Mandatory e-Invoice for Businesses with Turnover More Than Rs 5 Crore

As per the notification of the Central Board of Indirect Taxes and Customs (CBIC), all the GST taxpayers whose annual turnover is more than Rs 5 crore in a financial year will have to generate B2B e-invoices. The rule will come into force from August 1st, 2023.

The e-Invoicing limit is reduced to Rs. 5 crore from Rs. 10 crore. Check the different e-Invoice turnover limits applicable in the current and previous years:

• 1st August 2023 - Rs. 5 Crore
• 1st October 2022 - Rs. 10 Crore
• 1st April 2022 - Rs. 20 Crore
• 1st April 2021 - Rs. 50 Crore
• 1st January 2021 - Rs. 100 Crore
• 1st October 2020 - Rs. 500 Crore

The e-invoicing system was launched to introduce GST evasion in the country. This new move improves compliance and boosts collections under the GST. For tax authorities, GST is a focus area. 

In this new notification, it is said, the business should review their vendor masters and must ensure that those who are crossing a limit of Rs. 5 crore must issue an e-invoice to avoid any dispute. Let’s check how this

Why Launched e-Invoice System?

The e-Invoice System is for GST-registered persons. Businesses must upload all the B2B invoices to the Invoice Registration Portal (IRP). In return, the IRP generates and provides a unique Invoice Reference Number (IRN), digitally signed e-invoice and QR code to the user. The buyer and seller, both need to follow this process. So, it helps in matching the e-invoices which reduces duplication and errors.

The government realised that many midsized and small businesses are coming under the e-invoicing system now. So, e-invoicing aims to combat tax evasion and check the real-time invoice matching between the buyer and the seller. This process shows transparency and enhances the tax collection system.

Benefits of e-Invoicing System

The invoice information will transfer from the e-invoice1 portal to the GST portal and e-way bill portal in real-time. And it eliminates the need for manual data entry while filing a GSTR-1 return. The business has the multiple benefits of using e-invoice:

• Reduce the mismatch errors and plugs a major gap in the data reconciliation.
• The process of e-invoice generation is completely based on one software, and it can be read by another software. It helps in reducing data entry errors.
• The e-invoices can be tracked in real-time which is prepared by the supplier.
• Automation of the tax return filing process. All the relevant details of the invoices will be filled out automatically in the various returns. Especially for generating part-A of e-way bills.
• Faster availability of genuine input tax credit.
• Low possibility of audits/surveys by the tax authorities.

Who is Not Complying with e-Invoice?

For now, e-invoicing is not applicable to the following persons:

1. An insurer, banking company or financial institution including an NBFC.
2. A Goods Transport Agency (GTA)
3. A registered person supplying passenger transportation services
4. A registered person supplying services by way of admission to the exhibition of cinematographic films in multiplex services.
5. A government department and Local authority.
6.  Persons registered in terms of Rule 14 of CGST Rules (OIDAR)

Process of Generating e-Invoice

The following is a process to generate an e-invoice which is applicable for businesses who want to know how to generate an e-invoice:

Step 1: Use billing or accounting software to generate an e-invoice as per the prescribed format. Generating an e-invoice for businesses should be part of their daily business activities. This is a one-time step to follow to generate an e-invoice. The seller must ensure that their accounting/ billing software is capable of generating JSON files. 

Step 2: There are two options for generating IRN also known as hash. This is a unique number that is generated through a hash generation algorithm. Every submitted document has a unique 64-character IRN number. Currently, there are two ways to generate IRN, the first is offline and the second is API. Taxpayers can generate the e-invoice by using these options:

• Using offline tool
• GSPs Integration
• API Direct Integration
• E-way bill API-enabled Taxyayers

Step 3: After generating the IRN, a digitally signed e-invoice and QR code (Quick Response Code) will generate. The Invoice data will update with IRP’s digital signature and the QR code to the JSON file. The QR will make the process of validation quick.

Consequences of Non-generation of e-Invoices

If a business failed to generate e-invoices then there are penalties, and these are as follows:

• For every not generated invoice businesses have to pay Rs. 10 thousand.
• For every incorrect invoice, you will attract a penalty of Rs. 25 thousand.
• If goods transport without a valid invoice, the department can detain the goods and the vehicle. Also can put other penalties.
• The businesses cannot generate E-Way Bill without a valid IRN.  

Conclusion

To conclude, all businesses whose yearly turnover is more than Rs. 5 crores must generate an e-invoice from August 1st, 2023. At a time, only one invoice should be uploaded into IRP. Follow the e-invoice because it simplifies the process of claiming tax credit and invoices transmission ensures better safety.

Also read: Checklist of Documents Required for GST Registration

Author: Dushyant Sharma

Hey there, I'm Dushyant Sharma. With the extensive knowledge I've gained in past 8 years, I have been creating content on various subjects such as banking, insurance, telecom, and all the important registration and licensing processes for various companies. I'm here to help everyone with my expertise in these areas through my articles.