GST INVOICE

E-Invoice Applicability – Whether Penalty is rightfully levied?

Electronic invoicing, popularly called as ‘e-invoice’ is a concept in which all B2B invoices are electronically uploaded by the supplier and authenticated by Invoice Registration Portal (IRP) with a unique number called IRN and a QR code. An invoice is considered valid only when there is a unique IRN and QR code printed on the invoice. Rule 48(4) of the CGST Rules, 2017 has been inserted to provide for preparation of an e-invoice.

First of all, it is important to understand that e-invoice is not applicable for all registered persons under GST. The categories of person on whom e-invoice is not applicable are as follows:

Banks, Insurance Companies, and Financial Institutions including but not limited to NBFCs
Goods Transport Agency
Passenger Transport Services
Supplier of Services by way of admission to the exhibition of films.
Special Economic Zones (SEZ) Units (E-invoicing is applicable to Economic Zone Developers)
A government department and Local authority
OIDAR i.e. person supplying online information and database access or retrieval services from a place outside India to a non-taxable online recipient

Therefore, all persons either issue B2C invoices or they fall in the above-mentioned categories, are exempted from e-invoice.

E-invoice has been implemented phase-wise for reporting B2B invoices. Only the large businesses were targeted initially to start with the e-invoice system, and gradually, in a phased manner, smaller businesses have been brought into its scope by reducing the turnover limit.

The applicability of e-invoice based on the turnover has been given below:

Annual Turnover	Date of implementation
Exceeding 500 crore	1^st October 2020
Exceeding 100 crore	1^st January 2021
Exceeding 50 crore	1^st April 2021
Exceeding 20 crore	1^st April 2022
Exceeding 10 crore	1^st October 2022
Exceeding 5 crore	1^st August 2023

Therefore, w.e.f. 1^st August 2023, all businesses with annual turnover exceeding five crore rupees shall mandatorily issue e-invoice. Further, it should be noted that turnover for the purpose of determining the eligibility of e-invoice means turnover of all GSTINs under a single PAN for any of the financial years from 2017-18 onwards.

If the applicable provisions for e-invoice are violated, two types of penalties may be levied:

Penalty for failure to create an e-invoice: If a person to whom e-invoice applies, fails to generate an e-invoice, the penalty would be equal to either 100% of the tax owed on the supply or Rs. 10,000, whichever is greater.
Penalty for incorrect e-invoice: If an e-invoice is created improperly, penalty equal to Rs. 25,000 per invoice shall be levied.

With the increasing litigation under GST, various notices are being issued levying penalty for non-compliance of e-invoice provisions. Hence, it is important to check the eligibility criteria and turnover threshold to determine whether e-invoice is eligible to a person or not for the period under dispute.