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In an effort to further plug income leaks and ensure improved tax compliance from firms, the centre via notification number 17/2022 has made electronic invoicing essential for companies with annual revenues exceeding Rs 10 crore as of October 1.
E-invoice is an invoice that is completely generated, transmitted and processed digitally with little to no manual processing. Currently, enterprises with a yearly turnover of more than Rs 20 crore, an electronic invoicing requirement is there.
The e-Invoice System is for GST registered person for uploading all the 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.
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E-invoicing was first mandated for businesses with a 500 crore rupee annual revenue, but this was then lowered to 100 crores, then to 20 crores, and finally to 10 crores. According to the sources, e-invoicing would be required for companies with Rs 5 crore in annual revenue by the next year.
Impact of reduction in e-Invoicing limit
According to experts, this decision would also enable the tax authorities to more accurately analyse patterns in the use and abuse of input tax credits across industries and close revenue gaps.
The Finance Ministry has announced reducing the threshold as per the GST Council’s recommendation. With electronic invoicing, an invoice must follow a standardised structure that a computer can understand. The Goods & Services Tax Network (GSTN) uses this method to electronically validate B2B invoices before they can be used on the common GST site.
GST e-invoicing system has crossed milestone in last 22 months by enabling generation of 200 crores of e-invoices by 3.05 lac tax payers on NIC portal. In the month of July 2022, a total of 13.21 Crore invoices were generated.
Every invoice submitted using the electronic invoicing system will receive an identification number from the GSTN-managed invoice registration site (IRP). Businesses must use electronic invoicing; otherwise, their invoices will not be accepted. The recipient is not permitted to claim input tax credit (ITC) on the item in question in this case, and further fines may apply.
Why government is continuously lowering the threshold of E-Invoice
Officials claimed that since the tax authorities will have real-time access to data, the e-invoice system will serve to curtail the acts of dishonest taxpayers and lessen incidences of fraud. The goal of tax departments adopting the e-invoice system is to get the capacity to pre-populate the return and to minimise reconciling issues.
According to tax experts, reducing the threshold will assist prevent tax avoidance.
Copy of Notification is given below:
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