Can marketplaces be sued for not providing timely e-invoices for transactions?

In the digital era, the use of electronic invoices (e-invoices) has become a crucial component of e-commerce transactions. E-invoices provide proof of purchase, facilitate tax compliance, and ensure transparency in financial dealings. In India, the Goods and Services Tax (GST) law mandates that businesses, including online marketplaces, issue e-invoices for transactions above a certain threshold. Failure to issue timely and accurate e-invoices can lead to significant legal consequences, including penalties and potential lawsuits, especially if it causes financial or legal harm to consumers or tax authorities.

Key Points Regarding Marketplace Liability for Not Providing E-Invoices

Legal Requirement Under GST Law

• Under the GST Act, all registered businesses, including online marketplaces, are required to issue e-invoices for sales above a specified threshold (₹50 lakhs annually, as of 2023). E-invoices must be generated through the government’s GST portal or an authorized e-invoicing system. These invoices contain specific details like the buyer and seller’s GSTIN, transaction details, and a unique invoice number that is automatically validated by the GST system.
• Marketplace’s Role: Marketplaces like Amazon, Flipkart, or any e-commerce platform must ensure that their sellers comply with e-invoicing requirements. If the marketplace facilitates the transaction, they may be held responsible for ensuring that the proper e-invoices are issued.
• Penalties for Non-Compliance: Failure to comply with the e-invoicing requirements can result in penalties for both the seller and the marketplace. The penalties can include a fine for not issuing the correct invoice or not filing it on time. Under Section 122 of the GST Act, penalties may be levied for non-compliance or false invoicing.

Consumer Protection Laws

• Beyond tax compliance, online marketplaces must also consider consumer protection laws. If a consumer purchases a product or service and the marketplace fails to provide an e-invoice, it can lead to complications in warranty claims, refunds, or returns. Under the Consumer Protection Act, 2019, consumers are entitled to request a proper invoice for any product or service they purchase.
• Consumer Rights: Failure to provide an invoice may lead to complaints or legal action from consumers who require proof of purchase for returns, exchanges, or warranty claims. If a marketplace fails to issue a timely e-invoice, consumers may file a case under consumer protection laws, claiming a lack of transparency or failure to fulfill the contract terms.

Marketplace as an Intermediary

• Online marketplaces may argue that they are only intermediaries between buyers and sellers, and it is the seller's responsibility to issue the e-invoice. However, this defense may not always be valid, especially when the marketplace facilitates the entire transaction and is responsible for collecting payments and managing the logistics. In such cases, the marketplace might be held liable for the failure to ensure compliance with e-invoicing regulations.
• Shared Responsibility: Marketplaces that handle the transaction or process payments could be held accountable for ensuring that sellers comply with the e-invoicing requirement. In fact, some marketplaces might implement their own invoicing systems or work with third-party solutions to ensure that all transactions are compliant.

Liability for Non-Issuance or Delay

• If an online marketplace fails to provide an e-invoice in a timely manner, both the buyer and the tax authorities can be affected. Delays in providing an e-invoice can lead to issues in tax filing for the buyer, who may need the invoice for input tax credit claims. If a consumer is unable to claim a refund or warranty due to the lack of an invoice, they may pursue legal action against the marketplace.
• Tax Filing Issues: For businesses, not having the correct e-invoice can lead to complications in tax filing and the risk of attracting scrutiny from tax authorities. Marketplaces are generally expected to help sellers maintain records and ensure that transactions are properly documented.

Steps Marketplaces Can Take to Ensure Timely E-Invoice Issuance

• Automated E-Invoice Generation: Implement automated systems for generating e-invoices at the time of transaction. This can be integrated directly into the checkout process to ensure no delays.
• Compliance Checks: Marketplaces should have compliance teams or systems in place to monitor and ensure that sellers are issuing e-invoices properly, especially for high-value transactions.
• Clear Communication with Sellers: Provide sellers with clear instructions and tools to help them comply with e-invoicing regulations. Many marketplaces also offer support for sellers to understand the tax implications of non-compliance.
• Consumer Awareness: Make consumers aware of their right to request an e-invoice and ensure that the process is simple and automated.

Legal Action for Non-Compliance

• Tax Authorities: If the marketplace fails to ensure proper invoicing, tax authorities may take action, including levying fines or initiating audits.
• Consumer Lawsuits: Consumers can file complaints or lawsuits under the Consumer Protection Act if they are unable to get an invoice for warranty claims or returns.

Example

Suppose Sanjay purchases a smartphone from an online marketplace, ShopMart, using a BNPL option. The product is defective, and Sanjay needs to return it. However, when he requests an e-invoice from the marketplace to process the return and warranty claim, ShopMart fails to provide it in time.

Steps Sanjay Could Take:

• Contact ShopMart: Sanjay should first reach out to ShopMart’s customer support and request the invoice.
• File a Consumer Complaint: If the marketplace fails to comply, Sanjay could file a complaint under the Consumer Protection Act for not providing the invoice and causing inconvenience.
• Escalate the Matter: If ShopMart continues to delay, Sanjay could escalate the issue to the Consumer Court or file a grievance with the National Consumer Helpline.

Steps ShopMart Should Take:

• Ensure Timely E-Invoice Generation: ShopMart should integrate an automated e-invoicing system to generate and send invoices immediately after transactions.
• Review Seller Compliance: ShopMart should ensure that sellers using its platform are aware of their responsibilities regarding e-invoice issuance.