CBIC (Central Board of Indirect Taxes and Customs) recently made an important change to e-invoicing regulations by lowering the threshold threshold to generate invoices to Rs 5 Crores effective 1 August 2023. If your business’s annual turnover reaches this amount or greater than this threshold value, electronic invoices must be generated for all B2B transactions from that point forward.
Definition and Significance of e-Invoicing
“e-Invoicing”, also known as “electronic invoicing,” is a system wherein B2B invoices and a few other documents are electronically verified by GSTN.
Benefits of e-Invoicing for Businesses
- Data from B2B invoices is reported in the e-invoice form once.
- Reduced transcription errors as the buyer’s inbound supply register will be prepared using the data provided to the tax department.
- Complete trail of business-to-business invoices.
- Data from e-invoices can be used to generate e-way bills and are automatically entered into GSTR-1.
- Input credit and output tax matching at the system level
- The data received from the GST system can be reconciled with the purchase order.
- Removal of fraudulent invoices
Understanding the GST e-Invoice Limit
Explanation of GST e-Invoice Threshold
The most recent update reduced the GST e-invoice limit from the previous Rs.10 Crore turnover to Rs.5 Crore. As a result, companies with an annual turnover of over Rs.5 Crore in any of the 2017–18 fiscal years must now generate e-invoices. The new rule was enacted on 1 August 2023.
Businesses Exempted from e-Invoicing
- An insurance, bank, or other financial organisation, such as an NBFC Goods Transport Agency (GTA),
- An individual with a registration who offers passenger transportation services
- A registered individual who provides cinematographic film exhibition entrance services in multiplexes
- A SEZ unit (excluded by Central Tax Notification No. 61/2020, CBIC)
- A local government agency and a government department (excluded by CBIC Notification No. 23/2021 – Central Tax)
- Individuals registered under CGST Rules, Rule 14 (OIDAR)
- Documents exempted are bills of supply, delivery challans, bills of entry, commercial or financial credit or debit notes and ISD invoices.
- Transactions such as B2C sales, imports, zero-rated, non-taxable, or exempt business-to-business sales of products or services and reverse charge supplies are exempted.
Key Steps for Successful e-Invoicing Implementation
Analyse the requirement of implementing e-invoicing
e-Invoicing is new and may not apply to every business. The key question is whether or not it applies to your company. Make a checklist with a few questions like, “Does your company fall under e-invoicing? Can I maintain and combine the e-invoice schema with my present ERP system? Is e-invoicing integrated by the software provider I currently use? Does understanding e-invoicing require training for my employees?” Using this checklist will assist you in determining which steps are necessary to implement electronic invoicing.
Familiarise with the e-invoice schema
The next step involves familiarising your company with the most recent e-invoice schema made available by the GSTN. Businesses used to create invoices without following any rules or standard formats. Now, the generated e-invoice will have a standard format for all organisations.
Look for an appropriate vendor
Look for a vendor who can integrate your ERP systems to bring them into compliance with the e-invoice standards. When selecting a software solution provider, it is essential to make a well-searched decision for the successful implementation of e-invoicing systems in your company.
Integration of the system with e-invoicing standards
The next step is to integrate the ERP system with e-invoicing standards. ERP can be combined in several ways, such as the SFTP-based approach and the API method.
Train team members
E-invoicing may seem simple enough at first glance, but your team may require additional training on their new e-invoicing system. A brief training on your system must take place to make sure all staff remain well informed of its features and any updates to it that might happen over time.
Regular reviews should be conducted following successful implementation to evaluate performance and avoid systemic errors. Businesses must ensure that every document that is issued complies with legal standards, and workshops should be held to communicate any updates in the system.
