The Goods and Services Tax (GST) Council in its 24th meeting has decided to implement a nationwide e-Way Bill system for inter-state movement of goods from 1 February 2018. This comes as a surprise considering that earlier the GST Council had deferred the implementation of e-Way Bill up to 31 March 2018. However, it has now been decided to roll out the nationwide e-Way Bill system in two phases:
- On a trial basis latest by 16 January 2018, wherein, traders and transporters can use the system on a voluntary basis.
- Compulsorily from 1 February 2018.
- The date of implementation of e-Way Bills for intra-state movement of goods has been left to the discretion of the respective states.
- However, all states will have to implement it latest by 1 June 2018.
Although the Ministry of Finance has said that the decision to prepone the implementation of e-Way Bill has been taken in view of representations received from traders and transporters about the undue hardship and confusion caused due to separate e-Way Bill system being implemented by each state, this decision of the Council has evoked mixed reactions amongst industry circles with many wary about the complexities involved, possibility of longer duration for transportation and a return of the inspector raj.
The concept of Way Bill is not new to India. However, under the Value Added Tax (VAT)/Central Sales Tax (CST) regime, way bills were not linked to tax returns. Hence, the possibility of the authorities to verify movement of goods with the returns filed by taxpayers was limited. Furthermore, Way Bills resulted in bottlenecks at check posts and made compliance difficult due to each state prescribing its own procedure and documentation for the Way Bill.
A nationwide e-Way Bill system seeks to remedy this situation by linking tax returns to the e-Way Bill with the intention to act as an effective tool to track the movement of goods and curb tax evasion.
The government, while proposing the idea of incorporating provisions of e-Way Bill within the ambit of GST, had said that this will provide various benefits to the industry such as:
- Abolition of check-posts.
- Seamless movement of goods within a state and across different state borders.
- Boost to India’s logistics ecosystem resulting in lesser traffic on major transportation routes, fall in transportation costs and reduction in transportation lead time.
However, the idea to incorporate provisions of e-Way Bill within the ambit of GST has been controversial from the day it was proposed. Initially, the implementation of e-Way Bill was deferred due to various reasons such as:
- Inadequate back end Information Technology (IT) infrastructure.
- Avoiding complexities involved in the e-Way Bill system at the stage of transition to GST.
- Unorganised nature of the logistics sector in the country.
GST collection has seen a drop in the past couple of months. There is a rising concern in the central and various state governments that there is tax evasion from businesses and the implementation of e-Way Bill is seen as an effective measure to curb such malpractices.
Impact of implementing e-Way Bill in its present form
The provisions of e-Way Bills as per ‘e-Way Rules’ have certain significant provisions impacting the industry and the transportation and logistics sector.
- e-Way Bill needs to be generated for every consignment exceeding INR 50,000 in value, subject to certain exemptions. Previously, the Goods and Services Tax Network (GSTN) portal struggled to cope up with the increased traffic during return filings. The addition of e-Way Bill system to the portal without adequate strengthening of the back-end infrastructure may result in further delays and difficulties for businesses.
- A certain class of transporters may be required to embed a unique Radio Frequency Identification Device (RFID) on their conveyance and map the e-Way Bill to the RFID. This will result in additional cost for the transporters and there is a possibility of raising queries and harassment by the authorities on any anomaly or digression noticed.
- e-Way Bill once generated will be valid for one day where the goods are to be transported for a distance of up to 100 kilometres. The validity period will increase by one additional day for every additional 100 kilometres or part thereof. Considering the deficient transportation infrastructure in most parts of India, this validity period appears unrealistic and many assesses may find themselves renewing the e-Way Bill frequently, increasing the compliance burden.
- The e-Way Bill rules empower the Commissioner to authorise interception of any conveyance to verify the e-Way Bill. Such a significant power to the Commissioner contradicts the government’s commitment to abolish check-post system and can potentially result in harassment from tax officials.
- All accepted e-Way Bills will be reconciled automatically in GSTR-1 during return filing. This will curb the black economy as transportation of goods without a valid invoice and raising of tax invoices without actual movement of goods will no longer be possible.
The e-Way Bill system has inherent complexities associated with it and a rushed implementation without adequate preparation on the part of authorities and the businesses can be catastrophic. However, a nationwide e-Way Bill system will be an effective tool in the hands of the Revenue to curb tax evasion. An effective e-Way Bill mechanism complemented by co-ordination between various departments of the government has the potential to restrict the black market economy by making businesses accountable for every invoice raised and every movement of goods caused.
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