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Alerts:

Indirect Tax Alert: E-invoicing applicability on taxpayers having turnover exceeding 1Bn

11 November 2020

After the successful implementation of Phase 1 of E-invoicing (applicable to taxpayers with turnover > INR 5 Bn), the Government’s resolve to onboard other taxpayers to implement e-invoicing appears to be undeterred. The Government is resolute in making e-invoicing operational/ mandatory for companies with turnover between INR 1 Bn – INR 5 Bn from 01 January 2021.

The Government had in December 2019 prescribed that the GST Taxpayers having aggregate annual turnover more than INR 1 Bn in any preceding Financial Year will be required to issue e-invoices for all Business to Business (B2B) supplies, in the manner prescribed under rule 48(4) of the CGST Rules, 2017 w.e.f. 1 April 2020. Further, it was also mandated under rule 48(5) of the CGST Rules, 2017 that a B2B invoice or an export invoice issued by such a taxpayer, in any other manner, shall not be treated as an invoice. In March 2020, the date of implementation of e-invoice was extended to 1 October 2020. Keeping in view the hardships faced by the taxpayers due to the lockdown on account of COVID-19, in July 2020, it was further prescribed that the taxpayers having aggregate turnover exceeding INR 5 Bn only would be required to issue e-invoice w.e.f. 1 October  2020.

In the initial phase of implementation, to ease the compliance burden, it has been decided that the invoices issued by such taxpayers during October 2020 without following the manner prescribed under rule 48(4), shall be deemed to be valid and the penalty leviable under section 122 of the CGST Act, 2017, for such non-adherence to provisions, shall stand waived if the Invoice Reference Number (IRN) for such invoices is obtained from the Invoice Reference Portal (IRP) within 30 days of date of invoice. It was also clarified that no such relaxation would be available for the invoices issued from 1 November 2020 and such invoices issued in violation of rule 48(4) of the  CGST Rules 2017 would not be valid and all the applicable provisions of CGST Act and Rules would apply for the said violation.

However, a banking company, non-banking financial company, other financial institutions, Goods Transport Agency (GTA), provider of passenger transportation services, multiplexes and Special Economic Zone (SEZ) units are exempted from the e-invoice compliance requirements.

BDO Comments:

Businesses should ensure that appropriate modifications are made to the ERP systems to be in synchronisation with the e-invoice schema and requisite validations/ tests/ training to be undertaken to bridge the gap including realigning of invoicing process from data entry to printing, to go live on the roll-out. For taxpayers, automating the indirect tax ecosystem through seamless interoperability between different systems it is likely to bring in a major change to current core business processes. The mandatory introduction of e-Invoicing would require taxpayers to reassess their readiness to comply with this new requirement.

[Notification no:88/2020-Central Tax dated 11 November 2020]