How India's new 7-day time limit for e-invoice generation affect some taxpayers

The Indian government had introduced e-invoicing in 2020, mandating a certain category of taxpayers to generate invoices in an electronic and standardised format on the Invoice Registration Portal (IRP). However, beginning with taxpayers exceeding a turnover of Rs. 500 crore, the e-invoicing mandate now extends to taxpayers exceeding a turnover of Rs. 10 crore, with a few exceptions.

Until now, there was no time limit for e-invoice generation. Taxpayers had the option to generate e-invoices in real-time or even after a few days or weeks. However, now there is a new restriction; a seven-day time limit for reporting invoices to the IRP. The time limit will apply to e-invoicing-eligible businesses with a turnover of Rs.100 crore or more from 1st May 2023.

How did taxpayers generate e-invoices until now?


e-Invoice generation has typically involved the creation of invoices on the taxpayer’s own accounting or ERP system and then uploading of the same to the IRP for authentication. The IRP generates a unique Invoice Reference Number (IRN) and QR Code for each e-invoice. The data is then transferred electronically to the GST and e-way bill portals, eliminating the need for repeated data entry.

The process of e-invoice generation varies depending on taxpayer type and scale of business. Larger taxpayers typically prefer automated and real-time e-invoice generation either directly on the IRP or through government-authorised GST Suvidha Providers. Even taxpayers with a huge volume of invoices each month prefer automated solutions for their speed and accuracy. On the other hand, smaller taxpayers or taxpayers with just a few invoices each month generate their e-invoices manually or through offline tools. This process is time-consuming and could be error-prone.

Further, up to this point, there has been no time limit for the generation of e-invoices. Some taxpayers did it in real-time, while others consolidated and generated e-invoices on a weekly or monthly basis. This gave rise to the issue of several taxpayers backdating their e-invoices, with absolutely no way for the government to track this practice.

New 7-day time limit effective May 1

According to the recent advisory, taxpayers with an annual aggregate turnover (AATO) of Rs.100 crore and above will not be allowed to report invoices that are older than seven days as on the date of reporting. It is important to note here that this timing restriction only applies to the document type ‘invoices’ and not to debit and credit notes. The new seven-day time limit will apply from 1st May 2023 and was introduced in a bid to ensure timely compliance and prevent the backdating of e-invoices.

For example, for an invoice dated 7th May 2023, there will be time up to 14th May 2023 to generate the e-invoice. Post 14th May 2023, there will be no option to upload and generate an e-invoice on the IRP. Validations built into the IRP will prevent the user from reporting such invoices once the seven-day window has elapsed. Hence, notified taxpayers must ensure that they now report e-invoices within this seven-day window.

How does this new restriction impact taxpayers?

The new time limit imposed could give rise to several hassles and challenges for taxpayers. In large enterprises with multiple branches across the country, e-invoice generation typically takes place through centralised software. The branches affect the sales and issue invoices and then later send this data to the head office, where e-invoice generation takes place in bulk at a later date. Some of the reasons why e-invoice generation does not take place at a branch level include network connectivity issues in the case of remote locations, lack of finance teams at each branch, or simply due to cost-effectiveness.

Now, the new time limit restriction will create a major hassle for such businesses. They will need to take utmost care to adhere to the seven-day deadline of sharing invoice data with the head office, or alternately, will need to install an e-invoicing solution at every branch location.

Another major issue that may soon arise is when businesses fail to generate an e-invoice due to human error or any other reason. Until now, e-invoices could be generated even after a few weeks or a month later. Now, what happens if a business realises that they have missed generating an e-invoice after the seven-day period has lapsed? The invoice will not be valid without an IRN.

Further, it is possible that these errors may only get detected at the time of GSTR-1 filing, leading to mismatches since there is no option to generate e-invoices post the seven-day time period. It also puts the recipient business at a disadvantage as the input tax credit will not reflect in their GSTR-2B statement.

Can taxpayers comply more effectively with a real-time e-invoicing solution?

To allow taxpayers enough time to comply with this new restriction and make changes to their ERP system, it has been proposed to implement this restriction from 1st May 2023. With under three weeks to go, taxpayers should look at integrated and automated e-invoicing solutions that generate e-invoices in real time. This is the only way to ensure compliance with the new mandate.

Integrated solutions automatically push invoices to the IRP for e-invoice generation in real-time, preventing the taxpayer from having to track and ascertain if any invoices have been missed out on. Integrated solutions also offer advantages, such as 100% accuracy due to almost zero manual intervention, reduced effort in reconciling and filing GST returns and e-way bills, real-time tracking of invoices, and seamless flow of input tax credit to the recipient business.

(The author is the founder and CEO at Clear, or formerly ClearTax)