The Finance Ministry has issued a notification stating that businesses with a turnover of ₹5 crore or more will be required to adopt e-invoicing from August 1, whereas the current threshold stands at ₹10 crore.

As per Rule 48(4) of CGST Rules, notified class of registered persons have to prepare invoice by uploading specified particulars of invoice (in FORM GST INV-01) on Invoice Registration Portal (IRP) and obtain an Invoice Reference Number (IRN). After following above ‘e-invoicing’ process, the invoice copy containing inter alia, the IRN (with QR Code) issued by the notified supplier to buyer is commonly referred to as ‘e-invoice’ in GST.

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Because of the standard scheme, ‘e-invoicing’ facilitates exchange of the invoice document (structured invoice data) between a supplier and a buyer in an integrated electronic format. It is important to note that ‘e-invoice’ in ‘e-invoicing’ doesn’t mean generation of invoice by a government portal. The invoice not registered on the portal will not be valid. In such a situation, input tax credit (ITC) on the same cannot be availed by the recipient and will attract applicable penalties. 

Experts’ take

Experts say the assessees with turnover between ₹5-10 crore are small assessees, and if the limit is reduced to ₹5 crore, they will need to register on the portal and upgrade their accounting systems very quickly. The staff will also have to be trained.

According to Mahesh Jaising, Partner, Leader (Indirect Tax) with Deloitte India for companies, e-invoicing is a boon rather than a bane as suppliers who are e-invoicing compliant result in proper flow of input tax credit and reduce the churn around credit issues. “With this announcement, scope of MSMEs under e-invoicing will be expanded and will need to implement e-invoicing. The agility of the government systems and awareness sessions that have been done indicate that this compliance being met should not be an onerous one,” adds Jaising.

B2B customers

Shashi Mathews, Partner, IndusLaw, says now a larger base of assessees will now be required to comply with the e-invoicing requirements. It is understood that government has plans to further reduce it to ₹1 crore in the future. Failure to comply with the said mandate would mean that the underlying supply has been made without an invoice recognised under the GST laws. On this account, a minimum penalty of ₹10,000 is prescribed under the laws, apart from any other amount proportionate to the tax evaded, he said.

According to Vivek Jalan, Partner with Tax Connect Advisory, it is pertinent to note that even the B2B customers of these new taxpayers to whom e-invoice would now be applicable would be affected. In case they accept the invoices without e-invoice compliance from such suppliers then their input tax credit would be denied resulting in GST loss for them to the extent of 18 per cent generally, which could severely impact their bottomline. So, all GST Registered taxpayers should take note of this significant change and plan from August 1 accordingly, he advised.