Govt further widens e-invoicing net to boost compliance
Having been lenient to small tax payers by suspending many technology-enabled policing features of GST in the initial years of the tax reform in 2017, the authorities are now leveraging its full potential to widen and deepen tax base
The finance ministry has further widened the scope of e-invoicing requirement from 1 April as part of a drive to step up oversight of transactions and improve tax compliance.
All business-to-business transactions above ₹50 crore barring select services will need e-invoicing from the next fiscal year, a government order issued late on Monday said.
E-invoicing entails uploading key transaction details to a government portal to generate a reference number on a real-time basis.
E-invoicing was made compulsory for businesses with ₹500 crore sales since October 2020 and the threshold was lowered to ₹100 crore from January.
The government’s earlier idea was to extend the same to all businesses from April but it has now opted to go more gradually. State governments, too, will notify the change.
The National Informatics Centre, the portal which generates the reference number, captures details of the buyer, seller, technical description of the item sold, sale value and the tax payable.
The move helps in greater oversight of the economic activities in real time and is set to improve tax compliance.
Also, this will enable officials to trust the final sales figures reported by businesses in their income tax and goods and services tax (GST) returns and spare business of avoidable regulatory scrutiny.
As per rules, any invoice that does not follow e-invoice requirement by a business that is required to generate e-invoice will not be counted as a valid.
Experts said small businesses have to quickly get their act together.
“E-invoicing for taxpayers with ₹100 crore plus turnover was recently introduced from 1 January 2021. Now, e-invoicing has been made mandatory for businesses for ₹50 crore plus turnover from 1 April 2021, which showcases the proactiveness and the intent of the government to widen the net of digitization. As limited time is left, industry players in this segment will need to proactively map out the IT and process changes and start implementing the same," said Abhishek Jain, tax Partner, EY.
The move also shows that after showing lenience to small tax payers by suspending many of the technology-enabled policing features of GST in the initial years of the tax reform in 2017, the authorities are now leveraging its full potential to widen and deepen the tax base.
Unlock a world of Benefits! From insightful newsletters to real-time stock tracking, breaking news and a personalized newsfeed – it's all here, just a click away! Login Now!