What SMBs over Rs 20 cr revenue must know about GST e-Invoicing

What SMBs over Rs 20 cr revenue must know about GST e-Invoicing-01
The Ministry of Finance has recently mandated GST e-Invoicing with effect from 1st April 2022 for the taxable persons having annual turnover in excess of 20 crores in any FY from 2017-18 and onwards. Such a regulatory change has evolved compliance requirements for small businesses encouraging them to embrace technology in issuing invoices. The exemption for the units operating in Special Economic Zones (excluding SEZ developers) and financial institutions, such as insurance, banking, and non-banking financial companies, and goods and passenger transportation services shall continue. The officials in the ministry expect that the mandatory e-Invoicing for companies with annual turnover above 20 crores will increase the GST registrations by 75%, or add about 1,80,000 GSTINs, up from the existing 2,40,000, to around 4,20,000. The effects of the gradual reduction of the e-Invoicing threshold from 500 crores in October 2020 to 50 crores from 1st April 2021 have been evident in the sustained improved GST collections during this period. As per the latest statistics, around one lakh suppliers have implemented e-Invoicing. 36,910 taxpayers with a turnover of over 500 crore and 52,595 taxpayers in the 100-500 crore bracket are successfully generating e-Invoices under GST. The lower threshold of e-Invoicing, coupled with the stringent provisions relating to the claim of input tax credits, will further help in plugging the revenue leakages. But, before that, there are a few important concepts that small and medium businesses must know about the e-Invoicing mandate to ensure compliance. This will also restrict them from jeopardizing the right of their customers or clients to claim input tax credits of the tax charged by them.

Scope of the notification

The present notification covers only B2B and export transactions (but not B2C transactions or purchases under reverse charge). The requirements are briefly summarized below:

  1. Documents against which IRN must be generated:
    • Invoices
    • Debit notes
    • Credit notes
  2. Supplies for which IRN will be required:
    • Domestic supplies to registered person (B2B)
    • Exports with payment of tax or under LUT
    • Supplies to SEZ with payment of tax or under LUT
  3. Transactions or supplies for which IRN will not be required:
    • Invoices issued by ISD
    • Supplies to unregistered persons (B2C)
    • Supplies under Bill of Supply i.e. exempt or nil-rated supplies
    • Commercial credit or debit notes
    • Self-invoices for procurements under reverse charge

Auto-population of GST returns

The details of e-Invoices generated will be auto-populated in the GST returns, resulting in the auto-population of the returns to the extent of B2B and export transactions. Although the system would allow rectification or deletion of the auto-populated details during filing the returns, any significant discrepancy between the liabilities as per e-Invoices generated and the returns may invite further scrutiny.

Tracking of movement of goods

e-Invoicing and generation of e-Way Bills on the basis of IRN will help in tracking the goods from their origin to destination. Thus, every such movement of goods would have to be backed by a valid e-Invoice. The absence of GST e-Invoicing may lead to confiscating goods in transit, penalties, and prosecution on the charges of attempt to evade the taxes.

What are valid e-Invoices?

If the taxpayer is required to generate an e-Invoice but has not generated it, such document shall not be considered as a valid invoice. Thus, recipients of such invoices would not be able to claim the input tax credit of the tax paid by them, resulting in the additional cost for the buyers.

Non-compliance & penalties

Continued defaults or non-compliances, such as missing e-Invoices wherever required, may put the small businesses at the risk of being blacklisted due to penal consequences attached to it for their recipients, such as blocking of the input tax credits, reversal of credits along with interest when utilized.

While small and medium businesses constitute the key pillar of the Indian economy, e-Invoicing will definitely pull these businesses towards digitalization.

If you are one such business looking forward to comply with the government mandate and start an e-Invoicing journey before 1st April, Cygnet Tax Tech can surely help you. Contact us today: hello@cygnetgsp.in and leverage the extensive suite of e-Invoicing solutions that are affordable and easy to use. Automate the e-Invoicing process and start generating valid e-Invoices within 24 hours.

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