MUMBAI: Small companies that were not required to bother about e-invoicing under the Goods and Services Tax (GST) are now rushing to upgrade their information technology (IT) systems so as to abide by the new government regulations.
The government has said that e-invoicing or electronic invoicing will be mandatory for any company that has a turnover of more than Rs 100 crore. The limit was Rs 500 crore as per the earlier regulations.
Industry trackers say that in most cases the companies that are now required to abide by the regulations may find it tough. This is mainly due to the investment required in the IT infrastructure and the limited time frame to do so.
“Aligned to the recent communications by various Government officials, e-invoicing has now been notified for INR 100 crore and above companies as well. With only approximately 50 more days, these mid size companies would need to soon gear up their processes/ IT systems to enable compliance with this new invoicing regulation,” said Abhishek Jain, Tax Partner, EY India.
Tax experts said that the decision of the Government to reduce the threshold for e-invoice compliance from INR 500 Crores to INR 100 Crores is in line with the original plan of the GST Implementation Committee.
“This approach of introducing the requirement in a phased manner has been a good move, allowing the system to stabilize and giving the MSME’s an additional period of 3 months to implement the changes to their IT systems,” said Mahesh Jaising, Partner & Leader Indirect tax, Deloitte India.
Electronic invoicing is essentially a form of electronic billing. As per the GST framework invoices are an integral part of the system.
“Larger companies who have successfully implemented and complied with the new requirement will now have to shift focus on their procurement processes. Robust mechanisms and checks would need to be put in place to ensure that all vendors who are required to comply based on the revised threshold from January 1, 2020 provide them with valid e-invoices,” said Jaisingh.
The e-invoicing regulations could also mean that the tax department would be able to track the issue of fake invoices and fraudulent credits taken by companies more stringently.
The tax department has started blocking input tax credit of many companies suspecting that they were fraudulently availing it either by creating a fake trail of shell companies or through fake invoices. Input tax credits are essentially part of the tax paid by a company that can be used to set off future tax liability.
Experts opine that there are infact several instances where individuals and companies are using the GST system to manipulate and benefit. Like in a recent case, a 25-year-old student of chartered accountancy (CA) was arrested by the tax officials for committing a fraud to the tune of Rs 50.24 crore through input tax credit manipulation, TOI reported on October 22.