GST e-invoicing threshold to be lowered to Rs 5 crore

The finance ministry has decided to lower the threshold for mandatory e-invoicing under the goods and services tax (GST) to Rs 5 crore from the Rs 10 crore at present, effective August 1, a move that will help improve the tax collections further.

According to a notification by the Central Board of Indirect Taxes and Customs, firms with an annual turnover of Rs 5 crore will have to generate e-invoices for business transactions. Under the e-invoice system, GST registered persons have to upload all B2B and export invoices to the Invoice Registration Portal (IRP). The IRP generates and returns a unique Invoice Reference Number, digitally signed e-invoice and QR code to the user. This is then transferred to the GST portal.

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Over the years, the government has been reducing the threshold and bringing more and more taxpayers in the fold of e-invoicing in order to bring in transparency and gathering data for comparison with the returns filed by taxpayers.

Initially from October 1, 2020, e-invoicing was mandatory for businesses with an annual turnover of Rs 500 crore. This was then lowered to Rs 100 crore from January 1, 2021 and further brought down to Rs 50 crore from April 1, 2021. Effective April 1, 2022 the threshold was further reduced to Rs 20 crore and then to Rs 10 crore from October 1 last year.

Experts noted that businesses should get their systems in place over the next few months. MS Mani, Partner, Deloitte India, said, “The progressive reduction in the e-invoicing threshold has been one of the contributory factors in the increasing GST collections, however impacted businesses would need to modify their supply and distribution activities to ensure compliances from August 1.”

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Vivek Jalan, Partner, Tax Connect Advisory, noted that e-invoice is another way to curb the menace of fake invoices and the government is making it further stringent by reducing the threshold limit for generating e-invoices.

“It is pertinent to note that even the B2B customers of these new taxpayers to whom e-invoice would now be applicable would be affected,” he said. In case they accept the invoices without e-invoice compliance from such suppliers then their input tax credit would be denied resulting in GST loss for them to the extent of 18% generally, which could severely impact their bottomline.