SMEs supplied by large cos could face ITC denial over wrong e-invoice

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SME Times News Bureau | 06 Nov, 2020
Small businesses will need to be extra careful while taking supplies from big vendors from November as they would not be able to claim input tax credit on such supplies if the supplier has issued a non-compliant e-invoice.

The government has made e-invoice generation mandatory for all businesses with a turnover of over Rs 500 crore from October 1 with some relaxation available till the end of the month. What this means is that any supplies made by these large corporations without proper e-invoices will deny even the receiver of goods and services the claim made over ITC (input tax credit).

E-invoicing is a system wherein invoices generated for each transaction are registered electronically by the Invoice Registration Portal (IRP) for use on the common GST portal. The system curbs tax evasions and checks fake and fraud invoices while helping in establishing an audit trail of B2B invoices presenting data in a standardised format.

Sources said that the Central Board of Indirect Taxes and Customs (CBIC) may disallow claims of ITC made by a trader that receives goods and service against a non-compliant e-invoice or where e-invoice had not been issued at all.

This, sources said, will follow from provisions in CGST wherein recognition of a e-invoice issued in violation of rule 48(4) of the CGST Rules 2017, is not considered valid.

"Taxpayers, before procuring any supplies from large vendors, must ensure that e-invoice is issued to them for the said supplies. In case of any default by the supplier in issuing an e-invoice, entire tax credit on the said invoices would be negated, resulting in dead loss to the recipient," said Rajat Mohan Senior Partner at AMRG & Associates.

"Citing the importance of e-invoicing compliance by suppliers National Informatics Centre has issued a list of entities registered for issuing e-invoices," he added.

What the staggered implementation of e-invoicing norms has done is that it has made the process cumbersome for businesses as they would now have to maintain a check on the authenticity and correctness of e-invoices generated by their suppliers or else they could be be denied tax credits available under the GST system.

The Finance Ministry had made e-invoicing mandatory for all organisations with turnover exceeding Rs 500 crore from October 1. Those above Rs 100 crore turnover are required to follow e-invoicing from January 1, 2021 followed by a roll-out for all taxpayers with effect from April 1, 2021.

The Rs 500 crore turnover has brought who's who of India Inc. under the new e-invoicing regulations. These include companies like Vodafone, Exide, ABB, Abbott, Reliance Industries etc.