The Government will soon make the GST E-invoicing mandatory or compulsory for companies and firms with a turnover of over Rs. 5 crores. This rule will be implemented or will come into effect from the 1st of January, 2023 onwards. It has come down from the current threshold value of 20 crores. It is done to further plug leakages, and ensure better compliance and policy formulation, according to the chairman of CBIT (Central Board of Indirect Taxes), Mr Vivek Johri.
According to him, expanding the GST E-invoicing Registration limit to over Rs, 5 crores will finally give good data and statistics for policy making. It will also give an overview regarding which sectors are contributing more to the GST which have higher potential but are not contributing enough.
With this expansion of GST E-invoicing registration for companies having turnover over 5 crores, the tax authorities will be able to better analyse the new trends and it also helps in the availing of Input Tax Credit also known as ITC across the various sectors. It will also help in excluding and sorting out fake Input Tax Credits which had emerged as a menace for the government. The fake ITC claims have posed the biggest problem in recent years in front of the government. Fake ITC claims worth over Rs, 50,000 crores were detected in the past one and half years alone. It will also widen the scope of e-invoicing of GST returns and will promote the automation of GST returns. It would curb the problem of fake e-invoices thereby leading to better tax compliance and collections.
E-Invoicing registrations for B2B (Business to Business) transactions were first started with a very high limit covering companies and organisations with a turnover of over Rs 500 crores from the 1st of October 2020. In the second phase businesses with a turnover exceeding Rs 100 Crores were mandated to issue e-invoices from the 1st of January 2021. In the third phase, firms or businesses with a turnover of Rs 50 crores had to generate GST e-invoices from the 1st of April 2021. Now, it has been extended to firms or organisations having a turnover between Rs 20 crore to Rs 50 crore from the 1st of April, 2022.
The e-invoicing registration 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.
According to Mr Johri, Chairman of the Central Board of Indirect Taxes, once one can construct all the returns based on the e-invoicing registration, the need for invoice matching will itself diminish in thin air and yet have a foolproof system or method of return filing. E-invoices will then eventually become universal.
These E-invoicing reforms have played a crucial role in the recent surge in GST collections from an average of Rs 0.9 trillion in the financial year of 2018 to Rs.1.23 trillion in the financial year of 2022. And it will be an average of Rs. 1.4-1.5 trillion in the financial year 2023. It will give some relief to states as their five-year guaranteed GST compensation for shortfall has ended on the 30th of June.
One of the major criticisms of the GST law since its implementation in 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 they had a fear that it would result in revenue leakages and non-compliance would go unidentified or undetected.