In the GST regime, E-Invoicing is one of the most spoken about topics for over a year now. This new invoicing mechanism was made mandatory for businesses with an annual turnover of more than INR 500 crores on 1 October 2020. Furthermore, for businesses with an annual turnover of more than INR 100 crores, e-Invoicing had to be implemented from 1 January 2021. Additionally, the Government has already enabled Sandbox testing for businesses with turnover between INR 50-100 crores. That means this section of GST registered Businesses will have to implement the e-Invoicing process mandatorily soon.
Brief Introduction To E-Invoicing
Under e-Invoicing, notified taxpayers have to generate their B2B invoices on their internal accounting system/ERP and upload them on the Invoice Registration Portal
(IRP) for validation. To ensure that these invoices are interoperable, the Government has notified a standard format (e-Invoice schema) for the invoices that will be uploaded.
The IRP will then verify the details in these uploaded invoices and digitally sign the invoice and send the e-Invoice back to the taxpayer with the Invoice Reference Number (IRN) and the Quick Response (QR) code.
What Happens If A Business Fails To Generate An E-Invoice?
According to the GST rules, e-Invoicing is mandatory under Rule 48, sub-rules (4), (5), and (6). If any business falls under the ambit of e-Invoicing but fails to generate the same:
- A penalty of INR 10,000 or 100% of the tax, whichever is more, may be imposed.
- The penalty for a wrong/incorrect e-Invoice can amount to INR 25,000.
Furthermore, If a business is not compliant with the e-Invoicing rules (when applicable), there can also be a significant impact on the continuity of the business. We can say so because:
- Invoices issued by any specified taxpayers without the QR code and IRN will be treated as non-issued under the sub-rule (5) of rule 48 of the GST rules. That means such non-compliance can make the invoices invalid.
- Certain details in the GST returns are auto-populated based on details available with the IRP. If the correct details are not included in the GST returns, the GSTR-2A/2B of the customers will not reflect the Input Tax Credit (ITC) available accurately. Because of this, these customers will not be able to claim the same.
- In some cases, Customers may refuse to accept non-compliant invoices, which will, in turn, cause revenue and goodwill loss.
- As per the latest Government regulations, taxpayers who do not comply with the e-Invoicing regulations (when required) will not be able to generate e-Way Bills. Without an e-Way Bill, the movement of goods will be restricted, and this will definitely impact the delivery of the same. Unavailability of correct invoice or valid EWB can also lead to the detention of vehicles/goods and even result in huge penalties.
To avoid these consequences, it is imperative that businesses comply with all the GST rules and issue valid e-invoices