E-Invoicing Mandate for MSMEs – Transformation, Expectations & The Road Ahead

By Shreyas Shrivastava

As of August 1, 2023, all B2B suppliers in India with an annual turnover exceeding ₹5 crore are mandated to generate e-invoices via the Invoice Registration Portal (IRP). While this move is a part of the government's larger vision for a digitised tax ecosystem, it is now reshaping how MSMEs engage with GST compliance.

Latest Industry Insights

According to the June 2025 Avalara & Cebr Report, India is leading globally in e-invoicing:

• 80% of invoices received and 70% of those issued are now electronic.
• A full adoption of e-invoicing could unlock a staggering ₹32,000 crore in economic value per year.
• For an average business, it could mean annual operational savings of ₹1.09 crore, driven by automation and compliance efficiency.

However, a worrying disparity remains:

Large Enterprises: 72% of invoices e-invoiced

MSMEs: Only 37% of invoices currently e-invoiced

This gap is both a challenge and an opportunity.

Key Focus Areas for MSMEs

1. Compliance Scope: The ₹5 crore threshold, introduced in August 2023, significantly expands the compliance net. Many MSMEs that previously operated outside this digital regime are now required to integrate with the IRP system and comply with QR code and IRN requirements.
2. System Integration & Upgrades: Businesses must align their existing ERP or billing systems with the IRP. Real-time generation of Invoice Reference Numbers (IRNs) and QR codes is essential to ensure that invoices are considered valid under GST law. Delays or errors in this process could result in ITC denial for buyers or penalties for the suppliers.
3. Benefits of E-Invoicing:Streamlined ITC Flow: Real-time invoice visibility to GSTN helps in quicker reconciliation and credit availability. Built-in system checks deter fake invoicing and circular trading. Standardised invoice formats and automated workflows improve invoice approval cycles.
4. Challenges on the Ground: Legacy accounting software or Excel-based billing tools lack e-invoicing capabilities. Human staff often require training on new workflows, error handling, and system navigation. Full value is only unlocked when both vendors and customers adopt the system efficiently, ensuring seamless credit flow and payment traceability.

Way Forward

The e-invoicing mandate is not merely a compliance requirement, it is a gateway to financial transparency, operational efficiency, and global competitiveness. MSMEs that embrace digital transformation today will likely gain a strategic edge in tomorrow's tax ecosystem.

At LexEtAl Global , we’re helping businesses big and small, navigate this shift with confidence. From IRP integration to compliance advisory, our tax experts ensure you're future-ready.

#LexEtAl #EInvoicing #MSMEIndia #GSTIndia #TaxCompliance #DigitalIndia #InvoiceAutomation #BusinessTransformation