Government Reduces E-Invoicing Threshold to Rs 5 Cr Under GST

The centre today announced that businesses with an annual turnover of over Rs 5 crore will be required to adopt e-invoicing for business-to-business transactions under the Goods and Services Tax (GST) starting from August 1, 2023. Earlier the threshold for e-invoicing was Rs 10 crore for the businesses. This move aims to enhance compliance and address gaps in revenue collection.

Govt Aims Towards Enhanced Tax Compliance and Revenue Collection?

The Union government has amended the Central Goods and Services Tax Rules, 2017, to lower the threshold for e-invoicing from Rs 10 crore to Rs 5 crore. As a result, smaller businesses and startups will be obligated to conduct their transactions using e-invoices from August 1, 2023.

In exercise of the powers of the Central Goods and Services Tax Rules, 2017, the government, on the recommendations of the Council, made the amendment in the notification.

"In the said notification, with effect from the 1st day of August, 2023, for ten crore rupees, five crore rupees shall be substituted," it said.

Sharing his opinion with TICE News, Mr. Viveck Karwanyoon, Managing Partner at The Perfect 1 One Partners, expresses, "It is beneficial for taxpayers as it reduces the time required for GST return preparation for both the recipients and issuers of invoices."

Regarding the E-Invoicing server, he mentions, "The server is functioning effectively. However, some taxpayers may encounter difficulties if their accounting software is not set up to integrate invoicing information from the GST E-server. But if the application is linked, it simplifies the process."

Previous E-Invoicing Thresholds: From Rs 500 Crore to Rs 10 Crore

The GST law previously made e-invoicing mandatory for companies with a turnover exceeding Rs 500 crore from October 1, 2020. The threshold was later reduced to Rs 100 crore from January 1, 2021, and then to Rs 50 crore from April 1, 2021. As of April 1, 2022, businesses with a turnover of over Rs 20 crore were required to generate B2B e-invoices, and from October 1, 2022, the threshold was further lowered to Rs 10 crore.

Impact of Reduced Threshold Limit On Startups and Small Businesses

TICE News spoke to a Tax Expert to know more about the reduced threshold limit and how will this impact the small businesses and startups.

According to a Tax Expert, “The objective of reducing the threshold is to bring more taxpayers within the tax system and enhance monitoring capabilities. While this measure primarily applies to the movement of physical goods as well as on services.”

The Expert says that the implementation of e-invoicing may pose some initial challenges and compliance burdens for startups and small businesses. They will need to utilize the government's e-invoice website, which offers advantages such as ensuring timely filing of GST returns and simplifying the process of claiming input credits. By eliminating the need to reconcile invoices manually, e-invoicing can save time, reduce costs, and minimize errors in the long run.

Although the transition phase might require some adjustment, the move toward e-invoicing aligns with the government's goal of streamlining tax procedures, promoting transparency, and fostering a more efficient business environment. By mandating e-invoicing for a broader range of businesses, the government aims to enhance tax compliance and revenue collection, adds the Expert.