e-Invoice Limit 5 Crore: e-Invoicing mandatory for businesses above Rs.5 crore turnover

e-Invoice limit 5 crore is newly notified via Notification No. 10/2023–Central Tax and has been implemented from 1st August 2023. e-Invoicing or electronic invoicing system was introduced under the Goods and Services Tax (GST) law and applies to certain taxpayers registered under the GST law in phases. 

e-Invoice 5 crore notification 10/2023 was issued on 10th May 2023 amending the earlier notification No. 13/2020 – Central Tax issued on 21st March 2020. Accordingly, GST e-invoice limit for turnover more than Rs.5 crore in any financial year from 2017-18, applies from 1st August 2023.

Read on to understand entirely how the sixth phase of e-invoicing mandatory setup for e-Invoice Limit 5 Crore taxpayers, any updates on the e invoice latest notification, changes in operations, how to choose between various modes of e-invoice generation, steps for one-time registration, and issues and tested solutions with Clear IRP and Clear e-Invoicing to assist such businesses.

Latest Updates

10th May 2023
CBIC notified the 6th phase of e-invoicing. Hence, taxpayers with Rs.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.

Businesses covered in the sixth phase of e-invoicing

From 1st August 2023, the e-invoicing is mandatory for businesses with annual aggregate turnover of over Rs.5 crore in any previous financial year from 2017-18.

Earlier, phase I applied to the e invoice turnover limit of more than Rs.500 crore from 1st October 2020. During phase II, businesses with a yearly turnover of over Rs.100 crore started to issue e-invoices from 1st January 2021. 

Phase III extended to businesses with an annual turnover of more than Rs.50 crore beginning from 1st April 2021. A year later, the government reduced the e invoice limit to more than Rs.20 crore as phase IV. Phase V has been implemented recently from 1st October 2022 for businesses with an annual turnover of over Rs.10 crore.

Here's an overview of e-invoicing implementation in India until the sixth phase-

So, e invoicing applies to-

• Tax invoices, 
• Debit notes, 
• Credit notes, and 
• Invoice-cum-bill of supply

The e invoicing system covers transactions such as-

• Taxable Business-to-Business (B2B) supply of goods or services, 
• Business-to-Government (B2G) supply of goods or services, 
• Export sales, and
• Sales falling under the Reverse Charge Mechanism (RCM)

The e-invoicing scope excludes the below documents, transactions and businesses-

• Exempted sales for which the bill of supply is raised, 
• Imports, 
• Job works, 
• Delivery challans 
• Banks, financial institutions, and insurance companies
• Exhibiting cinematographic films on multiplex screens
• Non-banking financial companies, 
• Goods transportation and passenger transportation agencies, 
• Units in SEZ or special economic zones, and 
• Government departments.

e-Invoicing objective and impact 

The primary objective of further bringing down the threshold turnover limit for e-invoicing is to control GST evasion and fraud while enhancing GST compliance, among MSMEs. Almost 4 lakh businesses are covered in this phase.

Enterprises along the supply chain can avail of genuine and verified Input Tax Credit (ITC). Hence, it keeps a tab on the GST revenue leakages for the government. e-Invoicing also promotes digitisation in India and enables one to digitise all transactions at the source, i.e., invoicing stage.

The main impact on the notified businesses is the drastic change in their business process, GSTR-1 preparation and alterations to their billing system or software. While GSTR-1 filing turns out to be easier by auto-population of details, reconciliations can become complicated, as explained in the afterwards. 

Hassle-free access to formal credit channels, such as invoice discounting or invoice financing, provides leverage to small businesses since their invoices are validated and authenticated by the government. 

However, large enterprises purchasing from small businesses which are notified for e-invoicing can have a daunting task at hand. They must ensure that their small vendors comply with the e invoicing mandate more regularly. It is essential since they can otherwise lose input tax credits or face delays in claims due to non-generation of e-invoices. Ultimately when e invoicing system is streamlined by the vendor businesses, they enjoy claims of genuine tax credits. 

Quick Video for A-Z about Sixth Phase of e-Invoicing

Changes in business processes due to e-invoicing & how to prepare?

Newly added businesses under the e-invoicing net must equip, implement and test the setup before the date of notification. The GST Network (GSTN) has already enabled testing of e-invoicing setup in a sandbox environment for such applicable businesses since July 2022.

Larger chunk of taxpayer companies fall in the Rs.5-10 crore annual turnover category as compared to the previous phase. Moreover, these small businesses also tend to have a greater transactional magnitude inviting fresh compliance challenges.

Read on how enterprises can implement e-invoicing easily and how it can change business processes for them-

Tax invoice creation-

e-Invoicing does not involve creating invoices on the government portal. However, it involves businesses reporting already created tax invoices onto the government-authorised IRP for validation and authentication. IRP includes the NIC’s e-invoice portal and Clear IRP.

Arranging for continuous staff training-

Create awareness about the changes in invoice-handling across various finance and accounting teams much before the date of applicability. Understand the complete process of e-invoicing, and navigate any challenges with our insightful content on ‘All about e-Invoicing’. 

Team Clear also has curated resources in the form of videos, articles and whitepapers on e-invoicing. Further, team Clear has a talented managed services team for round-the-clock technical support.

Remodelling the billing or accounting, or ERP system, as needed-

Accounting or billing software must be altered or realigned to comply with the rules and e-invoice schema or format. Identify the e invoicing applicable transactions and documents and bifurcate from the rest for uploading onto the Invoice Registration Portal (IRP) such as NIC and Clear. 

e-way bills can be auto-generated using e-invoice details entered at the option of users. Hence, one must sort such documents accordingly based on the needs to avoid repetition. The invoice print commands must be modified to capture IRN and QR code details on the e-invoice. Although some teams have been handling document segregation manually, it would reduce errors and be more efficient with the help of tool such as Clear e-invoicing solution. Either ways, these tasks require modifications in the current billing, ERP, accounting systems, or software.

Keeping invoice details error-free-

One must start maintaining proper and verified records of supplier and customer master data, if not in the past. For precision, it must contain additional invoice details such as validated GSTIN, bank account and payee details. Any invoice rejection by the IRP ends up with an invoice cancellation and regeneration. These put additional burden on the team, leaving buyers dissatisfied with the delay as amendments of e-invoices are not allowed.

Choice of e-invoice generation mode- 

Choose the best-suited mode for your business for generating Invoice Reference Number (IRN) and signed QR code from the IRP. Several options are broadly grouped as the online and real-time processing, SMS, offline and batch processing. Some of the popular modes are as follow-

• SFTP or API integration in fully functional, end-to-end solutions such as Clear e-Invoicing, 
• Access IRP via existing e-way bill APIs, and GST APIs
• Web-based direct integration with IRPs, including NIC and Clear, 
• Integration via a GST Suvidha Provider (GSP) such as Clear, 
• SMS-based or mobile app-based generation, and 
• Offline spreadsheet-based utilities such as the GST e-invoice preparing and printing (GePP).

Go for cloud-based solution that gives IRN backup and retrieval option. Further, check for the capabilities of handling large-scale invoices in the shortest time with heightened data security. Clear e-Invoicing can generate IRN at the highest speed of 200 ms versus the market average of 3 seconds.

Registering on the e-invoice portal or IRP-

First-time registrants must register on the e-invoice portal or notify IRP such as NIC (https://einvoice1.gst.gov.in/) or Clear. Check out our article ‘Steps for registration on the e-invoice portal or IRP’ for more information on the steps.

Reconciliation and reporting in GSTR-1-

The GST returns preparation and filing process tends to change with e invoicing. The e-invoice details will get auto-filled into the GSTR-1, whereas taxpayers must subsequently mention manually the other details such as the non-taxable and B2C sales. Reconcile sales register with the e-invoices auto-filled in GSTR-1 to confirm that accurate information is reported and prevent receipt of any notices.

Potential internet issues- 

A significant challenge before small businesses is possibility of intermittent network and it’s effect on generation of e-invoices. It will be deeply felt in tier II and tier III cities. Businesses in these cities lack internal technology to enable a real-time e invoice generation and IRN capture on invoices. 

Facing delays in IRN generation-

Enterprises failing in the sixth phase of e invoice deal with thousands of B2B transactions daily. They may find it hard to keep the customers waiting for e-invoice generation. Therefore, such businesses can try the services of GSP or IRP such as the one provided by Clear for a smooth compliance.

Is e invoicing compulsory? – Consequences of non-generation of e-invoices

If newly added businesses fail to generate e-invoices from the notified date, they will attract huge penalties. Non-compliant businesses end up paying Rs.10,000 for every invoice not generated. Furthermore, non-generation of IRN is considered incomplete invoicing and one can attract a penalty of Rs.25,000 for every incorrect invoice.

Besides, small businesses can face the following additional adverse consequences-

• GSTR-1 may not getting auto-filled with B2B sales details.
• Buyers cannot avail any eligible ITC, face delays and may eventually hold up payments, especially the GST portion. It negatively affects the working capital of such businesses. 
• Buyers may deny or reject invoices that are not e invoice compliant and can hamper the continuity of business contracts.

How can Clear help you with e-Invoicing?

Here is a brief on how our Clear e-Invoicing solution assists enterprises to be e-invoicing compliant. Clear e-Invoicing is a cloud-based SaaS solution for unified e-invoice and e-way bill generation.