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What Has Changed for Businesses with New GST Rules?

With amendments to the Goods and Services Tax (GST) Act, on August 1, businesses with an annual turnover of 5 crores need to issue an e-invoice. The change applies to businesses that reported an annual turnover exceeding Rs. 5 crores in any preceding fiscal from FY18.

The notification to lower the revenue threshold was released by the CBIC in May. Earlier, businesses with annual revenue of Rs. 10 crore or more were required to generate e-invoices.

GST Invoice is used for taxation purposes helping in reporting and tracking taxes. GST has become increasingly tech-based with E-return, E-invoicing, and E-way Bill that aims to simplify tax reporting and compliance activity.

The changes have resulted in business transformation by promoting digitization to increase efficiency and ensure a robust tax function.

History of E-invoicing

Initially introduced for large companies with turnover exceeding Rs. 500 crores, the threshold for e-invoicing has been lowered to Rs. 5 crores within a period of 3 years. By lowering the e-invoicing threshold the GST department aims to generate additional revenue and prevent tax evasion.

E-invoicing become mandatory in 2020 for businesses with a revenue of Rs. 500 crore and more. The limit was decreased to an annual turnover of Rs. 100 crores in January 2021.

Later, on April 1, 2021, e-invoicing was made mandatory for companies with revenue exceeding Rs. 50 crores. The revenue threshold was further reduced on October 1, 2022, to Rs. 10 crores.

There is also a time limit for reporting old invoices. To ensure timely compliance, taxpayers will not be allowed to report invoices older than 7 days. However, this time limit currently applies only to taxpayers with an annual turnover of Rs. 100 more or more.

This rule also stops large companies from backdating e-invoices. There are possibilities that this rule may be extended to businesses with lower turnover in the future.

With a phased implementation of e-invoicing, the government aims to reduce disruptions while improving compliance.

Benefits of E-invoicing for MSME Businesses 

Experts also believe that the change in the e-invoice rule can help boost the MSME business.

This change is expected to benefit the overall business ecosystem with faster invoice processing and reduce errors, which will also limit commercial disputes in the long run.  Here’re the key benefits of e-invoicing:

  • It reduces data entry errors and ensures data consistency across systems.
  • With real-time validation and verification of invoices, ITC claims can be faster and smoother.
  • Eliminates the need for manual filing, data is captured and updated in the GST portal automatically.
  • A unique invoice reference number (IRN) allows easy tracking of invoices.
  • Prevents the generation of fake invoices as only registered taxpayers can generate e-invoices through the GST portal.
  • Opens opportunities for innovation with technologies such as cloud computing, blockchain and machine learning.

In the future, E-invoicing is expected to grow further with more and more businesses embracing its benefits. E-invoicing enables new opportunities such as real-time analytics and automated payments. It is not only a technical change but also a transformation of business processes.

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