What is the current e-invoicing threshold under GST?

Notification 10/2023 Central Tax dated 10 May 2023 lowered the e-invoicing threshold from ₹10 crore to ₹5 crore aggregate turnover effective 1 October 2023. Every taxpayer whose aggregate turnover in any preceding financial year from 2017-18 onwards exceeded ₹5 crore must generate e-invoices for B2B supplies, exports, and credit/debit notes. The threshold is rolling, once crossed in any year, the obligation continues. Notification 1/2025 Central Tax has further proposed a reduction to ₹3 crore from 1 April 2026, although the timeline has been deferred.

What is an Invoice Reference Number (IRN)?

The IRN is a unique 64-character hash code generated by the Invoice Registration Portal (IRP) for every B2B invoice. The IRN is computed by the IRP from the supplier GSTIN, the financial year, the document type, and the document number, using a SHA-256 hash. An invoice without an IRN is not a valid GST invoice for the buyer to claim input tax credit. The IRN, along with a digitally signed QR code, must be printed on the invoice before it is issued to the buyer.

What is the INV-01 schema?

The INV-01 schema is the standardised JSON template prescribed by the GSTN for e-invoice data exchange with the IRP. It contains over 130 mandatory and optional fields covering supplier details, buyer details, dispatch details, item-level data (HSN, UQC, taxable value, tax rates), payment information, and shipping details. The schema is documented at einvoice1.gst.gov.in and is versioned (current version 1.1). The supplier's ERP or accounting software must serialise the invoice into the INV-01 JSON, transmit to the IRP, receive the IRN and signed QR, and embed them in the invoice PDF.

What is the time limit to upload an e-invoice to the IRP?

The GST Council in its 49th meeting recommended a 7-day reporting window from the invoice date for taxpayers with aggregate turnover above ₹100 crore, effective 1 May 2023, later expanded to all e-invoice taxpayers effective 1 November 2024. Beyond 7 days, the IRP rejects the e-invoice upload. The buyer cannot claim ITC on an invoice without an IRN. For B2B invoices, this is a hard cap on the supplier's billing cycle, late uploads invalidate the invoice for credit.

What is the penalty for non-compliance with e-invoicing?

Section 122(1) of the CGST Act, 2017 imposes a penalty of ₹10,000 or the tax involved (whichever is higher) for issuing an invoice without an IRN where e-invoicing is mandatory. Section 122(3) imposes ₹25,000 penalty for the wrong information furnished. The buyer is denied ITC on an invoice without an IRN under Section 16(2)(aa) of the CGST Act read with the IRN validation rule. The combined effect is a cash impact on both supplier (penalty) and buyer (ITC denial), making e-invoicing a counterparty-relationship issue, not just a supplier compliance issue.

Which invoices are exempt from e-invoicing?

Notification 13/2020 Central Tax (as amended) exempts the following: (a) B2C invoices (these still require the dynamic QR code under Notification 14/2020 for taxpayers with turnover above ₹500 crore), (b) supplies by SEZ developers and SEZ units (but not by SEZs to DTA), (c) financial services by banking companies, insurance companies, financial institutions and NBFCs, (d) goods transport agencies, (e) passenger transport services, (f) government departments and local authorities, (g) Section 7 (free supplies) by SEZ units. All other B2B invoices, export invoices, and credit/debit notes for taxpayers crossing the threshold are subject to e-invoicing.

GST e-invoicing at the ₹5 crore threshold: the compliance architecture every mid-market business must build

The threshold reduction that pulled mid-market India into the perimeter

The Government of India's e-invoicing journey began with the 2019 GST Council recommendation and the phased rollout starting October 2020 for taxpayers above ₹500 crore turnover. The threshold was reduced to ₹100 crore in January 2021, ₹50 crore in April 2021, ₹20 crore in April 2022, ₹10 crore in October 2022, and ₹5 crore in October 2023 via Notification 10/2023 Central Tax. Each reduction pulled a new band of taxpayers into the perimeter.

The October 2023 reduction to ₹5 crore was the watershed moment for mid-market India. Approximately 1.7 million additional taxpayers were brought within the e-invoicing perimeter, including most mid-sized manufacturers, distributors, service providers, and trading firms across tier-1 and tier-2 cities. Many of these businesses operate on offline accounting systems, partial Tally or QuickBooks deployments, and manual invoice issuance workflows. The compliance gap is acute.

This post walks through the e-invoicing framework, the IRN generation workflow, the INV-01 schema fields that the IRP commonly rejects, the integration architecture between the ERP and the IRP, and the Section 122 penalty exposure for non-compliance.

The legislative and notification framework

The legal basis for e-invoicing is Section 31 of the CGST Act, 2017 read with Rule 48(4) of the CGST Rules, 2017. Rule 48(4) provides that the invoice issued by a notified class of registered persons must contain particulars in Form GST INV-01 and that the IRN obtained from the IRP must be embedded in the invoice. The notified class is specified through CBIC notifications.

The current operative notification chain is:

Notification 13/2020 Central Tax dated 21 March 2020 (initial notification, ₹500 crore threshold from 1 October 2020)
Notification 88/2020 Central Tax dated 10 November 2020 (₹100 crore from 1 January 2021)
Notification 5/2021 Central Tax dated 8 March 2021 (₹50 crore from 1 April 2021)
Notification 1/2022 Central Tax dated 24 February 2022 (₹20 crore from 1 April 2022)
Notification 17/2022 Central Tax dated 1 August 2022 (₹10 crore from 1 October 2022)
Notification 10/2023 Central Tax dated 10 May 2023 (₹5 crore from 1 October 2023)

The IRP infrastructure is operated by the GSTN through multiple IRPs: einvoice1.gst.gov.in (primary), einvoice2.gst.gov.in (secondary), and four additional IRPs operated by GSP partners. All IRPs accept the same INV-01 schema and produce the same IRN, the multi-IRP design provides load balancing and redundancy.

The IRN generation workflow

The IRN generation involves five steps end-to-end.

Step 1: Invoice preparation in the ERP. The supplier's ERP or accounting software creates the invoice in the regular workflow with all mandatory GST particulars (supplier GSTIN, buyer GSTIN, place of supply, HSN/SAC codes, taxable value, IGST/CGST/SGST, total invoice value).

Step 2: JSON serialisation per INV-01 schema. The ERP serialises the invoice into the INV-01 JSON template with the structured 130-plus fields. Validations are run locally: GSTIN format check, HSN code length validation (6 or 8 digits depending on turnover), tax computation cross-check, UQC code validation against the GSTN master.

Step 3: Transmission to IRP. The JSON is transmitted to the IRP API endpoint using HTTPS with token-based authentication. The IRP authenticates the request, validates the schema, and runs the duplicate-document check (same supplier GSTIN plus document number plus FY).

Step 4: IRN generation and digital signing. The IRP computes the SHA-256 hash of the supplier GSTIN plus FY plus document type plus document number to generate the 64-character IRN. The IRP digitally signs the JSON with its private key, generates a QR code containing the IRN, supplier and buyer GSTINs, invoice number, invoice date, total value, HSN, and other particulars.

Step 5: Response handling and PDF generation. The IRP returns the IRN, the signed JSON, and the QR code image to the supplier's ERP. The ERP embeds the IRN and the QR code in the invoice PDF, prints or emails it to the buyer.

The end-to-end latency for a single invoice is typically 1 to 3 seconds. Batch upload of up to 100 invoices in a single API call is supported.

The INV-01 schema fields that commonly fail

In KAMRIT's GST advisory practice, the most common IRP rejection reasons for mid-market taxpayers are:

HSN/SAC code length mismatch. Taxpayers with turnover above ₹5 crore must report 6-digit HSN for goods and SAC for services. For turnover above ₹500 crore, 8-digit HSN is mandatory. Mid-market taxpayers reporting 4-digit HSN are rejected.

UQC code mismatch. The Unit Quantity Code must match the GSTN master (KGS for kilograms, NOS for numbers, PCS for pieces, MTR for metres, etc.). Free-text units (UNT, EACH, JOB) are rejected.

GSTIN format and status validation. The IRP validates buyer GSTIN against the GSTN registration database. A buyer GSTIN that is cancelled, suspended, or invalid (wrong check digit) is rejected.

Place of supply derivation. The place of supply field must be consistent with the buyer's address and the GSTIN state code. Mismatched POS triggers rejection.

Total invoice value reconciliation. The IRP cross-checks the total invoice value against the sum of item-level taxable values, taxes, and adjustments. Rounding inconsistency in the line item-to-total computation triggers rejection.

Duplicate document number. Two invoices with the same document number under the same FY for the same supplier GSTIN are rejected on the duplicate check.

Date validation. Invoice date cannot be in the future. Invoice date older than 7 days (for taxpayers above ₹100 crore turnover) is rejected.

Reverse charge field. The "is reverse charge" flag must match the buyer GSTIN type and the nature of supply.

The integration architecture for mid-market

A mid-market business with ₹5 to ₹50 crore turnover faces a different integration challenge than a large enterprise. The large enterprise has SAP, Oracle, or Microsoft Dynamics with mature GSP-API integration. The mid-market business runs Tally Prime, Zoho Books, Marg ERP, or a custom Excel-based billing tool. The integration choices are:

Option 1: GSP-API integration through accounting software. Tally Prime, Zoho Books, and other major accounting platforms have built-in IRP integration via GSP partners (ClearTax, NIC, Cygnet GSP, Mastechs). The supplier configures the GSP credentials in the software and IRN generation is automatic on invoice save. This is the recommended option for most mid-market businesses.

Option 2: Excel utility on the IRP portal. The GSTN provides a free Excel utility that allows manual entry of invoices and bulk upload to the IRP. Suitable for low invoice volume (under 50 per month) but operationally tedious.

Option 3: GSP standalone integration. For businesses with custom ERP or non-standard billing tools, a direct GSP API integration is available. Vendors offer the integration as a SaaS subscription typically ₹10,000 to ₹50,000 per year depending on volume.

Option 4: Direct IRP integration (advanced). The GSTN offers direct IRP API access for taxpayers willing to handle the OAuth, JSON serialisation, and error handling in-house. This is rare for mid-market.

KAMRIT's recommendation for clients in the ₹5 to ₹50 crore band is Option 1, with the accounting software handling the GSP integration transparently. The cost is bundled in the software AMC, the user experience is seamless, and the audit trail is preserved.

Section 122 penalty exposure and the buyer-ITC denial

Section 122(1)(i) of the CGST Act, 2017 imposes a penalty of ₹10,000 or an amount equivalent to the tax evaded or the tax not deducted under Section 51 or short collected or short paid under Section 52, whichever is higher, for issuing an invoice without obtaining the IRN where e-invoicing is mandatory. Each non-compliant invoice attracts a separate penalty.

Section 16(2)(aa) of the CGST Act, 2017 read with Rule 36 of the CGST Rules requires the buyer to verify the supplier's invoice in GSTR-2A/2B before claiming ITC. The IRP-generated IRN is part of the verification chain. The buyer's ITC on an invoice without an IRN is denied at the next GSTR-3B reconciliation.

The combined effect is a working-capital and dispute amplifier. The supplier faces ₹10,000 penalty per invoice plus the tax liability if the invoice is not regularised. The buyer faces ITC denial and 18 percent interest on the wrong ITC claim if surfaced in an audit. Counterparty pressure typically forces the supplier to comply.

The action plan for a mid-market supplier in May 2026

Threshold check. Compute aggregate turnover for FY 2024-25 and FY 2025-26. If either exceeds ₹5 crore, e-invoicing applies prospectively.
Software audit. Confirm that the accounting software has IRP integration enabled and a GSP relationship configured.
Master data cleanup. Update HSN codes to 6-digit (or 8-digit if applicable), validate buyer GSTINs against the GSTN portal, refresh UQC codes against the GSTN master.
Pilot. Generate IRNs for 10 invoices and verify QR code, IRN, and signed JSON on the IRP portal.
Go-live. Switch all B2B invoices to e-invoicing from the next billing cycle.
Reconciliation. Reconcile the GSTR-1 auto-populated data with the IRN-generated invoices to ensure no gaps.
Audit trail. Retain the signed JSON and the IRN log for 6 years under the GST record-keeping rules.
Vendor and customer communication. Inform buyers and downstream parties of the e-invoicing roll-out date so they expect IRN-bearing invoices.

Talk to KAMRIT

KAMRIT's GST advisory desk has implemented e-invoicing for over 600 mid-market clients across the ₹5 to ₹50 crore turnover band since October 2023, working with Tally, Zoho, Marg, and custom ERPs. Our engagement includes the threshold and applicability memo, the software audit and GSP integration, master data cleanup, pilot validation, and the GSTR-1 reconciliation methodology. For businesses approaching the threshold or struggling with IRP rejections, we run a 14-day implementation engagement starting at ₹35,000. Reach out at kamrit.in for a free 30-minute scoping call.

References

CGST Act, 2017, Section 31, Section 122, Section 16(2)(aa).
CGST Rules, 2017, Rule 48(4) and Rule 36.
Notification 13/2020 Central Tax through Notification 10/2023 Central Tax (threshold reductions).
e-Invoice schema INV-01, version 1.1, einvoice1.gst.gov.in.
GST Council 49th meeting recommendation on 7-day reporting window.
CBIC FAQ on e-invoicing (April 2023 edition).