May 11, 2023
Durga Prasad

GST E-Invoicing Threshold Reduced to ₹5 Crore: Effective From August 1, 2023

The Ministry of Finance in India has taken a significant step towards enhancing transparency in the Goods and Services Tax (GST) system by reducing the turnover limit for e-invoicing from ₹10 crore to ₹5 crore, effective from August 1, 2023. 

The Notification Issued by Central Board of  Indirect Taxes and Customs (CBIC) says as: 

“In exercise of the powers conferred by sub-rule (4) of rule 48 of the Central Goods and Services Tax Rules, 2017, the Government, on the recommendations of the Council, hereby makes the following further amendment in the notification of the Government of India in the Ministry of Finance (Department of Revenue), No. 13/2020 – Central Tax, dated the 21st March, 2020, published in the Gazette of India, Extraordinary, Part II, Section 3, Sub-section (i) vide number G.S.R. 196(E), dated 21st March, 2020, namely:- In the said notification, in the first paragraph, with effect from the 1st day of August, 2023, for the words “ten crore rupees”, the words “five crore rupees” shall be substituted.”

E-invoicing, often known as 'electronic invoicing', is a system in which the GST Network (GSTN) electronically authenticates business-to-business (B2B) invoices and a few other documents to facilitate later usage on the common GST portal.

Under the Goods and Services Tax (GST) law, electronic invoicing, or E-invoicing, was made mandatory for business-to-business (B2B) transactions for companies. This rule was carried out in different phases.

Phase I was effective October 1, 2020. For the companies with a turnover of Rs 500 crore.

Phase II was effective by January 1, 2021. Which targets companies with a turnover of Rs 100 crore.

Phrase III was effective from April 1, 2021, and applied to companies with a turnover of 50 crores.

Phase IV was effective on April 1, 2022, for companies with a turnover of Rs 20 crore.

Phase V, which was effective from October 1, 2022, was for companies with a turnover of Rs 10 crore.

Now it's Phase VI, which will be effective from August 1, 2023, for the companies with a turnover of 5 crores.

As stated by Mahesh Jaisang, Partner and National Indirect Tax Leader at Deloitte India, "the government has been reducing the threshold and bringing more and more tax players into the game of e-invoicing with the aim to bring in more transparency and gather more data for comparison with taxpayers' returns." 

E-invoicing is a gain rather than a bane for businesses since suppliers that are e-invoicing compliant result in proper flow of input tax credit and reduce churn around credit concerns.

According to Rajat Mohan, AMRG & Associates Senior Partner, The phases of implementation of e-invoicing have reduced disruptions, improved compliance, and increased revenue. When we look at the phases, I was started on January 1, 2023, and now Phase 6 is about to go into effect on August 1, 2023. The threshold has been reduced from Rs 500 crores to Rs 5 crores in systematic phases, which has improved compliance and increased revenue.

According to Saurabh Agrawal, EY Tax Partner. The industry needs to review their vendor masters And ensures that any vendor supplying good or services and crossing the turnover of Rs 5 crores is necessarily issuing an e-invoice from August 2023 to avoid dispute concerning availment of ITC ( Input Tax Credit)

Prime Minister Narendra Modi acknowledged the record GST collection of ₹1.87 lakh crores in April on May 1st. The Prime Minister also stated that, despite lower tax rates, tax collection continues to rise, indicating the success of GST. When compared to the same month last year, GST collection in April rose by 12%.

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New GST Rules From Today, Biz With Over Rs 100 Cr Turnover Must Know This

Aggregate Annual Turnover (AATO) under GST

E-invoice under GST Regime