CA DK Agarwal

E-invoicing under GST

In a perfect world, every business or individual who comes under the purview of the tax system will wholeheartedly follow all the rules and will never make any advances to avoid or evade taxation. However, if this were to occur, there would be no need for a system in the first place. In the real world, people have different ideas; some follow the rules and meet all of the deadlines, while others may be non-compliant and even engage in fraudulent activities to avoid paying taxes.

The GST law of the land contains a detailed discussion of the consequences that a non-compliant person must face. It is critical to understand, especially for the newly added list of businesses and professionals with a turnover of more than Rs. 10 crores (implemented from 1st October, 2022) who have to face new compliance of E-invoicing. This article will give you a detailed peak in the consequences of not following the provisions of E-invoicing:

Table of Contents

  • Fundamentals of E-invoicing
  • Actions that may trigger consequences
  • Consequences of not following E-invoicing provisions
  • Penalty for non-complying E-invoicing Rules

Fundamentals of E-invoicing

Meaning: E-invoicing is a proposed system in which B2B invoices are digitally prepared and authenticated by the Goods and Services Tax Network (GSTN).

Purpose: The primary goal of e-invoicing is to ensure that all businesses use a consistent format when reporting invoices to the GST portal. The freedom to issue invoices in your own format was causing some friction for the betterment of GST complaints. Now that the scope of applicability of E-invoicing has been extended to businesses and professionals with a turnover of up to Rs. 10 crores, people must understand that the law requires a standard format of invoice that can be easily uploaded, monitored, and analyzed, and that makes the transactional process smooth while being entirely digital.

Actions That May Trigger Consequences

Consequences are not only reactions to your actions; doing nothing (no action or no compliance) will also result in consequences, and you will be penalized for it. The following are the actions, mistakes, or intentional activities that will result in non-compliance and, ultimately, penalty:

  1. Making a Wrong/Erroneous E-invoice

It is possible that noncompliance is the result of a clerical error. That’ll be a bummer, won’t it? The e-invoicing schema specifies 132 data fields, 28 of which are required and 18 of which are conditionally required. We include a number of validations when we send data for IRN generation to ensure that only the correct data is sent. As a result, in order to avoid errors, it is critical that the e-invoice is created in accordance with these e-invoicing validation rules.

  • Case-to-Case Hiccups

The compliance of E-invoice would be a cakewalk for many businesses whose daily transactions were simple and could easily be transited into the e-invoicing channel, but it is possible that some businesses’ customs and normal practices would get in the way of the compliance part. To avoid this simple action that causes noncompliance, a slow but strong transition (even industry-wide) is suggested.

  • Technical Twists

It also may happen that the businesses are unaware or have very little knowledge about the provisions of e-invoicing and may carry out an action that they believe to be normal but turns out to be violating.

For Example: Canceling an e-invoice is difficult and should be done with care. 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, cancellation must be done within 24 hours. If the e-way bill has already been generated or is active for the specific IRN, it cannot be canceled. In such cases, the active e-way bill must be canceled first, followed by the cancellation of the IRN.

  • Intentional Actions

The above topics are considered genuine mistakes whereas actually believing that one can fool the tax system and evade tax fraudulently is a mistake as well. The digitalization of the tax system is the strongest step taken to eliminate these intentional activities to evade taxes.

Consequences of Not Following E-invoicing Provisions

When compared to the purpose it serves in the GST system, the consequences of E-invoice are very logical. However, unlike the majority of provisions, E-invoice is linked to so many other aspects of the GST channel and serves as evidence to a transaction occurring, that if the provisions for E-invoicing are not followed, you somehow mess up and attract penalties from the other sections as well:

  1. No E-invoice, Means No Invoice

Rule 48(4) states that an e-invoice must be issued by a specified class of registered persons, and Rule 48(5) states that if an e-invoice is not issued, even if it is required, the invoice issued is null and void. As a result, failing to generate IRN is equivalent to failing to issue an invoice and if a transaction has no issue of invoice it turns out to be a bogus transaction which then will attract a penalty under section 122 of CGST Act, 2017.

  • Invoice Stands Invalid

Every supply of goods, services, or both must be accompanied by an invoice or a bill of supply, according to Section 31 of the CGST Act of 2017. And, where an invoice is issued under Rule 48, Rule 46 (r) requires the mention of a QR code (4). The above-mentioned QR code is received when an IRN is generated. As a result, if an invoice is not registered on the IRP, it is deemed invalid and subject to a penalty.

  • Restriction to Utilize ITC

A tax invoice is an essential document under GST. It not only proves the supply of goods or services, or both, but it is also required for the recipient to claim ITC. Section 16 of CGST Act, 2017 states that a registered person cannot claim input tax credit unless he has a tax invoice or a debit note. As a result, without a proper tax invoice with 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. Furthermore, without IRN, invoice data will not be auto-populated to GSTR-1 of the supplier’s and buyer’s GSTR-2A. In this case, the buyer cannot claim ITC for the tax already paid by the supplier.

  • Probable Transit Hinderance

Improper e-invoices or no e-invoices will be treated as no invoices at all, as stated in Section 129 of the CGST Act 2017, which states that any transport of goods that does not follow the rules outlined in the GST Act may result in the detention of goods. Starting the transportation of goods without a valid tax invoice with an IRN may result in the items and vehicles being detained because an invoice without a QR code is deemed invalid. This may result in a standard e-way bill penalty, detention of goods, vehicle confiscation, and other consequences.

  • E-invoice Affects E-wayBill Compliance

With the combination of e-way bill and e-invoicing, it is even more important to exercise extreme caution when conducting transit transactions. An E-Way Bill should not be generated for an invalid document, in theory. In addition, an invoice is not valid without an IRN (subject to applicability). As a result, a transit on an E-way bill generated for an invalid e-invoice can be considered an unauthorized movement of goods. While current government systems are not equipped to detect such cases, taxpayers should be on the lookout for the consequences.

Penalty For Non-complying E-invoicing Rules

Yes, not complying to the rules of E-invoicing would surely attract penalties and interest. According to sub-rule (5) of Rule 48 of the CGST Act 2017, if there are any differences/errors in e-Invoices, the following two penalties apply:

Failure to issue an e-invoice100% of the tax due OR Rs.10,000, Whichever is greater.
Submitting an incorrect or erroneous e-invoiceRs. 25,000

The actions that have malpractices or ill-intentions also have penalties mentioned in Section 122 and Section 132 of CGST Act, 2017.


Noncompliance with the e-invoice mandate, as is obvious, can result in significant penalties for taxpayers. It is critical for all taxpayers, particularly those added to the list after October 1st, 2022, to understand the E-invoice as part of their daily transactions, and if taxpayers have not already done so, it is critical that they begin upgrading their systems to e-invoicing as soon as possible.

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