On 24 February 2022, the Indian Central Board of Indirect Taxes and Customs (CBIC) issued a notification (Notification No. 01/2022 – Central Tax) that lowered the threshold for mandatory e-invoicing.

In India, e-invoicing is mandatory for taxpayers when exceeding a specific threshold (businesses operating in certain sectors are exempted). The current threshold for mandatory e-invoicing is 50 Cr. Rupees (approximately 6.6 million USD). From 1 April 2022, taxpayers with an annual threshold of 20 Cr. Rupees (approximately 2.65 million USD) or above must comply with the e-invoicing rules.

Evolution of e-invoicing in India

E-invoicing has been mandatory in India since October 2020. The IRP must approve and validate e-invoices before being sent to the buyer. Therefore, the Indian e-invoicing system is categorised as a clearance e-invoicing system, a type of continuous transaction controls (CTC).

From the beginning, the Indian tax authority clearly expressed their intention to gradually expand the scope of e-invoicing. In line with its message, the threshold limit has been lowered twice; in January 2021 (from 500 CR. To 100 Cr.) and April 2021 (from 100 CR. To 50 Cr.). Once again, the threshold limit is reduced to require more taxpayers to transmit their transactional data to the tax authority’s platform.

One important thing to be noted in this context is that voluntary adoption of e-invoicing is still not possible. Taxpayers cannot opt in to use the e-invoicing system and transmit their invoices to the IRP voluntarily. Given the recent developments, this might change in the future.

E-invoicing and E-waybill relationship

Suppliers in the mandatory scope of e-invoicing must generate e-waybills relating to B2B, B2G and export transactions through the e-invoicing platform because their access to the e-waybill platform is blocked for generating e-waybills relating to these transactions. E-waybills relating to transactions outside of the scope of e-invoicing can still be generated through the e-waybill platform.

Therefore, it would be advisable for taxpayers who are getting ready to implement e-invoicing to consider this aspect.

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With two weeks to go until the first mandatory phase of the Indian e-invoicing reform go live, the GST Council slammed the breaks. Or at least, bring it to a significant temporary standstill of 6 months. As a result, the India e-invoicing reform is now postponed until 1 October 2020

Following a long list of complaints — both from the private sector toward the GST Council, as well as from the GST Council vis-á-vis the IT infrastructure provider that powers the GST Network, Infosys — the council decided to revisit the 1 April go-live in a recent meeting held today, Saturday 14 March.

GST Council Decisions

The GST council made a number of important decisions, including most notably:

The decisions made in the 39th meeting of the GST Council will require either that the legislative framework (Notifications) published in early December be amended or entirely replaced with new ones to reflect the new reality. However, it wouldn’t be unreasonable to expect even further delays to the roll out of this reform. This given to the recent economic volatility triggered by the ongoing pandemic. Only once both global markets as well as the underlying technical platforms of the GST control reform seem to stabilize will the post-October timeline of the roll out be fully certain.

 

Is India postponing the mandatory implementation deadline for e-invoicing? For more than a year, India has been on the path to digitizing tax controls, with the first mandatory go-live for transmission of invoice data to a governmental portal scheduled for 1 April 2020. The very high pace of the roll-out of this reform made many taxpayers concerned that they might not realistically be able to meet the implementation deadline. As a result, leading many to hope that the Indian authorities might instead chose to postpone the go live date.

The latest news from India is that it looks as if these authorities may indeed consider a delay. Or at least discuss the possibility of – a delay to the go-live date. According to The Economic Times, the Indian government is going to discuss whether there is a need to defer the implementation deadline in the next meeting of GST Council, which is scheduled for the 14th of March. So far, a 3-month deferral is an option. This means that should the GST Council grant a delay, the first go-live would take place in July 2020.

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For those following the ongoing tax control reform in India, 2019 has been a very eventful year for Indian e-invoicing. Starting last spring, a group of government and public administration bodies have convened regularly with the mission of proposing a new way of controlling GST compliance through the introduction of mandatory e-invoicing. Given the vast impact such a reform would have on not just the Indian but the global economy, these discussions, often carried out behind closed doors, have triggered a large number of rumours, sometimes leading to misinformation on the market.

Navigating the information deficit

So far, not much information of a formal or binding nature has been published or made available to the public. After the public consultation held earlier this autumn, a high-level whitepaper describing the envisaged e-invoicing process was published; however, since then nothing formal or binding has been released. A recent media note made available by the relevant authorities to the press indicated that the timeline envisaged by the government for the roll-out would be:

1 January 2020: voluntary for businesses with a turnover of Rs.500 Crore or more;

1 February 2020: voluntary for businesses with turnover of Rs.100 Crore or more;

1 April 2020: mandatory for both of the above categories and voluntary for businesses with a turnover of less than Rs. 100 Crore.

While the clarity was welcomed, this timeline was not yet binding, and as a result, taxpayers were left with little information on how to meet the requirements of the tax control reform, and no binding indication of when they need to comply. However, this situation is now currently being remedied, and we are seeing the first codification into law.

The first pieces of legislation make an entrance

On December 13, 2019, a set of Notifications (No. 67-72/2019) introducing amendments to the existing GST legislation framework were released and are currently awaiting publication in the Gazette of India. In a nutshell, these Notifications:

These Notifications issued on December 13 will be the first of many pieces of documentation that are needed to formally clarify the details of the upcoming e-invoicing reform. More important still, they serve as a clear indication that the relevant Indian authorities are nearing the end of what has been an analytical and consultative design period, and that they now instead are transitioning into a period of preparation for the first roll-out.

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As more and more countries across the world depend on VAT, GST or other indirect taxes as the single most significant source of public revenue, governments are increasingly asking themselves what technical means they can use to ensure that they maximise the collection of the taxes due under the new tax regimes. India is the most recent such example.

GST was introduced in India in July 2017, following many years of discussions and negotiations between different stakeholders in the country. The reform has entailed significant simplifications and streamlining of taxation in India. While the road to roll-out of the tax was bumpy, it was by international comparison very quick. Nearly two years down the road, the roll-out is widely viewed as a success, and it appears as if the government is ready to take the GST success story one step further by introducing real-time tax controls to the B2B e-invoicing process.

India on the road to real-time tax enforcement

Earlier this spring, the Indian GST Council announced the formation of a special committee with the purpose of investigating a potential Indian implementation of a mandatory B2B e-invoicing system: the “Committee of Officers on generation of electronic invoice through GST Portal” (CoO).

More specifically, the CoO has been tasked with analysing and comparing the South Korean clearance system to similar systems in Latin America in order to understand global best practices and also to assess to what extent the existing Indian state-controlled platform – the GST Network – can serve as the central hub in a clearance-style e-invoicing process.

In late May, the CoO formed two sub-committees to continue working on parallel tracks: one on legal and policy matters and the other on the development of technical requirements. During the past few weeks, work has progressed in these working groups as well as in public-private consultations.

The committee is getting close to concluding the initial deliberations, but its closing recommendations have not yet been published in a final report. As a result, no draft laws, draft invoice schemas or draft process frameworks have yet been made public; however, results are expected to be published this summer.

What would the system look like?

While it’s still too early to describe what the Indian e-invoicing system will look like with any real certainty, speculation has naturally already begun. The CoO was specifically asked to investigate how the current eWaybill system could be recycled into a mandatory e-invoicing system, and it is therefore very likely that the new framework will bear strong similarities to the eWaybill process.

Such similarities include the principle of real-time or near-real-time generation of invoice number ranges by a central platform, which must then be included on the invoice document in order for it to constitute a fiscally valid invoice. In other words, this type of system would not entail issuance of the invoice on a clearance portal, such as in Italy, but constitute a somewhat softer version of a clearance e-invoicing system.

What’s next?

E-invoicing has been a legal possibility and practical reality in India for a number of years now, and as a result many companies are up and running with PDF-based e-invoicing in the country. Given the size of the Indian economy and the role it plays in global manufacturing, any major e-invoicing reform will have significant impact, not just on local businesses but on international commerce as a whole.

On 21 June, the GST Council is set to discuss the general topic of tax controls and how to increase tax collection through modernised compliance requirements. It remains to be seen if the GST Council is ready to formally decide on the introduction of mandatory e-invoicing in the country, or if it is ready to publish a high-level framework for basic considerations such as scope, dates for entry force and high-level technical principles.

If not, there’s still no reason to worry that a decision will be delayed; if anything, it would be wise to expect the opposite: the government has repeatedly displayed the ability to get things done with remarkable speed. Strengthened as the prime minister is after the recent elections not even a month ago, there’s every reason to believe that this project won’t be an exception.

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