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In a step to ensure better flow of data on taxpayers to the authorities and higher compliance, the turnover threshold for e-invoicing has been halved to Rs 10 crore effective October 1 this year under the Goods and Services Tax (GST) regime.
What is the decision on the threshold for e-invoice?
Businesses with annual turnover of Rs 10 crore or more will have to generate e-invoices for business-to-business (B2B) transactions from October 1 this year. The existing threshold for this is Rs 20 crore.
Pursuant to the GST Council’s decision to introduce e-invoicing in a phased manner, the Central Board of Indirect Taxes and Customs (CBIC) on August 1 notified lowering the e-invoice threshold to Rs 10 crore.
The GST Council approved the standard of e-invoice in its 37th meeting held on September 20, 2019. E-invoicing for B2B transactions was made mandatory for companies with turnover of over Rs 500 crore from October 1, 2020, which was then extended to those with turnover of over Rs 100 crore effective January 1, 2021.
From April 1, 2021, companies with turnover of over Rs 50 crore were generating B2B e-invoices. The threshold was brought down to Rs 20 crore beginning April 1, 2022. The CBIC now plans to further lower the threshold for e-invoice generation to Rs 5 crore.
What is e-invoice generation under GST?
The e-invoice system is for GST registered persons to upload all B2B invoices to the Invoice Registration Portal (IRP). The IRP generates and returns a unique Invoice Reference Number (IRN), digitally signed e-invoice, and QR code to the user.
After following the e-invoicing process, the invoice copy (with QR Code containing inter alia, IRN) issued by the notified supplier to the buyer is commonly referred to as the ‘e-invoice’. SEZ units, insurance, banking (including NBFCs), goods transport agencies (transporting goods by road in goods carriages), passenger transport services, and multiplex cinema admissions are exempt from the e-invoice system. A GST invoice is valid only with a valid IRN.
E-invoice does not mean generation of invoices from a central portal of the tax department — rather, it is the generation of invoice in a standard format so that an invoice generated on one system can be read by another system, and then reporting of e-invoice to a central system.
What does the lowering of thresholds for e-invoice signify?
Officials said the e-invoice system will help to curb the actions of unscrupulous taxpayers and reduce cases of fraud as the tax authorities will have access to data in real time. The aim behind adoption of the e-invoice system by tax departments is to acquire the ability to pre-populate the return and to reduce reconciliation problems.
Tax experts said the lowering of the threshold will help curb tax evasion.
“The move to reduce the turnover threshold and increase the ambit of e-invoicing is mainly aimed at resolving mismatch errors and checking tax evasion. Considering the timelines, concerned businesses will have to ramp up their IT systems to comply with the e-invoicing norms,” EY said.
M S Mani, Partner, Deloitte India, said the reduction of the e-invoicing threshold will further expand the GST tax base and provide more data to tax authorities, enabling better compliance. “The progressive reduction of the e-invoicing threshold indicates that over a period of time, e-invoicing will become mandatory for all categories of GST taxpayers,” he said.
Businesses would now need to tweak their systems to incorporate the changes, else they may run the risk of their invoices not being accepted by other businesses and hence, lead to issues in availing input tax credit.
Vivek Jalan, Partner, Tax Connect Advisory, a multi-disciplinary tax consultancy firm, said, “As of now e-invoicing compliance amidst already liable taxpayers is only 40%, which means that on average only 4 out of 10 liable invoices are e-invoicing-compliant. This change has a big impact on the recipients of goods or services also.
“In case their suppliers are liable to generate e-invoices and have not provided them with one, then the GST-Input Tax Credit on such invoices shall be denied to the recipients. Hence it is important for the recipients to check whether their suppliers are e-invoicing complaints also.”
Abhishek Jain, Partner, Indirect Tax, KPMG in India, said “This means any registered person with aggregate turnover exceeding Rs 10 crore in any FY 2017-18 onwards has to issue e-invoice from October 1, 2022. This has been done to widen the net of GST digitisation and to capture transaction details at the invoicing stage itself, which will help further prevent GST evasion.”
