The Central Board of Indirect Taxes and Customs (‘CBIC’) has recently released a circular (Circular No. 198/10/2023-GST dated 17.07.2023) to provide clarity on the applicability of e-invoicing under r. 48(4) of the Central Goods and Services Tax (‘CGST’) Rules, 2017 for transactions involving government departments, establishments, agencies, local authorities, and Public Sector Undertakings (‘PSUs’) registered for tax deduction at source under s. 51 of the CGST Act, 2017.
According to the circular, e-invoicing involves the issuance of electronically authenticated invoices through designated Goods Services and Tax Network (‘GSTN’)notified portals. It is applicable to supplies of goods and services made by registered persons whose turnover exceeds the prescribed threshold to government departments, establishments, agencies, local authorities, and PSUs registered under s. 51 of the CGST Act. The threshold for requiring e-invoicing has been revised several times since its introduction in 2020. Most recently vide Notification No. 10/2023 dated 10.05.2023, it applies to all registered persons with an aggregate turnover exceeding Rs. 5 crores in any preceding financial year from 2017-18 onwards.
The circular aimed to resolve any ambiguity regarding whether registered persons, whose turnover exceeds the prescribed threshold for e-invoicing, are required to issue e-invoices for supplies made to government departments, establishments, agencies, local authorities, and PSUs registered solely for tax deduction at source under s. 51 of the CGST Act.
The clarification from CBIC states that government departments, establishments, agencies, local authorities, and PSUs, which are mandated to deduct tax at source under s. 51 of the CGST Act and are also required to register as per s. 24(vi) of the CGST Act, are deemed as registered persons as defined under s. 2(94) of the CGST Act. As a result, any person registered whose turnover exceeds the prescribed threshold for e-invoicing, is obligated to issue e-invoices for supplies made to such government entities.
The circular issued by the CBIC on 17.07.2023 regarding the issuance of e-invoices for supplies made to government agencies under s. 51 of the CGST Act, provides much indeed clarification. It aims to eliminate the lingering uncertainty about whether registered individuals, whose turnover exceeds the prescribed threshold, must issue e-invoices under r. 48(4) of the CGST Rules for supplies to government bodies, including PSUs, responsible for tax deduction at source under s. 51 of the CGST Act. This circular plays a pivotal role in streamlining the e-invoicing process and promoting transparency in the taxation system. Additionally, it encourages stakeholders to promptly report any difficulties in implementing the circular to the CBIC.
*Authored by Kushagra Gahlot, Advocate at Metalegal Advocates. The views expressed are personal and do not constitute legal opinion. *
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