The Goods and services tax (GST) authorities are planning to electronically record details of invoices issued by shops and businesses to retail consumers under a pilot project covering select sectors from April 1, 2027, to improve tax compliance, two officials told Business Standard.
The move will enable tax officials to access the large volume of retail transactions in sectors prone to tax evasion and assess whether businesses are correctly reporting their sales and paying the appropriate amount of GST, they said.
Currently, businesses with annual sales of more than ₹5 crore have to electronically register invoices issued to other businesses on a government-designated portal, subject to certain exemptions. Extending this reporting requirement, known as e-invoicing, to sales to end consumers is the next logical step towards enhancing tax compliance.
Businesses currently report their aggregate sales through GST returns rather than individual retail transactions. E-invoicing at the retail level is expected to help tax officials match these transactions with the sales reported by businesses in their tax returns, one of the officials said.
The GST Council, at its 54th meeting in September 2024, had recommended a voluntary trial of electronic recording of consumer bills in select sectors and states.
The Council proposed introducing the system on a voluntary basis initially and subsequently making it mandatory in sectors prone to tax evasion, according to the minutes of the meeting, which are publicly available. Restaurants were cited as one of the sectors where retail e-invoicing could be introduced.
The Council had identified several potential benefits, including better tax compliance, environmental gains from avoiding physical invoices and lower costs. Consumers would receive e-invoices on their mobile phones.
Officials said the government was now keen to take the pilot project forward.
An email sent to the Ministry of Finance on October 23 seeking comments for the story remained unanswered till press time.
Banks, insurers and non-banking financial companies (NBFCs) are among those currently exempt from e-invoicing for transactions with other businesses. However, the Centre and state governments are also considering bringing their business-to-business invoices under the requirement, the first official said. This is not part of the proposed pilot project.
Managing retail sales data
A third official, who also spoke on condition of anonymity, said the idea of electronically capturing retail invoices had been discussed for years, but implementation was delayed by the challenge of processing the enormous volume of small-value transactions taking place every day.
Storing and processing such volumes would require substantial server capacity, and the earlier technology infrastructure was not equipped to handle that scale, the official said.
Retail e-invoicing could also help foreign tourists claim GST refunds on purchases made in India before taking the goods back to their home countries, as customs officers would be able to verify the tax paid more easily, the official said.
Another government official said the GST Network (GSTN), which manages the technology backbone of the GST system, awarded Infosys a fresh seven-year contract in 2025 after the original arrangement, which had already been extended beyond its initial five-year term, ended.
Officials believe the new arrangement has factored in the need for higher storage and processing capacity.
They said storing invoices in a common system could reduce compliance costs by enabling more efficient invoice matching and audits, instead of relying on separate statements and manual checks.
Digital records carrying timestamps could also improve transparency and make subsequent changes to invoices easier to track, they said.
The government is also studying how countries such as Brazil and Chile operate their e-invoicing systems. Both have long used electronic invoices for business and consumer transactions, officials said.
Experts said the impact of e-invoicing in retail could be significant. “E-invoicing could be leveraged by the government to incentivise customers who seek GST valid invoice for their purchases, thereby encouraging the unorganised sector moving to the organised,” an tax expert said.
Experts also welcomed the possibility of withdrawing the business-to-business (B2B) exemption for financial sector entities. Another tax expert said e-invoicing in sectors such as banking, NBFCs and insurance would bring all B2B transactions in the economy under the system.
“Customers of these sectors would also benefit. It would be important to give sufficient time to these sectors as they have very high volumes of B2B transactions, and also use several custom/bespoke billing systems,” he said.
“Overall, it is a positive change and the GST Policy wing can collaborate with the sector associations to make this a success,” he said.
On B2C e-invoicing, he said it could enable better integration of digital payment and invoicing systems, supporting automated reconciliation and reporting.
Another tax expert said banks and NBFCs handle millions of small charges every day.
“Keeping the B2C pilot focused on technology-enabled sectors such as organised retail, e-commerce, quick commerce and online gaming while moving financial institutions only on the B2B side first, is a practical approach,” he said.
