Government Lowers E-Invoicing Threshold to Rs 5 Crore for Increased Compliance
- ByStartupStory | August 1, 2023
Starting August 1, 2023, businesses with an aggregate turnover of Rs 5 crore or more will be mandated to implement e-invoicing as per the Goods and Services Tax (GST) regulations, according to the Central Board of Indirect Taxes and Customs. This move aims to boost GST collections and improve compliance while curbing fraudulent input tax credit claims. Under the e-invoicing system, businesses must upload all B2B and export invoices to the Invoice Registration Portal (IRP), which then issues a unique Invoice Reference Number. This helps in reducing errors and duplication while facilitating better invoice matching between buyers and sellers.
Previously, the mandatory e-invoicing threshold was set at Rs 10 crore, but it has been gradually lowered to include more businesses into the system. This decision is particularly important in preventing misuse of input tax credits, especially among exporters. The history of e-invoicing in the GST system goes back to June 2019 when the GST Council recommended its introduction on a voluntary basis for B2B transactions. The pandemic caused delays, and the provisions became applicable from January 1, 2021, for taxpayers with an annual aggregate turnover above Rs 100 crore.
The e-invoicing system allows taxpayers to generate GST invoices on their own systems, which are then reported to the IRP. The IRP generates a unique IRN and digitally signs the invoice, along with a QR code for offline verification. While e-invoicing offers benefits like real-time validation and matching, it may entail initial setup costs for small businesses and raise concerns about cyber threats due to sensitive financial data transmission.
Despite challenges, the streamlined process and enhanced compliance make e-invoicing a progressive step towards modernizing the tax collection system and broadening the GST base.
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