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March 11, 2021

GST e-invoicing mandatory for turnover of minimum Rs 50 crore from 1st April, 2021

by CA Jessica Nagaonkar in GST

GST e-invoicing mandatory for turnover of minimum Rs 50 crore from 1st April, 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. E-invoicing under the GST regime will become mandatory for entities with a turnover of Rs 50 crore and more from 1st April for business-to-business transactions, the government said in a notification on Monday. 

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.
  • Mandatory details like supplier and receiver’s names, address, registration number, date and time of supply, invoice date, applicable rate of GST and HSN number for the goods, among others, must be provided for generation of the electronic invoice.
  • Sectors like transportation, insurance and banking companies, other financial institutions, non-banking financial companies, goods transportation agencies, and passenger transportation services are exempt from e-invoicing.
  • Besides, units in special economic zones too are exempt from this.

Implementation of next phase of E-invoicing

  • E-invoicing becoming mandatory for entities with a turnover of Rs 50 crore and more from 1st April for business-to-business transactions will be the third phase of e-invoicing roll out.
  • The new GST e-invoicing system was rolled out for entities with Rs 500 crore and more turnover from October 1 last year.
  • It later extended to entities with Rs 100 crore and above from January 1 this year.
  • The government had earlier planned to extend e-invoicing to all entities from April 1, 2021, but has refrained, taking care of interest of small entities.
  • Keeping MSME organisations with turnover of up to Rs 50 crores out of the E-invoicing net would help them thrive and grow without any change in business processes.

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.

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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