Mandatory E-Invoicing Threshold Lowered to ₹5 Crore: What Businesses Need to Know

📌 Introduction

The Indian government has progressively lowered the threshold for mandatory e-invoicing under the Goods and Services Tax (GST) regime. Effective from August 1, 2023, businesses with an annual aggregate turnover exceeding ₹5 crore are required to generate e-invoices for B2B transactions. This move aims to enhance tax compliance and reduce tax evasion.ClearTax+1Fonoa+1

🧾 What is E-Invoicing?

E-invoicing, or electronic invoicing, involves the submission of invoices to the Invoice Registration Portal (IRP) for validation. Once validated, the IRP assigns a unique Invoice Reference Number (IRN) and a QR code to the invoice. This process ensures real-time reporting of transactions to the GST system, facilitating seamless input tax credit (ITC) claims and reducing the chances of invoice manipulation.ClearTax+3vatcalc.com+3Entrepreneur+3PwC Tax SummariesIndia Briefing

📉 Evolution of E-Invoicing Thresholds

Since its inception, the e-invoicing mandate has been implemented in phases:support.pagero.com+1Entrepreneur+1

• October 1, 2020: Businesses with turnover exceeding ₹500 crore.
• January 1, 2021: Threshold reduced to ₹100 crore.
• April 1, 2021: Further reduced to ₹50 crore.
• April 1, 2022: Threshold set at ₹20 crore.
• October 1, 2022: Lowered to ₹10 crore.
• August 1, 2023: Current threshold at ₹5 crore.Tax News+6SEEBURGER Blog+6Fonoa+6ClearTax+8vatcalc.com+8Fonoa+8

This gradual reduction signifies the government’s intent to bring more businesses under the e-invoicing umbrella, promoting transparency and efficiency.

🏢 Who is Affected?

Any GST-registered business with an annual aggregate turnover exceeding ₹5 crore in any financial year from 2017-18 onwards is mandated to generate e-invoices for B2B transactions, including exports. This applies to:India Briefing+6Fonoa+6ClearTax+6

• Manufacturers
• Wholesalers
• Retailers
• Service providersIndia BriefingBluedot Corporation

It’s crucial for these businesses to integrate their billing systems with the IRP to ensure compliance.Entrepreneur+2vatcalc.com+2support.pagero.com+2

❌ Exemptions

Certain entities are exempt from the e-invoicing mandate, regardless of their turnover:India Briefing

• Special Economic Zone (SEZ) units
• Insurance companies
• Banks and financial institutions
• Goods Transport Agencies (GTA)
• Passenger transportation services
• Multiplex cinema operatorsIndia Briefing+1PwC Tax Summaries+1Bluedot CorporationGlobal VAT Compliance+6PwC Tax Summaries+6Bluedot Corporation+6

These exemptions are detailed in CBIC Notification No. 13/2020 – Central Tax.support.pagero.com+2India Briefing+2SEEBURGER Blog+2

🛠️ Steps to Implement E-Invoicing

1. Assess Turnover: Confirm if your annual turnover exceeds ₹5 crore.
2. Register on the IRP: Access the Invoice Registration Portal and complete the registration process.
3. Integrate Systems: Ensure your accounting or billing software is compatible with the IRP’s API for seamless invoice submission.
4. Generate E-Invoices: Create invoices in the prescribed format and submit them to the IRP for validation.
5. Maintain Records: Store the IRN and QR code for each invoice for future reference and compliance.Entrepreneur+8ClearTax+8Global VAT Compliance+8ClearTax+3Entrepreneur+3vatcalc.com+3Entrepreneur+3vatcalc.com+3support.pagero.com+3PwC Tax Summaries+1vatcalc.com+1

⚠️ Penalties for Non-Compliance

Failure to generate e-invoices as mandated can lead to:support.pagero.com+2Fonoa+2Entrepreneur+2

• Invalid Tax Invoices: Invoices not registered on the IRP are considered invalid under GST law.
• Penalties: A penalty of ₹10,000 per invoice or 100% of the tax due, whichever is higher, may be imposed.
• Input Tax Credit Issues: Recipients may be denied ITC if the supplier fails to issue a valid e-invoice.

📈 Benefits of E-Invoicing

• Enhanced Compliance: Real-time reporting reduces errors and discrepancies.
• Faster ITC Claims: Immediate availability of invoice data facilitates quicker ITC processing.
• Reduced Tax Evasion: Standardized invoicing minimizes fraudulent practices.
• Operational Efficiency: Automation streamlines the invoicing process, saving time and resources.

official GST portal (https://einvoice1.gst.gov.in)

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