Consequences of non-generation of IRN or e-invoice

e invoice penalty can create a huge burden for applicable businesses on their cash flows and reputation. Any failure to comply with the e-invoicing provisions can lead to several other consequences apart from penalty for non generation of e invoice.

All registered taxpayers whose aggregate value of all taxable B2B/B2G supplies/exports exceeds Rs.20 crore in any previous financial years from 2017-18 to 2021-22 must presently generate e-invoices. This shall expand to cover those businesses with more than Rs.10 crore turnover starting on 1st October 2022. Recently, CBIC extended the e-invoicing for businesses with more than Rs 5 crore turnover w.e.f 1st August 2023. Read on to know more about the consequences of compliance failure.

Latest Updates

10th May 2023
CBIC notified the 6th phase of e-invoicing. Hence, taxpayers with ₹5 Cr+ turnover in any financial year from 2017-18 shall issue e-invoices w.e.f 1st August 2023.

6th May 2023
The GST department has deferred the time limit of 7 days to report the old e-invoices on the e-invoice IRP portals by three months. Further, the department is yet to announce the new implementation date.

13th April 2023
As per the GST Network's advisories dated 12th April 2023 and 13th April 2023, taxpayers with annual turnover equal to or more than Rs.100 crore must report tax invoices and credit-debit notes to IRP within 7 days of invoice date from 1st May 2023.

What is an invalid or incorrect e invoice?

Some of the reasons why an e-invoice is considered invalid or incorrect is as follows-

• The e-invoice generated is not as per the standard e-invoice schema or format or does not have one or more mandatory fields required as per the government notified schema.
• The e-invoice generated is duplicate of earlier invoice against which IRN is generated.
• Supplier or recipient GSTIN is inactive or invalid.
• As per update dated 12th April 2023 and 13th April 2023, taxpayers with turnover equal to or more than Rs.100 crore must report invoices and credit-debit notes to IRP and generate e-invoices within time limit of 7 days from invoice date from 1st May 2023. Hence, if they fail to do so, such invoices are non-compliant too.
• However, on 6th May 2023, the GST department has deferred the time limit of 7 days to report the old e-invoices on the IRP portals by three months. Further, the department is yet to announce the new implementation date.

In such cases, if the supplier issues such e-invoice to recipient or uses it for transportation of goods, it is considered offence. Accordingly, they have to incur a penalty as defined in the further section of this article.

What happens if you do not issue an e-invoice?

The e-invoice requirements are laid down under sub-rules (4), (5) and (6) of CGST Rule 48. It applies to specified taxpayers meeting the annual aggregate turnover criteria supplying taxable goods/services only. So, the rest of the taxpayers must follow the standard tax invoice provisions.

The e-invoice system requires intimation of all the B2B/B2G/export supply transactions to the government by way of uploading invoices on the Invoice Registration Portal (IRP). A taxpayer can first generate an invoice or the debit or credit note on his accounting software/ERP.

Thereafter, he/she must upload the invoice on the IRP. On uploading the invoice, a unique Invoice Reference Number (IRN) will be issued against each invoice.

Non-generation of e-invoices will imply non-intimation of supply transactions to the government. Any invoice issued by the applicable taxpayer without the IRN is considered an invalid invoice under GST law. In other words, it is regarded as a non-issue of the invoice as per sub-rule (5) of Rule 48 of the CGST Rules. Thus, it attracts a penalty for non generation of e Invoice as given in the next section.

Penalty for non generation of e Invoice and incorrectness

Non-issuance or incorrect issuance of e-invoice is an offence under GST and thus attracts e invoice penalty. Below is the penalty for non generation of e invoice along with the penalty for incorrect or invalid e-invoice:

1. Penalty for non generation of e invoice – 100% of the tax due or Rs.10,000, whichever is higher, for every invoice.
2. Penalty for incorrect invoicing – Rs.25,000 per invoice.

Consequences of non compliance of e invoicing

The following are the consequences of non generating IRN, apart from the penalty for e invoice-

Goods in transit can be detained- The transport of goods without accompanied by the e-way bill and e-invoice is not valid. It can lead to detention of conveyance and the goods under Section 129 of CGST Act 2017. Since an invoice without IRN and signed QR code is invalid invoice wherever applicable, accordingly, such transportation results in the goods and vehicle detention attracting standard penalty defined for e-way bill.

Holding up invoice payments/ITC claims may be denied to GST registered buyers- Under the GST law, a tax invoice evidences as an important evidence to claim the Input Tax Credit (ITC). Section 16 of CGST Act 2017 states that a registered buyer cannot claim ITC unless he possesses a valid tax invoice or a debit note and such ITC appears as eligible one in GSTR-2B.

If they possess an invalid invoice without IRN and signed QR code, the buyer can refuse to take the delivery of goods or may refuse to release payment. It affects or delays the buyer’s eligibility to claim ITC. Ultimately, it adversely affects the taxpayers’ customer/business relations

Technically, details of an invoice without IRN cannot get auto-populated into GSTR-1 of the supplier and accordingly may never reflect in buyer’s GSTR-2A and GSTR-2B. The buyer cannot claim such amount as ITC where the tax is not deposited by the supplier with the government.

Affects e-way bill generation and causes delays- There is a facility to auto-generate e-way bills together with e-invoices. Non-generation of e-invoices or incorrectness leads could also affect the e-way bills, affecting logistics and causing delays in delivery.

Hassles of correcting e-invoices and e-way bills- The taxpayers must spend time and could face hassles of rectifying errors made in e-invoices and e-way bills. If the rectification is carried out within 24 hours, they can cancel and reissue a new invoice against which the IRN can be generated. Likewise, a new e-way bill can be auto-generated. But if there is a delay in correcting beyond 24 hours, there is also need to generate a credit note/debit note to make corrections, increasing the reporting burden.

How to avoid non compliance of e invoicing?

Taxpayers can avoid non compliance of e invoicing by ensuring there are pre-built validations on their e-invoicing solution. The system must have been updated for the latest e-invoicing schema or format. The system must also have time limit validation to alert any potential delays in reporting invoices to IRP and proactively avoid the same, especially for applicable taxpayers. 

Further, the e-invoicing solution should have a user-friendly dashboard to filter invoices and correct errors before generation, just like the Clear e-invoicing solution that provides advanced UI for error correction. Also, Clear offers various modes to generate e-invoices, such as seamless API integrations, Excel mode, FTP, SFTP or Tally connector. The user can enjoy numerous value additions such as-

• Seamless generation of 5,000 e-invoices per minute
• Integration with a high-fidelity solution with 99.99% uptime
• 100+ data validations to ensure an error-free smooth e-invoicing experience
• Auto-retry of failed EWBs (with distance error) to improve the success rate of EWB generation
• Automatic generation of the e-way bill after IRN generation without any ingestion of data
• Faster loading of ‘e-invoices’ and ‘e-way bills’ on the screen for as many as 1 lakh documents
• Reconciliation vis-a-vis e-way bill and GSTR-1 data, insightful reports, customised print template for e-invoice, data archiving, etc.