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November 13, 2020

E-invoicing mandatory for companies with revenue over Rs 100 crore from 1st January, 2021

by CA Shivam Jaiswal in GST

E-invoicing mandatory for companies with revenue over Rs 100 crore from 1st January, 2021

Previously, businesses used to generate invoices through various software’s, and the details of these invoices were manually uploaded in the GSTR-1 return. The invoice information was thereafter reflected in GSTR-2A for the recipients for viewing only. On the other hand, the consignor or transporters had to generate e way bill by again importing the invoices in excel or JSON manually.

The GST Council, in its 35th meeting, decided to implement a system of e-invoicing, which would be applicable to specified categories of persons. The concept of GST e-invoice generation system was taken into consideration for the reduction in GST evasion.

What is the GST e-invoicing system?

  • GST e-invoice is basically a digital invoice for goods and services provided by the business firm generated at the government GST portal.
  • ‘E-invoicing’ or ‘electronic invoicing’ is a system in which B2B invoices are authenticated electronically by GSTN for further use on the common GST portal.
  • Under the proposed e-invoicing system, an identification number will be issued against every invoice by the Invoice Registration Portal (IRP) to be managed by the GST Network (GSTN).
  • All invoice information will be transferred from this portal to both the GST portal and e-way bill portal in real-time.
  • The new GST e-invoicing system was implemented from October 2020.

Amendment by CBIC w.r.t e-invoicing limit

The Central Board of Indirect Taxes and Customs (CBIC) is a part of the Department of Revenue under the Ministry of Finance, Government of India. It deals with the tasks of formulation of policy concerning levy and collection of Customs, Central Excise duties, Central Goods & Services Tax and IGST, prevention of smuggling and administration of matters relating to Customs, Central Excise, Central Goods & Services Tax, IGST and Narcotics to the extent under CBIC’s purview.

Recently, the CBIC notified that e-invoicing will be mandatory for business to business (B2B) transactions for taxpayers having turnover of over Rs 100 crore from 1st January, 2021. Currently, issuing electronic invoices is mandatory for businesses with turnover of Rs 500 crore and more. So now with only approximately 50 more days, mid-size companies would need to soon gear up their processes/ IT systems to enable compliance with this new invoicing regulation.

What is the benefit of implementing the system of e-invoicing?

For a nation like India where tax evasion is rife, this system can be a boon. Its most important benefit will be transparency and proof.

  • With e-invoicing, the moment an invoice is made, it will be uploaded to GSTN portal where pre- validation will be done and a unique number called IRN (Invoice Reference Number) will be issued. Once IRN is issued, the tax invoice will be shared with the recipient also. 
  • This real time tracking of invoices can be done by both, vendors and the government, and will result in a reduction of frauds and fake GST invoices
  • E-Invoice system boosts the automation of GST return filing process. E-invoicing can bring ease, speed and accuracy to the return filing process.
  • It will reduce the chances of fake GST invoices and the only genuine input tax credit can be claimed as all invoices need to be generated through the GST portal.
  • Since the input credit can be matched with output tax details, it becomes easier for GSTN to track fake tax credit claims.
  • E-invoice resolves a major gap in data reconciliation under GST to reduce mismatch errors.
  • Lesser possibility of audits/surveys by the tax authorities since the information they require is available at a transaction level.
  • The e-invoicing system will improve the payment cycle for industry and giving boost to invoice-based lending to MSMEs.

E-invoicing replaces the physical invoice and will soon replace the existing e-way bill system, and taxpayers will not have to generate separate e-way bills. In the first few days, about 8 lakh e-invoices were issued per day and over 69.5 lakh Invoice Reference Numbers (IRNs) were generated between October 1 and October 7. It was anticipated that the number would be around 20-21 lakh because it applies only to companies with a turnover of more than Rs 500 crore, covering about 18,000 odd companies. However, e-invoice issuance as of October 30 has been over 29 lakhs.

The e-invoicing process was introduced to capture sales details, reduce errors, automate data entry and improve compliance and trust between tax officials and companies. It will also help auto-populate certain forms. E-invoicing will most definitely provide a push towards a digital economy. Curbing tax evasion and increasing tax collections for the government may ensure that the government will not increase GST rates any further.

However, there are some challenges to the system. Many parts of India continue to suffer from lack of infrastructure. Large organizations, who have implemented auto generation of the e-waybill on creation of the tax invoices, will have to change their existing process. Taxpayers who have not up taken automation of e-waybill have to reach out their OEM’s for the configuration of the same. Similarly, the manual bill books and accounting software products used today may need to undergo an overhaul. This may prove to be a time-consuming task.

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