What are the New GST Regulations from the Government imply and how they might affect Businesses?

Introduction

For businesses that are GST-registered, this is crucial because they had to comply with many GST requirements before the year started, including creating new invoice analyzing series, assessing collected turnover to determine whether to choose the periodic return and monthly payment scheme for FY 2023–2024, filing LUT for FY 2023–2024, and deciding whether to use e-invoicing. To avoid any unpleasant encounters with the tax office, businesses of all payer types must be aware of the changes and adhere to the much more recent GST norms and requirements. Along with this conformity, the law regulating the goods and services tax (GST) will alter in many ways which has started changing from April 1, 2023. 

What will the new change focus on?

The government is considering reducing the minimum amount needed for businesses to produce e-invoices for business-to-business (B2B) deals from Rs 10 crore to Rs 5 crore and is rolling out an automatic exchange examination section for GST returns in an internal usage for central tax officers as two major initiatives to reduce tax evasion and boost conformity under the Goods and Services Tax (GST) regime.

These amendments are anticipated to widen the compliance requirement for more organizations, notably medium-sized businesses, and aid enhance the GST revenue collecting amid an increase in GST frauds and incidents of fraudulent invoices.

What does the automatic return inspection mechanism do?

In an examination of the Central Board of Indirect Taxes & Customs (CBIC) last week, Finance Minister Nirmala Sitharaman directed that an online return inspection mechanism for GST returns be implemented as soon as possible. According to a statement from the finance ministry, this will allow the officers to carefully examine the GST returns of taxpayers with central administration who have been chosen based on statistical analysis and system-identified concerns.

The tax officers will see disparities resulting from hazards related to a return. According to the statement, they will communicate with taxpayers via the GSTN common portal regarding disparities found in returns and take appropriate action, such as issuing an order accepting a response, issuing a show-cause notice, or starting an audit or probe.
According to the government, the digital return inspection mechanism has already started reviewing GST returns for FY 2019–20, and the necessary data is already in the hands of the tax authorities.

What modifications are made for e-invoicing?

The government has reduced the requirement for companies to produce digital invoices for business-to-business (B2B) transactions from Rs. 10 crores under GST to Rs. 5 crores. The modifications will take effect on August 1st.

The Finance Ministry announced reducing the e-invoicing level in a notification dated May 10. Currently, all business-to-business transactions have to produce an electronic invoice for companies with a turnover of at least Rs 10 crore.

What is intended by e-invoicing?

The fundamental goal of the e-invoice norm, which was accepted by the GST Council at its 37th session in September 2019, was to facilitate compatibility throughout the whole GST ecosystem. To establish an agreed-upon norm for all bills, a gradual approach was suggested. Specifically, an e-invoice issued by one software would have to be able to be read by any other software, allowing for consistent interpretation of an invoice owing to machine accessibility.

The tax authorities can pre-populate the return and minimize reconciliation concerns using a uniform invoicing mechanism. The GST authorities have advocated for the introduction of this e-invoicing structure due to a large number of instances including fake invoices and fraudulent claims for input tax credits. As tax collectors will have real-time knowledge of data, the new system is anticipated to assist in curb tax evaders' actions while decreasing the number of frauds. E-invoicing was once made available to big businesses with annual revenue of 500 crore rupees, however, after three years the cap was decreased to 5 crore rupees.

For companies with a revenue of more than Rs 500 crore, e-invoicing for business-to-business transactions would be required as of October 1, 2020. From January 1, 2021, it was subsequently broadened to companies with annual revenue of over Rs 100 crore. From April 1, 2021, it became available to companies with annual revenue of over Rs 50 crore, and from April 1, 2022, the minimum revenue requirement was dropped to Rs 20 crore. From October 1, 2022, it decreased again to Rs 10 crore.

What do professionals have to say about this?

While lowering the electronic billing threshold is thought to be a key component in increasing GST collections and reducing fraud, it will also make it more difficult for smaller enterprises to comply with regulations.

The scope of MSMEs covered by e-invoicing will be enlarged as a result of this news, according to Mahesh Jaising, Partner and National Indirect Tax Leader of the Indirect Tax Group at Deloitte. MSMEs will now need to implement e-invoicing. According to Jaising, "e-invoicing is a blessing for businesses rather than a nightmare because e-invoicing-compliant suppliers result in proper flow of input tax credits and decrease the churn around credit concerns.

According to Saurabh Agarwal, an EY Tax Partner, the sector needs to review its vendor masters and make sure that starting in August 2023, every vendor providing goods or services and exceeding the threshold turnover of Rs 5 crore must issue an electronic invoice to avoid any disputes regarding the use of input tax credits.
"The government will embark on an effort on fake GST invoices and fake GST registrations for two months from 16 May 2023 to 15 July 2023," said Vivek Jalan, Partner, Tax Connect Advisory. The government is cutting the minimum amount required for creating e-invoices on those taxpayers with a yearly cumulative turnover of Rs 5 crore or more to make it even stricter to combat the problem of fictitious invoices.

Conclusion

The tax authorities can pre-populate the return and minimize reconciliation concerns using a uniform invoicing mechanism. The GST officials have called for the start of this e-invoicing system due to the high number of cases that involve fake invoices and fraudulent claims for input tax credits. As tax collectors will have immediate knowledge of the data, the e-invoicing system is anticipated to assist in curb tax evaders' actions while decreasing the number of frauds.

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Author:

Archita Sharma
Kanpur
IV year BA.LLB (Hons.) student from PSIT College of Law