GST E-invoicing: A new era of efficiency and accountability in Indian taxation
May 19, 2023
The e-invoicing system has been mandatory for any businesses that report an annual turnover of over Rs 5 crores with effect from 01.08.2023.
Goods and Services Tax (GST) e-invoicing is a system implemented in India for generating and reporting invoices in a standardized electronic format. It was introduced to simplify the invoicing process and reduce errors while facilitating seamless data exchange between businesses and the Government. Under this system, businesses must generate invoices on their accounting or billing software and upload them to the GSTN portal, validating the information and issuing an Invoice Reference Number (IRN) and a digitally signed QR code.
Initially, the e-invoicing system was made mandatory for businesses with an annual turnover of more than Rs 500 crores. Subsequently, it was extended to businesses with an annual turnover of more than Rs 100 crores, and then to those with an annual turnover of more than Rs 50 crores. The phased implementation was done to ensure a smooth transition to the new system, provide sufficient time to businesses to make necessary changes to their systems and processes and address any issues that arose during the implementation.
The e-invoicing system is now mandatory for all businesses with an annual turnover of more than Rs 50 crores. This threshold was lowered to Rs.20 crore; however, from 1 October 2022, e-invoicing applies to businesses with a turnover of more than Rs.10 crore. The threshold is further lowered to Rs. 5 crore with effect from 01.08.2023.
Despite the implementation of the e-invoicing system, there have been compliance issues. Suppliers are uploading such invoices on the IRP portal on the current date, irrespective of the date of issue of such invoice. Technologically, these E-invoices have been accepted by GSTN until now, covering up for the non-compliance. Rule 48(5) provides that if a specified registered person issues any invoice other than an E-invoice, such invoice shall not be treated as an invoice. The immediate impact of this clause is that no Input Tax Credit would be available to the recipient of such an invoice.
Government imposes time-limit on reporting old invoices on the e-invoice portals
To address these issues and foster timely compliance, the Indian Government has imposed a time limit on reporting old invoices on the e-invoice IRP portals for taxpayers with Aggregate Annual Turnover greater than or equal to 100 crores. Taxpayers in this category will be prohibited from reporting invoices older than 7 days from the date of reporting. This stipulation, however, will only apply to the document-type invoice, and there will be no such time restriction on reporting debit/credit notes. However, in an advisory to taxpayers on May 6, GSTN has deferred the imposition of time limit of 7 days on reporting old E-invoices on the E-invoicing IRP portal for taxpayers with aggregate turnover greater than or equal to 100 crores by three months.
In order to ensure seamless compliance with the new mandate, it is imperative to understand the intricacies of the latest development. For instance, an invoice is dated April 1, 2023 but for some reason, it is not loaded on the IRP portal on the same date. Now, to safeguard the interests of the recipient supplier will report this invoice on the IRP portal later and issue an E-invoice to the recipient complying with all laws. This results in delay in reporting and data aggregation in government systems. Under the new requirement, such invoices cannot be reported after the 7-day window, that is to say, after April 8, 2023(in above case). The intricate validation system embedded within the invoice registration portal will effectively bar users from reporting invoices after the prescribed time limit. Taxpayers must remain cognizant of this time restriction and fulfill their tax obligations promptly, thus promoting operational excellence and cultivating a culture of compliance.
The impact of this development on taxpayers who pay a substantial amount of tax is profound. The new time limit will have a marked influence on the reporting process, necessitating significant changes to their existing systems. Taxpayers will need to ensure that they are adequately prepared to comply with this mandate and align their systems accordingly.
Furthermore, this new requirement may also impact the taxpayer’s Input Tax Credit (ITC) if their supplier cannot generate an e-invoice. Such a situation could lead to the taxpayer being unable to claim ITC, resulting in an augmented tax liability. Therefore, it is incumbent upon taxpayers to ensure that their suppliers are aware of this mandate and equipped to comply with it.
To provide taxpayers ample time to acclimate to this new requirement, the government has earlier proposed implementing it from 01.05.2023 onwards which is now deferred till three months. This will furnish taxpayers with a sufficient grace period to make the necessary changes to their systems, thus ensuring a smooth and seamless transition to the new requirement. The decision to impose a time limit on reporting invoices represents a significant step towards cultivating a more efficient, effective, and streamlined tax collection process. However, taxpayers must be cognizant of the impact of this new requirement.
(Rajat Mohan, Senior Partner, AMRG & Associates. Views expressed are author’s own.)
[The Financial Express]
