**Disclaimer:** This article is for informational purposes only and does not constitute legal, tax or compliance advice. Laws change frequently. Always consult a qualified GST professional before implementing changes. On 1 June 2026, the GST e-invoicing regime expanded to cover composition-scheme dealers for business-to-business (B2B) supplies—a material shift from earlier phases that exempted them.
Suppliers with annual turnover exceeding 5 crore rupees must now generate and report e-invoices through the Goods and Services Tax Network (GSTN) for all B2B invoices, effective immediately. This marks the third phase of mandatory e-invoicing rollout and affects thousands of manufacturers, traders and service providers operating under composition. The requirement applies regardless of buyer category.
Market signals
Previously exempt from e-invoicing, composition-scheme suppliers with turnover above 5 crore are now required to issue e-invoices for all business-to-business supplies. This removes the earlier distinction between composition and regular taxpayers in the B2B context, raising compliance complexity for smaller composition dealers.
GSTN has issued technical specifications for composition-dealer e-invoice generation, including revised JSON schemas and validation rules. Many legacy invoicing systems require API integration updates; SMEs must audit their ERP and accounting software for Phase 3 compatibility within the next 30–45 days.
E-invoices now create immutable digital audit trails, raising scrutiny on ITC claims. Buyers will see granular line-item and HSN-level data; any mismatch between composition-dealer invoices and buyer records may trigger notice-based reconciliation or demand letters.
Under the Central Goods and Services Tax Act, 2017, composition taxpayers were previously allowed to issue paper invoices without e-invoicing; Phase 3 eliminates this exemption for B2B supplies. The Ministry of Finance (Department of Revenue) and GSTN have published detailed guidelines on supplier identification, invoice structure and return mapping. Non-compliance—including failure to e-invoice or late e-invoice filing—may invite GST demand notices, penalties and interest under sections 122–129 of the CGST Act. Vinayakam Consultants advises composition-scheme businesses to conduct immediate system readiness audits, review vendor invoicing workflows, and engage GST consultants to map e-invoice data to existing returns (Form GSTR-1 and GSTR-4) to avoid reconciliation gaps and departmental action.
Your action checklist
- Confirm your composition-scheme turnover threshold (above 5 crore in preceding FY) and verify whether Phase 3 e-invoicing applies; obtain written confirmation from your GST advisor or use GSTN's eligibility checker.
- Audit your invoicing software and ERP system for Phase 3 e-invoice API compatibility; request vendor certification or plan integration within 30 days; test invoice generation and GSTN upload in sandbox mode.
- Map all existing B2B customer records (GSTIN, PAN, address) into your e-invoicing system; flag any incomplete or outdated customer data that may cause invoice rejection or ITC mismatches at buyer end.
- Review your Form GSTR-4 (quarterly composition return) submission process to ensure e-invoice line-item details (HSN, quantity, rate, tax value) align with return declarations; engage a GST consultant to validate reconciliation before 30 June 2026.
Frequently asked questions
GST e-invoicing Phase 3 for composition-scheme dealers becomes mandatory on 1 June 2026 for all B2B supplies. Composition dealers with annual turnover exceeding 5 crore rupees must generate and report e-invoices through GSTN.
Composition-scheme suppliers with annual turnover exceeding 5 crore rupees must now e-invoice all B2B supplies, regardless of buyer category. Previously, composition dealers were exempt from e-invoicing mandates.
SMEs should audit their ERP and accounting software for Phase 3 compatibility within 30–45 days and update API integrations with GSTN systems. Review revised JSON schemas and validation rules issued by GSTN for composition-dealer e-invoice generation.