E-INVOICE IS MANDOTARY OR NOT FOR SELLING EXEMPTED GOODS.

 As per the Central Board of Indirect Taxes and Customs (CBIC) notification, e-invoicing is mandatory for businesses with an aggregate turnover exceeding ₹10 crores in a financial year, starting from 1st October 2022.

However, there's an exemption for certain categories of suppliers, including those who: - Supply exempted goods or services - Supply goods or services attracting nil rate of tax In your case: - The taxpayer has a turnover exceeding ₹40 crores. -

 They sell 99% exempted items and 1% taxable items. For the exempted goods (99% of total sales), e-invoicing is not mandatory.

However, for the taxable goods (1% of total sales), e-invoicing is mandatory since the aggregate turnover exceeds ₹10 crores. To summarize: -

E-invoicing is not mandatory for exempted goods (99% of total sales). -

E-invoicing is mandatory for taxable goods (1% of total sales).

E-invoicing applicability is based on your aggregate turnover (Rs 5 crore threshold from FY 2023-24). If your turnover exceeds Rs 5 crore, you are covered under the e-invoice mandate.

However, the requirement to generate an e-invoice (IRN) applies ONLY for taxable B2B supplies, exports, and deemed exports. The following categories do NOT require e-invoicing:
- Supplies of exempted goods or NIL-rated goods
- B2C (business-to-consumer) transactions
- Supplies to unregistered persons
- Certain industries: banking/insurance/NBFCs, passenger transport, SEZ units (as supplier), government departments, and input service distributors

So if your business sells only exempted goods (like fresh vegetables, certain healthcare services), you are above the Rs 5 crore turnover threshold but your actual transactions do not require e-invoicing because they fall in the exempt category.

You still need to keep proper books and file GSTR-1, GSTR-3B etc. ,  just no IRN requirement for those specific exempt supplies.

This [e-invoicing mandatory guide for SMBs above Rs 5 crore](https://taxgarden.in/blog/e-invoice-mandatory-5-crore-businesses-2026) has the full list of excluded categories and sector-specific exemptions.