E-invoicing Under GST: Implementation and Threshold Impact

E-invoicing Under GST: Implementation and Threshold Impact
Rohit6 December 2023

Since the government introduced Goods and Services Tax (GST), all companies above a certain annual revenue threshold must apply for and obtain a unique GSTIN number. It is well known that GST has simplified transactions and taxation for businesses, especially those operating across multiple states. One of the primary reasons for this simplification is the concept of e-invoicing. 

In simple terms, e-invoicing refers to transmitting your invoice data to the GST portal to record the transaction instantly in the GST system. Previously, transactions were recorded when the business filed its tax returns. This system ensures that data is transmitted to the GST department when you invoice customers. 

Over the years, this threshold for mandatory e-invoicing has been consistently brought down from initially covering only companies above Rs. 500 crores of annual turnover to Rs. 10 crores. The government is further planning to reduce it to a threshold of Rs. 5 crores.

If your business is likely to cross this threshold this financial year, let's dive into the details of e-invoicing and prepare your organisation to get into the e-invoicing regime.

What is e-Invoicing Under GST, and Who Needs to Generate It?

E-invoicing refers to the electronic invoicing system mandated by the GST law for certain notified GST-registered businesses, where B2B invoices and a few other documents must be authenticated electronically by GSTN.

It's a system where B2B invoices and other relevant documents are attested electronically by GSTN (Goods and Services Tax Network) for further use on the common GST portal. Initially implemented for specific categories of persons, mostly large enterprises, e-invoicing has now been expanded to cover mid-sized and small businesses as well.

With e-Invoicing, you don't need to generate invoices on the GST portal. Instead, you submit an already generated standard invoice on a common e-invoice portal. This automates multi-purpose reporting with a one-time input of invoice details.

Under the electronic invoicing system, the government issues an identification number (IRN) against every invoice by the Invoice Registration Portal (IRP) managed by the GSTN. All invoice information gets transferred from this portal to the GST portal and the e-way bill portal in real-time. 

Therefore, it eliminates the need for manual data entry while filing GSTR-1 returns and generating part A of the e-way bills. You paste the IRN on the invoice and issue it to your customers.

Update: Government notification from 10 May 2023 

The Central Board of Indirect Taxes and Customs (CBIC) has recently announced a significant update to the e-invoicing regulations through Notification No.10/2023 - Central tax. They reduced the threshold to INR 5 crores with effect from 1st August 2023. 

Those who understand e-invoicing will know that if your business had an aggregate turnover of Rs. 5 crores or more in the previous year, you’re now supposed to issue an e-invoice.

Let’s understand these new rules and the implications of e-invoice applicability regulation. We will delve into the changes, examine the reasons behind the government's implementation of e-invoicing, and explore the benefits and challenges you may encounter. Additionally, we will provide a recommended Standard Operating Procedure (SOP) to help you navigate the compliance process effectively.

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