Upcoming Expansion of e-Invoicing in India

What Businesses Need to Know 

Businesses across India may soon be required to issue electronic invoices, or e-Invoices, for their sales to consumers as part of a broader effort to enhance transparency and curb tax evasion. Currently, the e-Invoicing mandate only applies to business-to-business (B2B) transactions for companies with an annual turnover of ₹5 crore or more. However, the Goods and Services Tax (GST) Council is set to discuss extending this requirement to business-to-consumer (B2C) transactions in its upcoming meeting on Monday. 

The GST Council, which oversees indirect tax policies, may propose a pilot program to introduce voluntary e-Invoicing for selected sectors, with participation from states that are ready to collaborate. A government insider informed Business Standard that this move is aimed at improving tax compliance in consumer transactions and could help streamline processes for both taxpayers and tax authorities. 

The law committee of the GST Council is currently working on the necessary amendments to the GST legislation to enable B2C e-Invoicing. Once approved, the GST Network (GSTN), the technical backbone of the GST system, will need to be upgraded to support this shift, including the development of a suitable commercial model. 

The Potential Benefits of B2C e-Invoicing 

The proposed pilot project will allow the tax department to assess the feasibility and impact of introducing e-Invoicing for consumer transactions. According to sources, the department believes that B2C e-Invoicing could provide a range of benefits for businesses, consumers, and tax administrators. For businesses, it could result in reduced transaction costs and greater operational efficiency. Moreover, consumers would be able to easily verify the authenticity of their bills, fostering trust and paving the way for future GST refunds for foreign tourists. 

From an environmental perspective, the widespread adoption of e-Invoicing would help reduce paper consumption, contributing to sustainability efforts. Additionally, the enhanced traceability of consumer transactions is expected to bolster the fight against tax evasion, further strengthening the integrity of the tax system. 

Phased Implementation and Future Outlook 

If the GST Council approves the proposal, the initial phase of the B2C e-Invoicing mandate will be voluntary. The threshold for mandatory compliance may be adjusted later, similar to the gradual rollout seen with B2B transactions. Initially, e-Invoicing was introduced in October 2020 for companies with a turnover exceeding ₹500 crore. Since then, the threshold has been systematically lowered, most recently to ₹5 crore in August 2023. 

However, challenges remain, especially for businesses with turnovers between ₹5-10 crore, where non-compliance has been more prevalent. Tax authorities have been urging these businesses to meet the e-Invoicing requirements and avoid penalties. 

The GST Council’s upcoming decision on B2C e-Invoicing represents a significant step forward in India’s tax digitization efforts. Businesses should stay informed and prepare for potential changes that could impact their operations in the near future.