Saturday, 26 August 2023

Penal provisions for not issuing E Invoice.

 It is a common error that a so called regular tax invoice has been issued but an E-invoice for the same has not been generated and the IRN has not been mentioned on the tax invoice. What is the severity for such non-compliance? Decoding the penalty provisions for such non-compliance below:

 
1. Rule 48(4) and (5) infer that, where e-invoicing is applicable, any invoice issued other than in such manner shall not be treated as an invoice for the purpose of the Act. Based on this reading, it is a common notion that Section 122(1) penalty for supply of goods/services without issuing an invoice, shall be applicable. However, by collective reading of Section 122, it may be understood that this section shall come into play only when there is tax evasion by the RP. If regular tax invoice (so called) has been raised, disclosed in GSTR-1 and tax has been discharged in GSTR-3B, penalty under Section 122(1) may not be applicable since there is no evasion of tax.
 
2. Since, no specific provisions of Section 122 are applicable, one may be penalized under Section 125 - general penalty for contravention of Rule 48(4) and (5).
 
However, it may be possible to be argued that neither of the penalty provisions shall be applicable. Section 126 restricts imposition of penalty for "minor breaches/procedural requirements/any omission or mistake in documentation which is easily rectifiable and made without fraudulent intent or gross negligence". Since, regular tax invoice (so called) has been raised and disclosed and discharged through GST returns, it is just a minor breach not having any tax implications. Further, there is no time restriction for raising an e-invoice, the same may be done at any point in time after issuing a regular tax invoice (so called) and it is a curable defect i.e., it is rectifiable as per Section 126.
 
Placing reliance on Section 126, no penalty should be imposed in cases similar to the above.

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