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Indirect Tax Alert - E-invoicing applicability on taxpayers having turnover exceeding INR 500mn

09 March 2021

After the successful implementation of Phase 1 of E-invoicing (applicable to taxpayers with turnover above INR 5bn) and phase 2 (for taxpayer with turnover between INR 1bn – INR 5bn) from 01 January 2021, the government’s resolve to onboard other taxpayers with lower turn over into the e-invoice mandate appears undeterred. The government is resolute in making e-invoicing mandatory for companies with turnover between INR 500mn – INR 1bn from 1 April 2021.

The government had in December 2019 prescribed that GST taxpayers having aggregate annual turnover more than INR 1bn in any preceding Financial Year will be required to issue e-invoices for all the 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 COVID-19 lockdown, in July 2020, it was further prescribed that the taxpayers having aggregate turnover of INR 5bn and above only would be required to issue e-invoice w.e.f. 01 October 2020.

In the initial phase of implementation of e-invoicing, 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 01 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.

Nevertheless, banking companies, non-banking finance companies, 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 suitable modifications are made to the ERP systems to synchronise with the e-invoice schema and to carry-out requisite validations/user tests/training to bridge the gaps, including realigning of invoicing process from data entry to printing and ‘go live’ on the roll-out date. For taxpayers intending to automate their indirect tax ecosystem through seamless interoperability between different systems, which in turn reduces manual dependency and cost optimisation, may consider this core business process change as an opportunity. The mandatory introduction of e-Invoicing would require taxpayers to reassess their readiness to comply with this new requirement.

[Notification no:05/2021-Central Tax dated 08 March 2021]