Mandatory e-Invoice Implementation: Effective August 1, 2023, for Businesses Exceeding the 5 Cr Turnover Limit

• e-Invoice business applicability from 1st August 2023
• e-Invoice process
• What should you do from 1st August 2023?
• Date of implementing e-invoicing in GST
• Business preparedness for e-invoicing in GST
• Who should issue an e-invoice?
• Next e-Invoicing update: Key expectations

The e-Invoice limit of ₹5 crore has been newly notified via Notification No. 10/2023–Central Tax, effective from August 1, 2023. The electronic invoicing system, introduced under the GST law, is being applied to certain taxpayers in phases.

Notification No. 10/2023, issued on May 10, 2023, amends the earlier Notification No. 13/2020–Central Tax from March 21, 2020. The GST e-invoice requirement now applies to businesses with a turnover exceeding ₹5 crore in any financial year since 2017-18, starting from August 1, 2023.

Electronic invoicing, popularly called as ‘e-invoice’ is a concept in which all B2B invoices are electronically uploaded by the supplier and authenticated by invoice registration portal (IRP) with an IRN and QR code. In turn, the IRN and QR code should be printed on the invoice by the supplier before issuing it to the buyer.

If you are new to the concept and would like to know more, read What is e-Invoice in GST

e-Invoice business applicability from 1st August 2023

In the recent update, it's mandatory for businesses with an annual turnover exceeding ₹5 crores to issue e-Invoices starting August 1, 2023.

e-Invoice process

e-Invoice requires you to generate the invoice data in the prescribed format (JSON), either using the ERP/business management software or offline tool provided by the portal. And, then upload it to the IRP which in turn validates and authenticates the invoice data with IRN and QR code.

The process to generate e-invoice is mentioned below:

• Generate the e-invoice in a prescribed format using the software solutions/business management software or use the offline tool provided by the portal
• Login and upload the e-invoice file to IRP. If the software is integrated with IRP via GSP, the upload of the JSON file will be automated, meaning system sends the required details directly to the IRP portal
• The IRP portal validates the key invoice elements and upon successful validation, the invoice data is authenticated with IRN number and QR code
• Next, you can download or receive the e-invoice file along with the IRN for the invoices that has been uploaded by you., Using the details received, update your invoice with IRN number and QR code. In case of an integrated environment of ERP and IRP via GSP, the software will automatically fetch and print such details.

Read How to Generate e-Invoice in GST? to know more about e-invoice generation.

Watch How to Generate e-invoices Using e invoice Software

What should you do from 1st August 2023?

Starting from August 1, 2023, if your business exceeds the e-invoice limit of ₹5 crores, following the latest e-invoice notification, it's mandatory to electronically upload all B2B and B2G invoices. Ensure generating e-invoices in the prescribed format and uploading them to the IRP portal. The IRP portal will authenticate invoice data and provide a file with IRN and digitally-signed QR code.

Watch - e-Invoicing in TallyPrime

e-Invoicing mandates that an invoice remains valid only if it has IRN and QR code that is authenticated by the IRP (Invoice Registration Portal). Invoicing is a key process in every business, it’s a necessity to have business management software that will help you seamlessly generate e-invoices without impacting the way you use to operate your business.

Businesses using ERP/ business management software that seamlessly connects to the IRP system via GSP, and automatically prints the QR code and IRN on the invoice, will find it easy to manage e-invoice requirements without many changes to the business process. Read How to Transit to e-Invoice System? to know the change in invoicing practice and things for smooth adoption of e-invoice.

Date of implementing e-invoicing in GST

The GST Council has approved the introduction of e-invoicing in a phased manner for reporting of business–to–business (B2B) invoices to the GST System. This is introduced based on turnover criteria as detailed below:

*The date of e-invoicing implementation is updated as per the latest e-invoicing notification

As mentioned in the above table, the e-invoicing system is already in place for larger businesses with a turnover exceeding 500 crores from 1^st October 2020. The mandatory implementation of an e-invoicing system for all businesses with a turnover exceeding 50 crores was from 1^st April 2021. 

Later, businesses with a turnover exceeding 20 crore were mandated to generate e-invoices from 1st April 2022, followed by mandating the e-invoice generation for businesses with a turnover exceeding 10 crores from 1st October 2022. In the recent update, e-invoicing will be applicable for businesses with a turnover exceeding 5crores from 1st August 2023.

The Government had considered only the largest businesses to start with the e-invoice system, and gradually, in a phased manner, more businesses are brought into the scope by reducing the turnover limit. 

Business preparedness for e-invoicing in GST

The e-invoicing functioning depends on how well the accounting software or ERP system interacts with the IRP system. This is because an invoice is valid only if it contains an IRN and QR code which is authenticated by the IRP system.

As a business, for you to sail smoothly, the accounting software you use should have a built-in capability to generate e-invoice data in the prescribed format and more importantly, seamlessly interacts with the IRP portal to complete the e-invoice process without the manual intervention. 

With e-invoicing being introduced, the first step towards preparedness is to understand the e-invoice fundamentals and get used to the system. Secondly, need to consider accounting software which will not only generate the e-invoice data but also has an online capability to interact with the IRP system to generate e-invoice.

Who should issue an e-invoice?

Businesses who are required to issue an e-invoice depend upon the aggregate annual turnover. So, if your business is registered under GST, then you should check the following table to ascertain the requirement of issuing e-invoices.

Next e-Invoicing update: Key expectations

The proposed reduction of the e-invoice limit to ₹1.5 Crores or ₹1 Crore, to be announced this year, will bring more small and medium-sized enterprises (SMEs) into the e-invoicing system. This move simplifies compliance, reduces manual errors, and facilitates quicker and more accurate GST return filings. Additionally, it will promote a more inclusive digital ecosystem for smaller businesses.

The government's goal to include all businesses underscores its commitment to reducing revenue leakages and improving tax compliance. This initiative will enhance the audit trail, making it easier for tax authorities to track transactions and minimize tax evasion.

Businesses can expect improved efficiency and better integration with the digital tax infrastructure, supporting a fairer business environment.

FAQs:

1. What is the current limit for e-invoicing?

The current e-invoicing threshold stands at Rs. 10 crore. However, from August 1, 2023, it will decrease to Rs. 5 crore. This entails that taxpayers with an annual turnover exceeding Rs. 5 crore but less than Rs. 10 crore will also need to generate IRN for their B2B invoices.

2. Is an e-Invoice mandatory for 5 Crore?

e-invoicing will be compulsory for businesses with a turnover of 5 crores or more starting August 1, 2023.

3. Who is eligible for an e-invoice in 2023?

Businesses with turnovers ranging from Rs. 5 crore to Rs. 10 crore are eligible for e-invoicing.

4. Who needs an e-Invoice?

Most businesses mandated by CBIC notifications, with exceptions, require e-invoicing. Presently, the turnover threshold for e-invoicing is Rs. 10 crore and above. However, effective August 1, 2023, it will apply to businesses with turnovers exceeding Rs. 5 crore but less than Rs. 10 crore.

5. Will the e-invoice limit decrease further to 1 crore?

Although there was a proposal to incorporate all businesses with turnovers exceeding 1 crore into the new framework to enhance compliance and address leakages, the Government of India has not yet specified any timeline or dates.

Know more about e-invoices in GST

e-invoicing from 1st October 2022 - CBIC Update 2022

Watch Video on E-Invoicing in TallyPrime