While e-invoicing alone may not generate high revenues, the key lies in the way fintechs leverage the data of enterprises to offer other products such as credit or supply chain finance
Allowing private fintech firms to issue GST e-invoices-–a proposal under consideration-–may bring forward innovative solutions that will ultimately yield higher adoption, said chief executives of some key fintechs. Such firms that may be eligible to apply said the interest is based on access to data and the opportunity to sell value-added products to businesses on top of e-invoice facilities.
As part of the Goods and Services Tax, the government in October 2020 launched ‘e-invoice’, with the idea that all local business trades get recorded in the GST database for quicker and more efficient GST reconciliation. Currently, the software is operated by National Informatics Centre, a unit under the Ministry of Electronics and Information Technology.
“E-invoicing alone may not have high revenue generation potential,” said Akash Gehani, co-founder, Instamojo, a fintech start-up that offers e-commerce and payment services to SMEs. “As a company, as long as I am able to use this in another way, (and) if I can leverage the data of enterprises to offer other products such as credit or supply chain finance, that is going to be the key.”
Proximity to business customers is a key attraction, said Anurag Jain, co-founder, KredX, a Tiger and Sequoia-based invoice discounting firm. “The opportunity to be a player that creates e-invoices for businesses will give us, for instance, a lot of heft in the market. It will also bring us closer to the businesses that actually require financing,” said Jain.
The idea of having multiple entities generating e-invoice (on behalf of GSTN) has been in the works for some months. Business Standard reported on 25 May that there is now a proposal to invite major fintech firms to become official issuers of e-invoice alongside NIC. A key nudge is the tepid adoption for e-invoice by businesses-–only 49 per cent of eligible firms used the facility in April.
E-invoice is not compulsory but is encouraged for all firms with over Rs 50 crore turnover. The plan is to slowly get businesses of all sizes on board. “One way is to mandate it, but a better solution is to have fintechs offers value-added services on top of the e-invoice to make the whole thing more useful,” said Ramaswamy Iyer, founder and chief executive officer, Vayana Network, one of the biggest supply chain trade financing firms in India and among the first GSPs to set up shop.
Logistics tools, linkage to companies’ ERP systems, or automated alerts to buyers or vendors could be useful plugs.
ClearTax, the country’s biggest tax filing platform, said it was waiting for the fine print of the proposal. “We will continue to build products that ease tax compliance for all stakeholders,” said Archit Gupta, CEO and co-founder. Alluding to the E-invoice filing tool it offers to businesses, Gupta said, “earlier this year, we launched a GST-compliant billing and e-invoicing product called ClearOne to help small businesses and streamline their billing/invoicing process. These tools have not just saved time but also helped over 600,000 businesses save taxes with the help of smart analytics and automated reconciliation.”
This isn’t the first time the government has looked at opening up e-invoice for private players. Late last year, it floated a Request for Quote (RFQ), a precursor to Request for Proposal (RFP), to invite IT firms such as Infosys and the like to develop the said system. However, the stance has changed since and now fintechs are being considered as a better fit.
“Fintech companies have had good success in terms of going deep into the ecosystem, to reach different types of customers which has been the problem with traditional financial institutions,” said Jain of KredX. “Through partnership with fintech companies it is believed that the reach and penetration (of e-invoice) can be accelerated.”
India’s fintech sector has had a hockey stick-shaped growth curve over the last decade.
Of the 51 unicorns-–start-ups with over $1 billion valuation-–11 are fintech firms. These include Paytm, Razorpay, BillDesk, Cred, Policy Bazaar, Groww, Zeta, among others. According to India Finch Report 2020 by Internet and Mobile Association of India (IAMAI), India had 2,174 fintech start-ups as of December 2020.
Founders compared the bid to bring in private players for e-invoice to the New Umbrella Entity (NUE) framework for Retail Payments. Even though several big consortiums from Tatas to Reliance and Amazon have put in bids-–for license to create a parallel UPI operator to NPCI-–the long-term revenue opportunity as a potential NUE is still being chalked out. It is widely accepted that payments processing alone does not make money- what makes money is partnerships with banks, offering data for analytics, customer profiling and so on.
“Now obviously the incentive is that once the (NUE) infrastructure is laid, you can come up with interesting applications on top of it,” said Iyer of Vayana Network. “Take WhatsApp as an example. As pure chat it was great, now you have WhatsApp payments. You get onto WhatsApp not just for chat but also for all the other things attached to it. The idea really is if you create underlying infrastructure, and then companies will create interesting products on top of it which in turn draw people in.”
What is an e-invoice?
E-invoicing under GST is a system that involves reporting the B2B and export invoices being issued by taxpayers to their customers, on the government portal and obtaining a unique Invoice Reference Number (IRN). It’s a faceless system with major thrust on API integration so that the eco-system can exchange the data electronically. The e-invoice portal returns the Signed QR code and Signed invoice back to the taxpayers. The standardised e-invoice format has led to machine readability, enhanced interoperability and uniform interpretation in the entire eco-system.
Oct 2020: 50 million
Nov 2020: 100 million
Dec 2020: 160 million
Jan 2021: 230 million
Feb 2021: 310 million
Mar 2021: 390 million