The Goods and Services Tax (GST) regime in India is set to undergo a significant change starting August 1, as the government makes e-invoicing mandatory for businesses with an aggregate turnover of Rs 5 crore or more. This move comes as part of the government’s efforts to boost tax collections and improve compliance under the GST, which has been a key focus area for the tax authorities.
Previously, the threshold for e-invoicing was set at Rs 10 crore. However, with the lowering of the threshold to Rs 5 crore, mid-sized and expanding small businesses will now be brought under the ambit of e-invoicing regulations. Over the years, the threshold for e-invoicing has been gradually reduced as part of the government’s strategy to increase the number of businesses adopting the system.
The Central Board of Indirect Taxes and Customs (CBIC) announced the new requirement in a tweet, stating that GST taxpayers with an aggregate turnover exceeding Rs 5 crore in any financial year must generate e-invoices for the supply of goods or services, as well as for exports, starting from August 1.
E-invoicing is a process wherein businesses registered under GST are required to upload all business-to-business (B2B) and export invoices to the Invoice Registration Portal (IRP). The IRP then provides a unique Invoice Reference Number (IRN) to the business, which is subsequently transferred to the GST portal. This system helps in matching invoices between buyers and sellers, minimizing duplication and errors in the process.
The implementation of e-invoicing is aimed at curbing tax evasion and facilitating real-time invoice matching between clients and vendors. By introducing transparency and enhancing compliance through a modernized tax collection system, the government aims to broaden the GST base and ensure smoother tax administration.
Experts in the industry have welcomed the move, acknowledging its potential to combat tax evasion effectively. Srivatsan Sridhar, Founder and CEO of Skydo, emphasized that e-invoicing will contribute to a broader GST base by ensuring transparency and improving compliance among businesses.
E-invoicing was initially made mandatory for businesses with an annual turnover of Rs 500 crore from October 1, 2020. With the threshold now lowered to Rs 5 crore, a larger number of businesses will come under the purview of e-invoicing, leading to more efficient tax administration and improved tax collection for the government.
