E-invoicing for businesses with aggregate turnover exceeding ₹5 crore will be mandatory from next year. At present, the threshold is ₹20 crore, which is going to come down to ₹10 crore from October 1.

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E-invoicing to be mandatory for businesses exceeding ₹10 cr turnover from Oct 1
FinMin issued the notification on lowering the threshold based on the GST Council recommendations

“The system is ready to facilitate e-invoicing for threshold of over ₹10 crore. Our effort is to lower the threshold to ₹5 crore from next year for which a notification prescribing the exact date is to be issued later,” a senior Government official told BusinessLine.

E-invoicing prescribes a standardised format of an invoice that a machine can be read. Here, an identification number is issued against every invoice by the invoice registration portal (IRP) to be managed by the GSTN. Businesses for which e-invoicing is mandated and if they do not, their invoice will not be valid. In such a situation, input tax credit (ITC) on the same cannot be availed by the recipient, besides attracting applicable penalties. 

Reduction in e-invoicing threshold

Smita Singh, Partner - Indirect Tax, Customs & Trade at S&A Law Offices says reduction of the threshold for e-invoicing is a planned effort by the Government targeting towards digitising of maximum transactions and transparency in sales reporting. This would lead to controlling the menace of fake invoicing, check mis-match errors, and improve tax compliances, ultimately improving tax collections.

“Now, large taxpayers must also ensure that their smaller vendors are adhering to the revised e-invoicing mandate to avoid enquiries by authorities on ITC availed with respect to such smaller vendors,” she said.

Saurabh Agarwal, Tax Partner with EY feels the reduction in e-invoicing threshold on a progressive basis is clearly an indicator that the Government may make it mandatory for all types of GST registrant over a period of time. This is being done to increase the taxable base and ensure digital administration as far as possible. For Small and Medium Enterprises, (SME) Government has websites for manual generation of e-invoice to facilitate the ease of doing business without adding too much of additional information technology costs.

“It’s important for the industry to either integrate their invoicing systems with the IRPs or provide appropriate training to their executives to generate e-invoices from the Government system manually. Non-generation of e-invoice is not merely a statutory non-compliance but may also lead to loss of business for the SMEs as the large business houses may not accept the non-compliant GST invoices while making payments for goods and services,” he advised.

Tax officials say businesses use various accounting/billing software, generating and storing invoices in their electronic formats. These different formats are neither understood by the GST system nor among the systems of suppliers and receivers. For example, an invoice generated by the SAP system cannot be read by a machine using the ‘Tally’ system, unless a connector is used. With more than 300 accounting/billing software products, there is no way to have connectors for all. In this scenario, ‘e-invoicing’ aims at machine-readability and uniform interpretation.