If your business has an aggregate annual turnover above Rs. 5 crore and you have not been generating e-invoices for your B2B transactions, you are liable to receive a GST notice from the tax authorities. E-invoicing is mandatory under Rule 48(4) of the CGST Rules, 2017, and non-compliance can attract penalties under Section 122 of the CGST Act. This guide is for GST-registered business owners, finance teams, and compliance officers who need to understand why the notice was issued, the penalties involved, and how to respond correctly.

• E-invoicing is mandatory for taxpayers with aggregate turnover above Rs. 5 crore (effective August 1, 2023)
• Penalty for non-issuance of a valid tax invoice can go up to Rs. 10,000 per invoice under Section 122(1)(i)
• Buyers cannot claim Input Tax Credit (ITC) on non-compliant invoices, compounding the risk

What is the E-Invoice Threshold in 2026?

E-invoicing was introduced by the GST Council as a mechanism to reduce tax evasion and enable real-time invoice tracking. The threshold for mandatory e-invoicing has been progressively reduced over the years.

Effective Date	Aggregate Turnover Threshold
October 1, 2020	Rs. 500 crore and above
January 1, 2021	Rs. 100 crore and above
April 1, 2021	Rs. 50 crore and above
April 1, 2022	Rs. 20 crore and above
October 1, 2022	Rs. 10 crore and above
August 1, 2023	Rs. 5 crore and above

As of 2026, businesses with an aggregate annual turnover exceeding Rs. 5 crore in any preceding financial year from 2017-18 onwards are required to generate e-invoices through the Invoice Registration Portal (IRP) for all B2B supplies, exports, and supplies to SEZ units.

Why Did You Receive a GST Notice for E-Invoice Non-Compliance?

GST authorities use data matching and GSTN analytics to identify taxpayers who cross the threshold but continue raising manual or offline invoices without registering them on the IRP. Notices are issued under the following circumstances:

• Your GSTR-1 data shows B2B invoices but no corresponding IRN (Invoice Reference Number) was generated
• Mismatch detected between your declared turnover and e-invoice data on the GST portal
• Third-party audit or buyer complaint flagging missing IRN or QR code on your invoices
• System-generated alert when your aggregate turnover in any prior FY exceeded Rs. 5 crore
• E-way bill generated without a corresponding e-invoice, triggering a discrepancy alert

The notice is typically issued as a SCN (Show Cause Notice) under Section 122 read with Rule 48(4) of the CGST Rules, 2017. In some cases, it may also be combined with a demand for reversal of ITC by the recipients of your invoices.

If you have received a GST audit notice along with this, you may also want to read about how to respond to a GST ADT-01 audit notice under Rule 101.

Legal Provisions and Penalties

Failure to generate an e-invoice when mandatorily applicable is treated as failure to issue a valid tax invoice under GST law. This attracts penal consequences under multiple sections.

Section 122(1)(i) of CGST Act

Any registered person who issues an invoice without complying with the prescribed provisions (including e-invoice requirements) is liable to pay a penalty of Rs. 10,000 or the tax evaded, whichever is higher, for each such invoice.

Section 16(2) ITC Denial Risk

Buyers who have claimed ITC based on non-compliant invoices (those lacking a valid IRN) may face ITC reversal notices. This is a downstream risk that affects your business relationships and reputation with clients.

Section 125 – General Penalty

For any contravention of the CGST Act or Rules for which no specific penalty is prescribed, a general penalty of up to Rs. 25,000 may be levied.

Offence	Applicable Section	Maximum Penalty
Not generating e-invoice (B2B, export)	Section 122(1)(i)	Rs. 10,000 per invoice or tax evaded (higher)
General non-compliance of GST Rules	Section 125	Rs. 25,000
ITC claimed on invalid invoice by buyer	Section 16(2)	Full ITC reversal + interest

Who is Exempt from E-Invoicing?

Even if your turnover crosses Rs. 5 crore, certain categories of taxpayers and transactions are exempt from the e-invoicing requirement under CGST Rule 48(4). It is important to verify whether your business falls under any exemption before responding to a notice.

• Insurance companies, banking companies, financial institutions, and NBFCs
• Goods Transport Agencies (GTA) supplying services under reverse charge mechanism
• Registered persons supplying passenger transportation services
• Suppliers of services by way of admission to exhibition of cinematograph films in multiplex screens
• Special Economic Zone (SEZ) units (not developers) as suppliers
• Government departments and local authorities
• B2C transactions (supplies to unregistered persons) - no e-invoice required

If your notice relates to a category that is genuinely exempt, this forms a strong defense in your reply to the SCN.

How to Respond to a GST Notice for E-Invoice Non-Compliance

Responding to a GST notice correctly and within the prescribed timeline is critical. Ignoring a notice or responding incorrectly can lead to ex-parte orders, demand confirmation, and recovery proceedings.

Step 1 – Read the Notice Carefully

Identify the specific periods and invoices mentioned, the sections cited, the quantum of alleged tax short-paid or penalty proposed, and the deadline for your response.

Step 2 – Verify Your Applicability

Check your aggregate turnover in the GST portal for the relevant financial years. If your turnover crossed Rs. 5 crore for the first time in FY 2022-23, e-invoicing became mandatory for you from August 1, 2023 onwards, not from an earlier date.

Step 3 – Identify the Defaulting Invoices

Pull up all B2B invoices issued without an IRN for the period mentioned in the notice. Calculate the total number of non-compliant invoices and the corresponding tax value. This helps you assess potential liability before drafting a reply.

Step 4 – Draft a Structured Reply

Your reply should include: acknowledgment of the notice, your legal position (applicable provisions and any exemptions), rectification steps already taken, and a request for waiver or reduction of penalty citing lack of intent to evade tax. A first-time, bona fide non-compliance is generally treated more leniently.

Step 5 – Upload Reply on GST Portal

Log in to the GST portal, navigate to the notice in question under "Services > User Services > View Additional Notices/Orders," and upload your signed reply within the due date.

Step 6 – Ensure Future Compliance

Integrate your billing or ERP software with the IRP through an approved GST Suvidha Provider (GSP) or directly via API. Going forward, no B2B invoice above Rs. 1 lakh should be raised without a valid IRN and QR code.

If you have also received a summons or a third-party notice, read more about how to respond to a GST summons and third-party audit notices.

Common Mistakes That Lead to E-Invoice Notices

• Unaware of threshold applicability – Many businesses do not monitor whether their turnover has crossed Rs. 5 crore in any prior FY since 2017-18
• Using outdated accounting software – Older versions of Tally, Busy, or other ERP tools may not be integrated with the IRP by default
• Partial compliance – Generating e-invoices for some buyers but not others, or only for high-value invoices
• Delay in IRN generation – E-invoices cannot be backdated; the IRP does not allow generation of IRN for invoices dated before the date of upload
• Assuming B2C exemption for all supplies – Some businesses incorrectly classify B2B supplies as B2C to avoid e-invoicing

How Taxocity Can Help You Resolve the Notice

Taxocity has been helping Indian businesses with GST compliance for over three decades. With a trust rating of 4.8/5 from 5,000+ verified clients and a team of real human GST experts, Taxocity provides end-to-end support from notice receipt to resolution and future compliance setup.

• Notice Analysis – Our experts review the SCN, identify the actual liability, and assess whether you qualify for any exemption or penalty waiver
• Reply Drafting – We draft a professional, legally sound reply citing the relevant provisions and mitigating factors
• E-Invoice Compliance Setup – We help you integrate your billing system with the IRP so this never recurs
• 100% Compliance Guarantee – We take ownership of your compliance calendar so you never miss a deadline or mandatory requirement
• GST Filing Support – If returns need amendment or rectification, our team handles GST filing end to end

Whether you are a startup, a growing mid-size company, or an established enterprise that recently crossed the Rs. 5 crore threshold, Taxocity offers structured compliance packages tailored to your business size. You can also explore our GST registration services if your business is new to the GST ecosystem.

Key Takeaways

1. E-invoicing is mandatory for all GST-registered businesses with aggregate turnover above Rs. 5 crore (as of August 1, 2023)
2. Failure to generate e-invoices attracts a penalty of up to Rs. 10,000 per invoice under Section 122(1)(i) of the CGST Act
3. Certain sectors (banking, insurance, GTA under RCM) are exempt from e-invoicing even above the threshold
4. Reply to the GST notice within the specified deadline; non-response leads to ex-parte demand orders
5. Immediately integrate your billing system with the IRP after resolving the notice to prevent future default
6. Buyers who received invoices without IRN risk ITC reversal, making your compliance critical for your entire supply chain

Frequently Asked Questions

Can I generate e-invoices retrospectively for past periods?

No. The IRP does not allow backdated IRN generation. For past non-compliant invoices, you can only address the issue through your reply to the SCN and by demonstrating good faith and corrective action. You cannot generate IRNs after the supply has already occurred.

What if my turnover crossed Rs. 5 crore in FY 2023-24 for the first time?

E-invoicing applicability is based on the aggregate turnover in any preceding financial year from 2017-18. If you crossed Rs. 5 crore in FY 2023-24, e-invoicing becomes mandatory for you from the start of the next financial year, i.e., April 1, 2024. You should consult a GST expert to confirm the exact date for your specific situation.

Is there a penalty waiver available for first-time non-compliance?

The CGST Act provides for penalty reduction in cases where the default was not intentional and there was no tax evasion involved. A well-drafted reply citing bona fide non-compliance, along with proof of immediate corrective steps, often results in reduced penalties at the adjudication stage.

Does e-invoicing apply to nil-rated or exempt supplies?

E-invoicing is applicable to taxable B2B supplies, exports, and supplies to SEZ units. Pure nil-rated or exempted B2B supplies are generally not excluded from the e-invoice mandate unless the supplier themselves falls under an exempt category.

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This article is intended for general informational purposes only and does not constitute tax, legal, or professional advice. GST laws and thresholds are subject to change by the GST Council and the Government of India. Please consult a qualified tax advisor or GST practitioner for advice specific to your situation before taking any action based on the information provided above.