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GST Update: E-invoice Limit Reduced to ₹1 Crore from April 2025—What Businesses Need to Know

The GST Council is considering a significant revision in e-invoicing rules, which may lower the mandatory e-invoicing threshold from ₹5 crore to ₹1 crore, effective April 1, 2025. If this proposal is implemented, a large number of small and medium businesses (SMBs) will have to comply with the e-invoicing system.

Currently, only businesses with an annual turnover of ₹5 crore and above are required to generate e-invoices. Over the years, the GST Council has gradually reduced this limit to expand compliance and improve tax transparency.

History of E-Invoicing Threshold Changes

The Indian government introduced the e-invoicing system in October 2020, starting with large businesses. Since then, the turnover threshold for mandatory e-invoicing has been gradually reduced:

  • October 1, 2020 – Applicable to businesses with turnover above ₹500 crore.
  • January 1, 2021 – Extended to businesses with turnover above ₹100 crore.
  • April 1, 2021 – Further reduced to businesses with turnover above ₹50 crore.
  • April 1, 2022 – Expanded to businesses with turnover above ₹20 crore.
  • October 1, 2022 – Applied to businesses with turnover above ₹10 crore.
  • August 1, 2023 – Reduced further to ₹5 crore (current threshold).
  • Expected April 1, 2025 – May be lowered to ₹1 crore (yet to be confirmed).

This trend suggests that the GST Council aims for universal e-invoicing in the future, possibly covering businesses with even lower turnover in subsequent phases.

What is E-Invoicing?

E-invoicing under GST does not mean generating invoices online but rather involves validating invoices through the GST portal, which assigns a unique Invoice Reference Number (IRN). This process helps:

✅ Standardize invoices across businesses
✅ Prevent fraudulent ITC claims and tax evasion
✅ Ensure smooth compliance and better record-keeping

Who Will Be Affected if the Threshold Drops to ₹1 Crore?

If the threshold is reduced to ₹1 crore, the following businesses will have to comply:

🔸 SMEs (Small and Medium Enterprises) that previously did not require e-invoicing.
🔸 Manufacturers, wholesalers, and traders with an annual turnover between ₹1 crore and ₹5 crore.
🔸 Service providers issuing B2B invoices above this threshold.

Impact of Non-Compliance:

  • Businesses won’t be able to generate valid invoices, leading to denial of Input Tax Credit (ITC) for buyers.
  • Heavy penalties under GST may be imposed for non-compliance.
  • Increased operational burden for small businesses that are not yet tech-enabled.

Why Might the GST Council Introduce This Change?

The expected lowering of the e-invoicing threshold is likely driven by:

✔ Stronger tax transparency: Helps in real-time tracking of transactions and reduces fake invoicing.
✔ Efficient ITC management: Ensures that businesses claim only legitimate Input Tax Credit.
✔ Simplified compliance framework: Encourages digital transformation and standardization across businesses.

Over time, the government has been expanding e-invoicing gradually, preparing businesses for wider implementation. The next logical step is reducing the threshold further to cover all businesses above ₹1 crore turnover.

How Should Businesses Prepare for This Change?

Even though this reduction is not yet confirmed, businesses should start preparing:

📌 Assess Your Turnover – If your annual turnover is close to ₹1 crore, consider implementing e-invoicing early.
📌 Upgrade Accounting & Billing Software – Ensure your ERP or invoicing software integrates with GSTN’s e-invoice system.
📌 Train Your Team – Educate finance teams about e-invoicing rules, IRN generation, and compliance.
📌 Test E-Invoicing Now – If possible, start voluntarily generating e-invoices to avoid last-minute disruptions.

Conclusion

The expected reduction of the e-invoicing threshold to ₹1 crore from April 1, 2025 could bring thousands of SMEs under the GST compliance net. While this is yet to be officially confirmed, it aligns with the government’s long-term objective of wider e-invoicing adoption.

Businesses should start preparing now by upgrading their invoicing systems and ensuring compliance readiness. Early preparation will help avoid last-minute confusion, penalties, and business disruptions.

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