e-Invoicing mandatory for businesses above Rs.5 crore and above

The Indian government has made e-invoicing mandatory for businesses paying GST whose aggregate annual turnover exceeds Rs 5 crore which is implemented from 1st August, 2023.

Over the years, this threshold for mandatory e-invoicing has been consistently brought down from initially covering only companies above Rs. 500 crores of annual turnover to now Rs. 10 crores of annual turnover.  From August this year, this threshold has been reduced to Rs. 5 crores.

The implementation of lowering the threshold for e-invoicing has been done in a phased manner considering the readiness of businesses, particularly small and medium-sized enterprises (SMEs).

Effective immediately, companies with a combined turnover of INR 5 crores or higher are now mandated to adopt e-invoicing as a result of a reduced compliance threshold. This new regulation is expected to have a notable effect on different types of businesses, particularly those that are experiencing growth, such as small businesses and mid-sized enterprises.

By implementing e-invoicing, the government aims to combat tax evasion and facilitate real-time invoice matching between clients and vendors. This step ensures transparency and enhances compliance by modernizing the tax collection system contributing to a broader GST base. E-invoicing offers numerous benefits as it enables real-time validation and matching of invoices between buyers and sellers, reducing the chances of errors, duplication, and tax evasion.

Although e-invoicing systems can provide numerous benefits, there are also several obstacles and downsides that businesses may encounter when implementing them. For smaller businesses, the initial costs associated with purchasing hardware, software, and training employees on how to use the new system can be challenging to manage.

Additionally, the transfer and storage of sensitive financial data that is necessary with e-invoicing present potential security risks, leaving businesses vulnerable to cyber threats and hacking. Therefore, eInvoicing mandatory for businesses to carefully assess their needs and risks before deciding whether to adopt e-invoicing as part of their financial operations.