The government has made it mandatory for small firms with annual turnover of ₹5 crore or more to issue e-invoices for business-to-business supplies from August 1, 2023 to check Goods and Services Tax (GST) evasion, reduce disputes over input-tax credit and make compliance easy, an official said. Currently, this threshold is ₹10 crore.
Enthused by the highest ever monthly GST collection at ₹1.87 lakh crore in April this year, the tax authorities are taking measures to check revenue leakages and reduce compliance burden further through the digital technology.
“Stricter compliance through data analytics is a must in order to maintain over ₹1.75 lakh crore monthly GST revenue in the current financial year,” the official said requesting anonymity.
Also Read: Businesses with over Rs. 100 Cr turnover must upload e-invoice on IRP within 7 Days
The progressive reduction in the e-invoicing threshold has been one of the contributory factors in the increasing GST collections, said MS Mani, partner at Deloitte India.
After the release of GST revenue data on May 1, this is the second major compliance-related order issued by the government.
Last week, the GST authority announced a two-month special drive starting from May 16 against unscrupulous elements – individuals, professionals and firms – usurping input tax credit (ITC) though fake identifications and forged documents without actually supplying products.
E-invoice is a full-proof mechanism to check actual valuation of goods and services supplied by firms. Manual invoices are subject to manipulations and often used by unscrupulous elements to take ITC without supplying products, he said.
Experts called it a boon for honest business entities for hassle free release of ITC on the basis of e-invoices.
“However, the industry needs to review their vendor masters and ensure that any vendor supplying goods or services and crossing the threshold turnover of ₹5 crore is necessarily issuing a e-invoice from August 2023 to avoid any dispute with respect to availment of input tax credit,” said Saurabh Agarwal, tax partner at consultancy firm EY.
Mahesh Jaising, partner & leader – Indirect Tax at Deloitte India said this is a move of the government to expand technology usage. “As the Finance Minister had stated, automated GST return scrutiny should be implemented along with an action plan to increase the taxpayer base through enhanced usage of technology,” he said.
With reducing threshold and bringing more and more taxpayers in the fold of e-invoicing is a step in the right direction in order to bring in transparency and gathering data for comparison with the returns filed by taxpayers, he said.
With this announcement, the scope of micro, small and medium enterprises (MSMEs) under e-invoicing will be expanded, he said. “For companies, e-invoicing is a boon rather than a bane as suppliers who are e-invoicing compliant result in proper flow of input tax credit and reduce the churn around credit issues,” he added.
The agility of the government systems and awareness sessions that have been done to educate businesses indicate that this compliance would be met and it “should not be an onerous one”, he said.
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