E-invoicing under GST, also known as electronic invoicing, is a digital system that simplifies the invoicing process for businesses operating within India’s Goods and Services Tax (GST) framework. This system requires that all business-to-business (B2B) invoices be created in a standardized electronic format and verified by the GST Network (GSTN) before submission to the government.
Beginning in January 2025, notable amendments to the Goods and Services Tax (GST) e-invoicing regulations will be implemented in India. These changes are designed to improve compliance, optimize processes, and increase transparency within the digital tax framework. Here are the key updates that businesses should pay attention to:
Mandatory E-Invoicing Requirements
- Current Requirement: Since August 1, 2023, e-invoicing has been mandatory for businesses with an Annual Aggregate Turnover (AATO) exceeding ₹5 crore.
- Upcoming Change: Starting April 1, 2025, the e-invoicing threshold will be adjusted, mandating that businesses with an Annual Aggregate Turnover (AATO) of ₹10 crore or more must upload e-invoices to the Invoice Registration Portal (IRP) within 30 days of their issuance. This marks a significant change from the previous requirement, which applied only to businesses with an AATO of ₹100 crore or higher.
- Consequences of Non-Compliance: If invoices are not submitted within the designated 30-day period, they will automatically be rejected by the IRP, underscoring the importance of prompt submission. This failure to comply may result in the forfeiture of input tax credit (ITC) on those invoices, potentially affecting cash flow and financial planning for businesses in a significant way.
Multi-Factor Authentication (MFA) Requirements for GST
Beginning in 2025, Multi-Factor Authentication (MFA) will become a vital requirement for all businesses operating under India’s Goods and Services Tax (GST) framework. This initiative is designed to bolster security and safeguard sensitive financial information from unauthorized access.
Currently, Multi-Factor Authentication (MFA) is mandatory for businesses with an Annual Aggregate Turnover (AATO) exceeding ₹100 crore, while it is optional for those with an AATO above ₹20 crore. This gradual implementation of MFA is intended to enhance the security framework throughout all tiers of GST compliance.
The Significance of Multi-Factor Authentication (MFA)
- Improved Security
- Fraud Mitigation
- Safeguarding Sensitive Information
- Establishing Trust
E-Way Bill Generation Restrictions
Beginning January 1, 2025, substantial limitations will be implemented on the generation of E-Way Bills (EWBs) within the Goods and Services Tax (GST) framework in India.
E-Way Bills can only be created for documents that are dated within 180 days of the generation date.
The maximum duration for extending an E-Way Bill will be limited to 360 days from the date it was originally generated.
These regulations are intended to promote the timely movement of goods and to prevent fraudulent activities like backdating invoices. Companies will need to adjust their logistics and invoicing practices to align with these new standards.
Mandatory Transactions for E-Invoicing
- Business-to-Business (B2B) Transactions: All sales conducted between registered businesses must be recorded using e-invoices.
- Business-to-Government Sales: Supplies of goods or services to government entities must include e-invoices.
- Export Transactions: Goods or services exported from India are required to have accompanying e-invoices.
- Deemed Exports: Supplies qualifying as deemed exports also fall under the e-invoicing requirement.
- Supplies to Special Economic Zones (SEZ): Any transactions supplying goods or services to SEZ units or developers must utilize e-invoices.
- Inter-State Stock Transfers: The transfer of goods between different states requires the generation of e-invoices.
- Services to Distinct Persons: E-invoicing is mandatory for services provided to distinct entities, such as various branches or divisions of the same organization.
- Transactions with SEZ Developers: Transactions involving developers in SEZs, akin to those to SEZ units, also require e-invoicing.
Starting April 1, 2025, businesses with an Annual Aggregate Turnover (AATO) greater than ₹10 crore will need to submit their e-invoices to the Invoice Registration Portal (IRP) within 30 days of issuance. This marks a notable shift intended to enhance compliance among a wider range of businesses compared to earlier thresholds.
GST E-Invoice: Mandatory To Be Uploaded Within 30 Days w.e.f. April 2025 – Click Here
FAQs
▪ Penalty for Non-Issuance of E-invoice: Businesses that do not generate an e-invoice when mandated may incur a penalty amounting to 100% of the tax due or ₹10,000, whichever is greater, for each occurrence of non-compliance. Consequently, if the tax amount is below ₹10,000, the penalty will still be set at ₹10,000.
▪ Penalty for Incorrect E-Invoice: If an e-invoice is issued with errors or inaccuracies, a penalty of ₹25,000 may be levied for each erroneous invoice. This encompasses problems such as the absence of the Invoice Reference Number (IRN) or the omission of the required QR code.
According to Section 129 of the CGST Act, authorities have the power to detain goods that are being transported without a valid e-invoice or Invoice Reference Number (IRN). This may lead to extra penalties and complications in the logistics process.
▪ Streamlined Invoicing Process
▪ Cost Savings
▪ Improved Cash Flow
▪ Enhanced Accuracy and Reduced Errors
▪ Better Compliance and Audit Readiness
▪ Enhanced Visibility and Control
▪ Strengthened Business Relationships
▪ Familiarize yourself with the latest e-invoicing regulations and requirements.
▪ Assess the current accounting and invoicing systems for compliance.
▪ Invest in e-invoicing software or enhance existing systems.
▪ Automate the invoicing process to ensure timely submissions.
▪ Provide training for employees on e-invoicing procedures and the use of software.
▪ Review and modify strategies for managing input tax credits (ITCs).
▪ Maintain precise and well-organized documentation for all transactions.
▪ Set internal deadlines for processing invoices to prevent last-minute complications.
▪ Regularly monitor compliance and stay informed about regulatory updates.
▪ Develop a contingency plan to address any potential technical issues.