One of the key objectives of the goods and services tax
(GST) was removal of all non-tariff barriers, such as check posts, entry tax
etc., so that movement of goods across states could be smoother, resulting in consequent supply chain efficiencies.
After GST has come in, more than 20 states have already done away with check post, which has reportedly reduced the transit time of transportation by 30 to 40 per cent. This is great news for businesses as well as consumers, as this would ultimately reduce the prices of commodities.
However, the industry is concerned as to whether this could change once the government implements the e-way bill system, which was approved by the GST Council
in its last meeting on August 5, 2017, after which rules have also been notified.
While the date of implementation has not been decided as yet, there are indications that it could come into effect from October 1, 2017. Till then, the states have been allowed to follow their own way bill/road permit system, including the ones used prior to July 1, 2017.
In a nutshell, the proposed rules require the transporter to carry an electronically generated way bill or a permit, with every consignment having value exceeding INR 50,000, possibly subject to few exemptions such as agricultural commodities.
The e-way bill can be electronically generated (on the government portal) either by the supplier or recipient of the consignment, before the movement of goods. Alternatively, it can be generated by the transporter, after the supplier furnishes certain details of transporter electronically. Where multiple consignments are transported in one conveyance, the transporter needs to generate a consolidated e-way bill covering all consignments.
The e-way bill, once generated, is valid for one day for consignment up to 100 km and then one additional day for every 100 km thereafter.
Where the e-way bill is generated but the goods are not transported or are not being transported as per details furnished then it has to be cancelled electronically. Further, if the transporter transfers goods from one vehicle to another in the course of transit, then he will be required to generate a new e-way bill, before commencement of the movement.
It is important to note that e-way bill is required even in case of intra-state movement (beyond 10 km), which was not the case earlier. Also, there were many states which did not have a system of way bill or a road permit in the erstwhile regime.
The industry, which is still settling in the new regime and struggling to do multiple filings, is concerned about the manner in which e-way bills would operate and challenges it can pose.
The first question being asked is, why do we need e-way bill at all? Under the VAT system, there was possibly an argument that states would want to monitor the movement across borders, as they needed to collect VAT on subsequent sales. Also, there were many states, which imposed entry tax and a road permit system provided a better control for tax collection.
Under GST, this problem is addressed to a large extent, through an elaborate online reconciliation mechanism on GSTN and the fact that state component of GST accrues to the destination state. In any case, the transporter is typically required to carry the GST invoice, which in turn would have the GST number of both supplier as well as the recipient. The authenticity of these details can be easily verified online by the authorities.
The other issue of trade diversion due to VAT
rate arbitrage is also no longer there GST
rate is uniform across states.
Against this backdrop, there is a strong view that e-way bill would serve limited purpose, at least from tax compliance standpoint.
Even otherwise, the mechanism proposed seems to be ahead of time, as it presumes a certain level of maturity in terms of technology, systems and processes. For instance, a large proportion of transport sector is still unorganised and may not be equipped to deal with technology-led compliances. Also, the mechanism appears to be too stringent and cumbersome in terms of the reporting requirement, timelines, etc.
Last, but not the least, the industry is skeptical that this could result in Inspector Raj and the associated corruption, which GST was otherwise supposed to eliminate.
Clearly, there is a need to have detailed and more inclusive deliberations around the need for e-way bills and the potential workarounds that could ensure a win-win situation for the government and taxpayers. In any case, the industry has enough and more on their platter as of now, and a rushed up roll-out of e-way bills would be a huge challenge at this point in time.
In summary, the operational challenges and consequent supply chain bottlenecks can far outweigh the benefits that this system may offer. Even if the government believes that e-way bill is a good idea, certainly it’s an idea whose time has not yet come!
The author is partner and leader, indirect tax, PwC
via E-way bill: Do we need it at all? | Business Standard Column