The goods and services tax (GST) e-invoicing will be mandatory for firms with a turnover of over Rs 10 crore from October 1, down from the current threshold of Rs 20 crore to further plug leakages and ensure better compliance.
A notification in this regard was issued by the Central Board of Indirect Taxes and Customs.
E-invoicing for business-to-business (B2B) transactions started with a very high threshold from October 1, 2020, when firms with a turnover of over Rs 500 crore came under its ambit. In the second phase, businesses with a turnover exceeding Rs 100 crore were mandated to issue e-invoices from January 1, 2021. In the third phase, firms with a turnover of over Rs 50 crore had to generate e-invoices from April 1, 2021. It has been extended to firms with a turnover between Rs 20 crore to Rs 50 crore from April 1, 2022.
The e-invoice has resulted in bringing in more taxpayers into the net which rose from about 1.25 crore in October 2020 to about 1.38 crore at present.
These system reforms have played a big role in the recent surge in GST collections from an average of Rs 0.9 trillion in FY18 to Rs 1.23 trillion in FY22 and Rs 1.5 trillion in the first four months of FY23, giving some relief to states as a five-year guaranteed GST compensation for shortfall has ended on June 30.
One of the criticisms of GST after it was rolled out on July 1, 2017 was that the tax authorities have not been able to streamline the return filing process and were not able to do invoice matching between the buyer and supplier because of which there was a fear that there may be revenue leakages and non- compliance was going undetected.
This phased move to bring more taxpayers under e-invoicing may deter the generation of fake invoices, thereby leading to better tax compliance and collections.