enterprises is their immature IT infrastructure. It goes without saying that a reliant and robust IT infrastructure is a must for E-invoicing; the lack of which may lead to a total collapse.
  • The capital required to build a robust IT infrastructure may also be absent in such enterprises who anyways have limited fund availability.
  • Few of these enterprises do not even have a digital accounting system in place, leave apart the capability to raise an invoice in a pre-defined format, that too real-time.
  • Enterprises that have an ERP in place, would have to integrate the E-invoicing module in their existing ERP and conduct extensive testing in the sandbox environment for seamless implementation.
  • Personnel training is another important challenge as E-invoice is a new concept and would need in-depth training. Beginning from data entry, printing and mailing invoice, type of transactions i.e. B2B or B2C, etc. need to be reviewed.
  • Another imperative aspect is the invoicing practices followed across sectors. For instance, the service sector sometimes invoices on a monthly basis or after the timesheets are closed for the previous period, invoices in the case of lots and installments, etc.
  • Further, invoice storage can also become an issue for businesses whose volume or quantity of invoices is high as the Invoice Registration Portal only stores the invoice for 24 hours.
  • Vendor-related issues may also crop up as the ITC of a business would entirely depend on the E-invoice generated by the vendor. In this sector, since the vendors could also be of micro and small size, their preparedness has to be reviewed.
  • A three-way reconciliation would be required between E-invoice data, E-way bill data, and GSTR-1 return which may prove to be time-consuming and cumbersome for the small entities.

Probable Solutions

  • Businesses need to prepare extensively as E-invoicing is a process change.
  • The tax/finance team needs to be trained in order to achieve the best results.
  • An effective vendor ecosystem needs to be created so that the vendor’s compliances to E-invoicing can be reviewed. For such a purpose, a backward integration approach can be followed.
  • Technological preparedness tops the list as E-invoicing can be said to be a technological disruption altogether. Businesses would need to do an impact analysis basis whether their supplies are B2B or B2C. In the case of majority B2B supplies, there would be a higher impact. Moreover, in such case, the businesses may need to have an E-invoice solution in place which can ease their journey without any hiccups. Such a solution would not only aid in raising E-invoices seamlessly but would also help in reconciliations which can be an uphill task otherwise. Such solutions also provide invoice storage space, vendor related information to safeguard the ITC of the enterprise.


Due to the paucity of time, it can clearly be said that the businesses who have not yet started their preparation to transition to E-invoice are already sailing in a slow boat. To make up for the lost time and to transition smoothly, the businesses may seek expert help from any of the ASPs/GSPs who have already gathered enough experience for implementing E-invoice in the initial two phases. Not only the businesses can encash on their experience, but they can actually benefit from the E-invoicing transition to iron their processes and emerge as a winner.

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