The Central Board of Indirect Taxes and Customs (CBIC) has mandated that businesses have to classify goods and services in greater detail in invoices while making business-to-business sales starting 1 April. The move is part of government’s efforts to step up oversight of transactions in the economy.
As per the new invoice norms, businesses with more than ₹5 crore sales have to describe goods and services in internationally accepted six-digit codes of nomenclature, said a statement from CBIC.
These codes called ‘harmonised system of nomenclature (HSN)’ in the case of goods and ‘service accounting code’ in the case of services are extensively used in international trade.
Businesses with less than ₹five crore sales need to give classification in four-digit codes which are product or service categorisation which are not as specific as the six-digit codes. Till now, the requirement was four- and two-digit classifications respectively. This brings greater accuracy in product description in invoices enabling the authorities to have a more detailed account of the transactions. These codes are used in both international trade as well as in domestic transactions where GST is levied.
Separately, CBIC has given three-month extra time for businesses to compulsorily show quick response (QR) code to retail customers either in invoices or through a digital display. This requirement, which was to come into force from 1 April, has now been deferred to 1 July, showed another official notification. QR codes can store large amounts of data and when scanned, customers can access all details of the transaction instantly.
According to Abhishek Jain, tax Partner at EY, some of the clarifications on issues around the QR code in retail invoices were issued by the government only a few weeks ago leaving very limited time for the industry to implement the needed changes in their systems. “This extension is a welcome relief and would provide the much need time to the industry to be ready and be compliant with this new requirement," said Jain.
These changes indicate the increasing policy focus on higher disclosure by businesses and technology-based oversight of activities in the economy.
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