Shreyansh Singh, an IIT Kanpur alumnus, has eight years of experience in the finance industry. He has spent 5 years at American Express developing mid to long-term strategies for multiple markets including US, Europe and India. Shreyansh currently leads Growth and Strategy initiatives at Pice.
New Declaration Feature for Exempt Entities: Businesses exempt from e-invoicing can now declare their exemption status directly on the GST e-invoice portal, streamlining compliance.
Mandatory for Exempt Taxpayers: The GSTN advisory mandates this declaration even for entities that fall under exemption categories, ensuring clear communication of their status to authorities.
E-invoicing Still Mandatory for Others: Businesses with an annual turnover of ₹5 crore or more must generate e-invoices unless specifically exempt.
Exemptions Apply by Entity Type, Not Turnover: Institutions like SEZ units, banks, NBFCs, and government bodies remain exempt regardless of turnover.
Supports Transparency and ITC Claims: Declaring exemption promotes audit clarity and reduces discrepancies in ITC claims between suppliers and recipients.
A new functionality has been introduced on the GST e-invoice portal. It supports businesses in the declaration of their exemptions from electronic invoicing. This update is of much importance for financial institutions and other types of entities which are exempt from generating tax invoices through an e-invoicing system based on annual turnover.
The GST declaration feature aims to simplify the process of meeting compliance requirements by offering a straightforward way to notify authorities of such applicable exemptions. Read on to know all about all that GST tax invoice declaration entails.
What is the E-Invoicing Mandate?
The e-invoicing mandate under GST is an electronic authentication of B2B tax invoices made through the Invoice Registration Portal (IRP). The portal is government-mandated. Its introduction is to facilitate transparency and reduce any tax evasion. This system applies to every registered person and business whose aggregate turnover exceeds the prescribed threshold. The e-invoicing turnover limit is ₹5 crore effective from 1st August, 2023 onwards.
Under this mandate, invoices must be reported through a unified portal infrastructure. This system enables real-time reporting, validation and assignment of Invoice Reference Numbers (IRNs). In order to ease the compliance burden, especially for large businesses that are engaged in bulk invoicing, the portal supports automated data uploads and integrations.
Businesses who claim GST tax invoice declaration with these exemptions need to submit a form to notify concerned authorities of their ineligibility. Overall, e-invoicing helps to streamline the tax ecosystem, reduce errors and ensure better enforcement of GST compliance.
E-Invoice Mandate Exemptions
The Indian government has implemented an e-invoicing system according to GST rules. This has been implemented in a phased manner. It is mandatory for businesses based on their aggregate turnover. However, there are a few categories of entities which are exempt from such generation of e-invoices regardless of their turnover. A few such exemptions applicable to entities and not on transactions are:
Special Economic Zone (SEZ) units have exemptions
Financial and Banking institutions including insurance companies, NBFCs (Non-Banking Financial Companies)
GTAs (Goods Transport Agencies) supplying services
Passenger transportation services
Cinematograph film exhibitions in multiplexes
Government departments and local authorities
Staying compliant and informed with e-invoice exemption mandates ensures a smooth experience to avoid facing penalties. It also supports an efficient and transparent ecosystem of GST.
Additional Things to Remember Regarding E-Invoice Mandate Exemptions
Here is a list of additional things to remember regarding E-invoice mandate exemptions:
The exemptions apply only if the entity’s supply of services falls under the exempt categories.
The SEZ developers are not exempt. Rather, only the SEZ units are.
Exemptions apply to applicable entities despite their aggregate annual turnover.
Mandatory Declaration of E-Invoice Exemption Under GSTN Advisory
E-invoicing under GST is very important when making an invoice legally valid. The new GSTN advisory states that E-invoice exemption declaration functionality is mandatory regarding a business’s supply of services. The feature is mainly meant for taxpayers who use e-invoicing but at the same time have an exemption from doing it under the GST Act.
Hence, businesses need to take note of this so that they can apply for exemption under this new compliance requirement.
Conclusion
The functionality for GST tax invoice declaration provides transparency and streamlines compliance for exempt taxpayers. This in turn facilitates a smooth audit and supports ITC (Input Tax Credit) claims. This update is vital to reduce any presence of errors between suppliers and recipients regarding the applicability of e-invoices.
Taxpayers are hence encouraged to adapt their billing systems for incorporating this declaration and stay compliant with the ever-evolving GST norms. Overall, this move also marks a step towards a more efficient and robust tax administration system in India.
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FAQs
Who needs to submit the e-invoice exemption declaration on the GST portal?
Businesses and entities that are exempt from generating e-invoices under the GST mandate must submit this declaration. These include financial institutions, SEZ units, insurance companies, GTAs, and government bodies. Even if their annual turnover exceeds ₹5 crore, they must officially declare their exemption status to remain compliant.
Is the exemption declaration mandatory even if my business never generated e-invoices?
Yes, according to the GSTN advisory, the declaration is mandatory for all exempt entities, irrespective of whether they previously generated e-invoices. This formal notification helps prevent compliance-related discrepancies and ensures accurate status records on the GST system.
What is the purpose of introducing this declaration feature?
The exemption declaration functionality aims to enhance transparency, reduce compliance errors, and ensure accurate status tracking by GST authorities. It also helps in validating ITC claims and streamlining audits by clearly distinguishing between e-invoice issuers and exempt entities.
Are SEZ developers also exempt from e-invoicing?
No, only SEZ units are exempt from e-invoicing. SEZ developers are not included under this exemption and must continue to generate e-invoices if their turnover crosses the ₹5 crore threshold. It's important to differentiate between the two to avoid non-compliance.
How can businesses submit their exemption declaration on the e-invoice portal?
Eligible taxpayers must log in to the e-invoice portal and access the exemption declaration section. There, they must fill out a form indicating the reason for exemption and submit it for record. This ensures that their exemption is officially recognized by GST systems.
Shreyansh Singh, an IIT Kanpur alumnus, has eight years of experience in the finance industry. He has spent 5 years at American Express developing mid to long-term strategies for multiple markets including US, Europe and India. Shreyansh currently leads Growth and Strategy initiatives at Pice.
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