E-Invoice under GST and Consequences of not issuing E-Invoices.

Rule 46 to Rule 55A of the CGST Rules, 2017 deals with the invoices. The Rule 48 deals with the manner in which the invoices will be issued by the registered person. This rule has three sub rules. Sub rule 1, Sub Rule 2 and sub rule 3.

The Govt. vide (Eighth Amendment) Rules, 2019, w.e.f. 13-12-2019 inserted sub rule 4, sub rule 5 and sub rule 6 to rule 48 which prescribes for the E - invoices.

Sub Rule -4 prescribes the manner in which invoice will be issued by certain class of the registered persons.

Let’s Read out the Rule 48(4) that says:-

The invoice shall be prepared by such class of registered persons as may be notified by the Government, on the recommendations of the Council, by including such particulars contained in FORM GST INV-01 after obtaining an Invoice Reference Number by uploading information contained therein on the Common Goods and Services Tax Electronic Portal in such manner and subject to such conditions and restrictions as may be specified in the notification.

The Govt. Vide (Eleventh Amendment) Rules 2020 w.e.f. 30.09.2020 has inserted the following proviso to the sub rule 4 of Rule 48

Provided that the Commissioner may, on the recommendations of the Council, by notification, exempt a person or a class of registered persons from issuance of invoice under this sub-rule for a specified period, subject to such conditions and restrictions as may be specified in the said notification.

Every invoice issued by a person to whom sub-rule (4) applies in any manner other than the manner specified in the said sub-rule shall not be treated as an invoice.

The provisions of sub-rules (1) and (2) shall not apply to an invoice prepared in the manner specified in sub-rule (4).

Hence all the registered persons except those are exempted from issuing the E Invoice shall issue E invoice in the manner prescribed in Rule 48(4) of the CGST Rules 2017 as amended w.e.f. 13.12.2019 vide Eighth Amendment) Rules, 2019.

Registered Persons responsible for E-Invoices

Initially the Govt. has fixed the aggregate turnover limit of Rs. 500 Crore for issuing E Invoice but it gradually reduces the turnover limit to cover the mid and small businesses also. As on date the turnover limit to issue E- Invoice is Rs. 5 Crore w.e.f. 01.08.2023 vide notification no. 10/2023 (Central Tax) dt. 10.05.2023

We will understand this scenario through the below mentioned Table:-

Hence any registered person whose turnover in any of the financial year started from 2017-18 to financial year 2022-23 is above Rs. 5 Crore will be liable to issue E invoice as per the manner prescribed under rule 48(4).

This limit of aggregate turnover will be applicable on PAN based as a whole. We will understand this with the following example:-

A is a registered dealer having head office in Delhi and two branches in two different states. His turnover in (say) 2018-19 in different states is as below:-

In the said example A will be liable to issue E invoices in each states or GSTIN as his turnover as a whole is above Rs. 5 Crore.

What supplies are presently covered under e –invoice ?

1. Supplies to registered persons (B2B),
2. Supplies to SEZs (with/without payment of tax)
3. Exports (with/without payment of Tax), Deemed Exports, by notified class of taxpayers are currently covered under e-invoice.

Means registered person as on date is not required to issue E invoices for B2C invoices.

Some Importanat FAQ's

Do SEZ Developers need to issue e-invoices?

Yes, if they have the specified turnover and fulfilling other conditions of the notification. In terms of Notification (Central Tax) 61/2020 dt. 30-7-2020, only SEZ Units are exempted from issuing e-invoices.

Is e-invoicing applicable for supplies by notified persons to SEZs?

Yes, e-invoicing is applicable for supplies by notified persons to SEZs. In terms of Notification (Central Tax) 61/2020 dt. 30-7-2020, only SEZ Units are exempt from issuing e-invoices.

Does Exempted goods covered under E invoice system

The Answer is No. Exempt supply and Nil rated supplies do not covered under E invoice system. In these cases only Bill of Supply is issued and hence no need to issue E invoice in case of exempt or Nil rated supply.

Does High Sea Sales required E- Invoice

No, High Sea Sales is not a part of the supply as per schedule III of CGST/SGST Act, 2017, hence there is no requirement of E invoice in the case of High Sea Sales.

Does Financial Credit/Commercial Credit Notes need to be reported to IRP

No, only the credit and debit notes issued under Section 34 of CGST/SGST Act have to be reported.

Are Free Trade & Warehousing Zones (FTWZ) exempt from e -invoicing?

Yes. As per Foreign Trade Policy, Free Trade & Warehousing Zones (FTWZ) are only a special category of Special Economic Zones, with a focus on trading and warehousing

Do I need to issue E- Invoice from one branch to another having same PAN

As per Section 25(4) of CGST/SGST Act, “A person who has obtained or is required to obtain more than one registration, whether in one State or Union territory or more than one State or Union territory shall, in respect of each such registration, be treated as distinct persons for the purposes of this Act.”

Hence supply from one branch to another branch having same PAN will be required to issue E Invoice.

Whether E Invoice is necessary for Import transactions

No, there is no requirement to issue E invoice for import bill of entry.

Invoices includes Debit Notes and Credit Notes. Means all the Debit Notes and Credit notes issued to registered persons will be covered under E invoice systems.

Whether E invoice is necessary for supply involving Reverse Charge

If the Supplies are made under section 9(3) of the CGST Act, 2017, E invoice is applicable but if Supplies are received from un-registered persons or advocates u/s 9(4) of the CGST Act, 2017 which attracts reverse charges then there is no need of issuing E invoice.

Entities/ Sectors Exempted from issuing E invoices

1. An insurer or a banking company or a financial institution, including an NBFC.
2. A Goods Transport Agency (GTA)
3. A registered person supplying passenger transportation services
4. A registered person supplying services by way of admission to the exhibition of cinematographic films in multiplex services
5. An SEZ unit (excluded via CBIC Notification No. 61/2020 – Central Tax)
6. A government department and Local authority (excluded via CBIC Notification No. 23/2021 – Central Tax)
7. Persons registered in terms of Rule 14 of CGST Rules (OIDAR).

Consequences & Penalties for Non Issuance of E invoices

If a registered person do not issue invoices as per the rule 48(4) then the sub rule (5) will come into effect and according to sub rule (5) of Rule 48 every registered person to whom sub rule (4) applies and he do not issue the invoice in that manner then such invoice shall not be treated a valid invoice and the purchaser will not get the input tax credit in that case.

Penalty u/s 122(1)(i)

Where a taxable person who––

Supplies any goods or services or both without issue of any invoice or issues an incorrect or false invoice with regard to any such supply;

He shall be liable to pay a penalty u/s 122(2)(a) of the CGST Act,2017 which may extend to Rs. 10000/- or 100% of the tax whichever is higher.

Penalty 122(3)(e)

If a registered person fails to issue invoice in accordance with the provisions of this Act or the rules made thereunder or fails to account for an invoice in his books of account, he shall be liable to a penalty which may extend to Rs. 25,000/- under each Act Central Act and State/UT Act, 2017.