E-invoicing for businesses with aggregate turnover exceeding ₹10 crore will be mandatory from October 1. Presently, e-invoice is compulsory for businesses with an annual turnover of over ₹20 crore
Following the recommendation by the GST Council, Finance Ministry has issued a notification for lowering the threshold. E-invoicing prescribes a standardised format of an invoice that a machine can be read. It is a system in which B2B invoices are authenticated electronically by the Goods & Services Tax Network (GSTN) for further use on the common GST portal.
Under the electronic invoicing system, an identification number will be 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.
On July 3, BusinessLine reported lowering the threshold in two phases – first for businesses with turnover over ₹10 crore and then to over ₹5 crore. Earlier, in an interview with this newspaper, Revenue Secretary Tarun Bajaj had said e-invoicing started with those having an annual turnover of ₹500 crore, then brought down to ₹100 crore and to ₹20 crore. Now the plan is to bring it down first to ₹10 crore and then to ₹5 crore.
“Timeline for lowering the threshold to ₹10 crore is there, but before that, we want stability in the IT system. The number of assesses between ₹10 crore and ₹20 crore would go up substantially, so we want to be sure that our IT system is good. GSTN is working on the plan and they should be ready in the next 3-4 months,” he had said.
Saurabh Agarwal, Tax Partner with EY says the move to reduce turnover threshold and increase the ambit of e-invoicing is mainly aimed at resolving mis-match errors and check tax evasion. “Considering the timelines, concerned businesses will have to start preparing and ramp up their IT systems to enable compliance with the e- invoicing norms,” he said.
GST Council recommendation
The GST Council, in its 37th meeting on September 20, 2019, recommended the introduction of an electronic invoice (‘e-invoice’) in GST in a phased manner. The government has already made it clear that mandatory conditions will not add a financial burden on businesses as GSTN has empanelled various accounting and billing software products which provide basic accounting and billing systems free of cost to small taxpayers.
Here, small taxpayers mean businesses having a turnover of less than ₹1.5 crore. Those small taxpayers who do not have accounting software today can use one of the empanelled software products available online (cloud-based) as well as offline (installed on the computer system of the user) mode.
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. To ensure this complete ‘inter-operability’ of e-invoices across the entire GST eco-system, an invoice standard is a must. By this, e-invoices generated by one software can be read by any other software, eliminating the need for a fresh/manual data entry.