Supplier’s/Vendor’s non-compliance of e-invoicing provisions can cause denial of ITC to the Buyers/Recipients – Safeguard your ITC now!!

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In today’s world, with rapidly expanding technology, digital transformation is no longer just an option, but an eventuality. GST e-invoicing system is a path-breaking initiative aimed to revolutionize the way businesses interact with each other. ‘E-invoicing’ essentially involves reporting details of specified GST documents to a Government-notified portal i.e., Invoice Registration Portal (“IRP”) and obtaining a unique Invoice Reference Number (“IRN”).

On the recommendations of the CGST Council, e-invoicing has been introduced vide Notification No. 13/2020- Central Tax dated March 21, 2020 (as amended vide Notification No. 61/2020- Central Tax dated July 30, 2020) for B2B supplies of taxpayers having aggregate turnover of more than INR 500 crore in any preceding financial year from 2017-18 onwards w.e.f. October 1, 2020, with exceptions for certain taxpayers viz., SEZ units, an insurer or banking company or financial institution, GTA, passenger transport service provider and invoicing in case of services by way of admission to exhibition of cinematograph films in multiplex screens.

Now, the above notification is further amended vide Notification No. 88/2020- Central Tax dated November 10, 2020, to make e-invoicing mandatory for B2B supplies of all taxpayers having aggregate turnover of more than INR 100 crore in any preceding financial year from 2017-18 onwards w.e.f. January 1, 2021 except notified exceptions.

In nutshell, the cumulative effect of the above, as far as B2B supplies are concerned is as follows:

Quantum of aggregate turnover

Applicability of e-invoicing

Registered Supplier having PAN basis aggregate turnover exceeding INR 500 crore

E-invoicing applicable w.e.f. October 1, 2020
Registered Supplier having PAN basis aggregate turnover exceeding INR 100 crore

E-invoicing applicable w.e.f. January 1, 2021

In this regard, Rule 48(5) of the CGST Rules, 2017 (“CGST Rules”) states that if the invoice issued by a person to whom Rule 48(4) of the CGST Rules (i.e., e-invoice in Form GST INV-01 as prescribed) applies is not generated in accordance with the said sub- rule, the same will not be considered as a valid tax invoice. Thus, if an invoice is not registered on the IRP, then such an invoice would not be treated as a valid tax invoice as not having valid IRN for availing GST credit and all GST related matters.

Therefore, if the Suppliers/ Vendors does not comply with the provisions of e-invoicing, then, the Recipients/Buyers can be disallowed Input Tax Credit (“ITC”) as one of the essential conditions to avail ITC as per Section 16(2)(a) of the CGST Act, 2017 (“CGST Act”) is possession of the tax invoice, which will be valid tax invoice only when such invoice is having valid IRN, digitally signed and having QR code assigned by the IRP.

Further, non-compliances of above provisions may also result into levy of penalty under the CGST Act and Rules made there under.

Thus, as your professional partners in GST excursion, we advise you to take a declaration from all your Suppliers/Vendors in relation to the e-invoicing applicability on below points in order to safeguard interests of the Company from any unanticipated losses:

  • Whether e-invoicing provisions as per Rule 48(4) of the CGST Rules are applicable to them?
  • If yes, then applicable from which date – October 1, 2020 or January 1, 2021?
  • Undertaking to issue e-invoice and credit/debit notes in compliance with the required provisions of GST Law, if in future, e-invoicing or related provisions becomes applicable on them.
  • Undertaking to the effect that in case of any queries from any State or Central Goods and Services Tax Authorities, on applicability of e-invoicing provisions, the concerned Supplier/ Vendor will be solely responsible.

Note: Above undertaking may be made mandatory for processing further payment of the Supplier/ Vendor w.e.f. January 1, 2021.

Further, National Informatics Centre (“NIC”) has issued a list of GSTINs for whom e-invoicing is mandatory which can be accessed at: https://einvoice1.gst.gov.in/Others/GSTINsGeneratingIRN

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