E-invoice may help banks step up pace of lending to MSMEs

Published on Nov 28, 2019 11:47 PM IST
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ByRajeev Jayaswal

New Delhi

The electronic invoice (e-invoice) under the Goods and Services Tax (GST) regime that will be rolled out in January will help banks speed up disbursal of loans to micro, small and medium enterprises (MSMEs), whose creditworthiness can be instantly verified by the system, two officials in the finance ministry said, requesting anonymity.

“Providing loans to MSMEs is a priority of the government. PSBs (public sector banks) have been told to give loans to the sector according to the laid-down prudential norms. E-invoicing will help banks to instantly verify order books of these firms and help in faster sanctioning of loans. If required necessary directives will be issued (to PSBs),” one of the officials said.

Better credit flow to MSMEs is crucial as they are a key engine of the economy, contributing as much as 29.7% of gross domestic product (GDP) in 2017-18, according to the Central Statistics Office (CSO) .The government has announced several policy measures to boost sagging economic growth since August. The Indian economy grew 5% in the June quarter, the slowest pace of grown in over six years.

The GST Council has already approved the introduction of e-invoicing in a phased manner for reporting of business-to-business invoices to the GST System. “It will start operating on a voluntary basis from January 1, 2020 for enterprises having a turnover of Rs 500 crore or more,”the second official cited above said.

The system will be extended to businesses with a turnover of Rs 100 crore or more on a voluntary basis from February 2020. After that, it will be mandatory for the two categories of companies from April 1, 2020. Companies with a turnover of less than Rs 100 crore will also be able to generate e-invoices from the system starting in the next financial year, but it will be voluntary for them, the official said.

The GST Network (GSTN) has already standardised the e-invoice after consultation with industry and the Institute of Chartered Accountants of India. “Having a standard is a must to ensure complete inter-operability of e-invoices across the entire GST ecosystem so that e-invoices generated by one software can be read by any other software, thereby eliminating the need of fresh data entry, the second official added.

Pratik Jain, partner and leader of the indirect tax practice at consulting firm PwC India, said the proposed system will “surely help MSMEs as the data would be real time and can be authenticated easily” for extending funding and other purposes.

E-invoicing will also help in ease of doing business as it will pre-populate GST returns besides reducing reconciliation of data problems. The basic aim behind the adoption of the e-invoice system is to simplify the GST returns system, the second official said.

Jain said: “Introduction of this mechanism on a voluntary basis to start with, that too linked with turnover threshold, {it} provides an opportunity to the government as well as industry to prepare for this change. Over a period of time, this should make the compliances easy, particularly if input credit is completely linked with e-invoices. It would be good if large companies start using this on a voluntary basis as soon as they can.”

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