E Invoice consequences and penalties

If a taxpayer falls under the criteria for e-invoicing but fails to generate the e-invoice, there can be consequences and penalties.

1Penalty: Under Section 122 of the CGST Act, 2017, any person who fails to generate an e-invoice as per the requirements can be liable to a penalty. The penalty for non-compliance is INR 10,000 or an amount equivalent to the tax evaded, whichever is higher.

2Notice and Demand: Tax authorities may issue a notice to the taxpayer demanding an explanation for non-compliance with e-invoicing requirements. The taxpayer must respond to the notice within the stipulated time, providing an explanation for the non-compliance. If the explanation is unsatisfactory, the tax authorities may impose penalties.

3Input Tax Credit Denial: If a supplier fails to generate an e-invoice, the recipient of the supplies may face issues in claiming Input Tax Credit (ITC) on the supplies. As per GST laws, ITC can only be claimed if the details of the invoice are uploaded by the supplier in the GST portal, which is automatically done when e-invoices are generated. If the supplier fails to generate an e-invoice, the recipient may not be able to claim ITC, leading to increased costs.

4Audit and Scrutiny: Non-compliance with e-invoicing requirements can also lead to increased scrutiny and audit by tax authorities, which could result in additional time and resources spent on addressing their concerns.

To avoid these consequences, it's essential for taxpayers to understand and adhere to the e-invoicing requirements under Indian GST laws.