India Expands Compulsory eInvoicing to Plug Revenue Leaks

Businesses in India with an annual turnover of Rs 10 crore and above will be mandated to use electronic invoicing as of Oct. 1 in a move by the Central Board of Indirect Taxes and Customs (CBIC) intended to plug revenue leakages and facilitate compliance.

Currently, eInvoices are compulsory for businesses with an annual turnover of over ₹20 crore, according to a press release from CBIC and multiple media reports.

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The change stems from a decision by the Goods and Services Tax Council (GST) to phase in e-invoicing. Initially, electronic invoicing was made mandatory in October 2020 for businesses having an annual turnover of ₹500 crores with 53,523 eligible GST identification numbers (GSTINs).

The government lowered the threshold to ₹100 crore in January 2021 covering 91,583 GSTINs, and in April 2021, the GST lowered it again to ₹50 crore covering 95,461 GSTINs. The most recent change was in April 2022 covering 180,000 GSTINs. In 2023, businesses with a turnover of ₹5 crore will be required to use eInvoices.

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The use of electronic invoices is expected to make it easier for tax collectors in the country to analyze the input of tax credits across business industries and see where there are revenue leaks.

“The move to reduce turnover threshold and increase the ambit of e-invoicing is mainly aimed at resolving mismatch errors and to check tax evasion,” Saurabh Agarwal, tax partner, EY, told Economic Times.

Affected businesses, or those expected to be, will have to start getting prepared now to enhance IT capabilities to ensure easy compliance with electronic invoicing conventions, Agarwal said.

Regulators in India have uncovered phony input tax credit (ITC) totaling more than ₹50,000 in 18 months with over 20,000 fake GSTINs, according to Economic Times.

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