As per the e-invoicing mandate, every business (having turnover above 20 Cr.) is required to register all of its B2B and export invoices with the Invoice Registration Portal (IRP) to get a unique identification number known as the Invoice Reference Number (IRN). Thus, an e-invoice is a document with an IRN and a digitally signed QR code printed on it.

Once an IRN is generated and the invoice has been authenticated, its details are made available on the GST portal in T+2 days. If you want to learn more about e-invoicing and understand who needs to generate, how to generate, e-invoicing in relation to SEZ, RCM etc., please read – all about E-invoice under GST.

In this article, we will not just learn about the consequences of non-compliance with e-invoicing but also understand the mistakes to avoid to save yourself from the penalty. However, to do the same, we will first have to know the e-invoice applicability i.e. who is required to adhere to the e-invoicing mandate, read here: E-invoice under GST.

Consequences of non-compliance with e-invoicing mandate

1. Invalid Tax Invoice: As per Section 31 of the CGST Act, 2017, it is mandatory to issue an invoice or a bill of supply for every supply of goods or services or both. And Rule 46 (r) – provides for mentioning of QR Code where the invoice is issued under Rule 48(4). The QR code, as suggested above, is received when IRN is generated. Hence, If an invoice is not registered on the IRP, then such an invoice is not considered as a valid tax invoice and consequently attracts a penalty.
2. Failure of Invoice Issuance: As notified via several notifications, Rule 48(4) provides that a class of registered persons as may be notified shall issue an e-invoice and Rule 48(5) – provides that if an e-invoice is not issued even if it is required to be issued, then the invoice so issued shall not be a valid invoice. Hence, if a taxpayer fails to generate IRN, then it is considered as a failure of the issuance of an invoice.
3. Detention of Goods: As per Section 129 of CGST Act 2017, any transport of goods not in accordance with the rules laid down under the GST Act can lead to the detention of goods. As an invoice without a QR code is not to be considered as a valid invoice, hence, starting the transportation of goods without a valid tax invoice with an IRN may result in the detention of the items and the vehicles. This may also result in a standard penalty related to e-way bill.
4. Denial to ITC Claim: Under GST a tax invoice is an important document. It not only evidences the supply of goods or services or both but is also an essential document for the recipient to avail Input Tax Credit (ITC). As per Section 16 of CGST Act 2017, a registered person cannot avail input tax credit unless he is in possession of a tax invoice or a debit note. Hence, without a proper tax invoice that has an IRN, the buyer has the option to refuse delivery of the products and/or payment, which may affect the buyer’s ability to claim ITC. Also, without IRN, the invoice data will not be auto-populated to GSTR-1 of supplier and buyer’s GSTR-2A. In this scenario, buyer can not claim Input Tax Credit (ITC) for the tax already paid by supplier.
5. EWB and E-invoicing: Now with the e-way bill and e-invoicing pairing, it is all the more important to be extra cautious when carrying out transit transactions. Theoretically, an E-Way Bill should not be generated for an invalid document. And an invoice is invalid without an iRN (subject to applicability). Hence, a transit happening on an E-way bill generated for invalid e-invoice can be considered unauthorized movement of goods. While current govt systems are not ready to identify such cases, taxpayers should remain vigilant for the consequence.

While it is important to know the consequences of non-compliance to the e-invoicing mandate, it is also important to know the mistakes one should avoid when complying with the e-invoice mandate:

1. E-Invoice as per Validation Rules: As per the e-invoicing schema, there are a total of 132 data fields out of which 28 are mandatory and 18 are conditional mandatory. When we send the data for IRN generation, there are a lot of validations built to ensure correct data passes through. Hence, it is important that the e-invoice is made as per these validation rules for e-invoicing in order to avoid errors.
2. Business-specific scenarios: However, along with validations, there are some business-specific scenarios where these value validations fail but there is a workaround for such cases. So, read all the business-specific scenarios under e-invoicing that can help you to handle such cases.
3. Cancelling the invoices: The cancellation of an e-invoice is tricky and should be handled with proper attention to detail. Although, it is possible to cancel an IRN for an invoice that has already been uploaded or reported to the Invoice Registration Portal (IRP) and for which an IRN has been generated but cancellation must be done within 24 hours. If the e-way bill has already been generated or is active for the particular IRN, then it cannot be cancelled. In such cases of active e-way bill need to be cancelled first then only cancellation of IRN is possible.

Hence, one must avoid these mistakes when preparing e-invoices.

What is the penalty for non-compliance with e-invoicing?

In the event that there are any differences/errors in e-Invoices, the following 2 penalties are applicable, according to sub-rule (5) of Rule 48 under the CGST Act 2017:

• Penalty for non-issuance of e-invoice- 100% of the tax due or Rs.10,000 whichever is higher.
• Penalty for incorrect or erroneous e-invoice is Rs.25,000

As is evident, any non-compliance with the e-invoice mandate can result in heavy penalties to the taxpayers. Hence, it is important that taxpayers soon start to upgrade their systems to e-invoicing if not done already.

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The government is planning to soon reduce the e-invoicing threshold even further i.e. to businesses with an AATO of Rs. 10 Cr. and then to Rs. 5 Cr. It is important that you be prepared and have a system in place that can make your transition to e-invoicing seamless and IRIS E-invoicing Software can do that for you!