A lot of buzz has been generated recently around E-Way Bill as part of the GST compliance mechanism, similar to what Input Tax Credit has generated few months back with government all set to rollout this very soon. This blog provides an overview of E-Way Bill and its significance without getting much into the technical and operational aspects.
What is an E-Way Bill?
An E-way Bill is an electronic way bill that needs to be generated online (via GST portal) for movement of goods either for inter-state or intra-state sales. This E-Way bill needs to be raised before the goods are shipped and should include information such as details of the goods, their consignor, consignee and transporter. As support documents, a transporter needs to carry the invoice and the copy of the Eway Bill for goods, which are being transported.
Though check posts have been abolished under the new GST regime, a consignment can be intercepted at any moment during the goods transit for verifying the E-Way Bill. In case a transporter fails to show an E-Way Bill for the consignment, a penalty of Rs. 10,000 or tax sought to be evaded, whichever is greater can be levied.
GST offers flexibility to let any of the parties of a transaction, either the consignor or the consignee to generate the E-Way Bill, provided they are registered parties. Whatever may be the mode of transport of goods – either by air, rail or road, the E-Way Bill must be mandatorily generated. In a scenario, where goods are handed over to the transporter and neither of the parties – a consignor nor a consignee generates the E-Way Bill, the onus lies on the transporter to generate it.
When either of the parties generates the E-Way Bill, the recipient of the consignment is bound to either accept or reject it on the portal. In case there is no response (no action taken) from the recipient within 72 hours, it shall be deemed to have been accepted. For generating an E-Way Bill from the portal, the registered party should have a portal login.
Why is it important?
The primary objective of GST is to unify India with a common in-direct taxation system. One of the most significant aspects of GST is the removal of the inter-state check posts – particularly the transit delays encountered in some states like Rajasthan, Maharashtra, Bihar or Jharkhand. It is expected that both the GST levy and E-Way Bill would weed out such transit delays and at the same time, helps in plugging issues related to tax evasion.
Technically speaking, every E-Way Bill that is generated by a consignor or a consignee is to be automatically updated in the GSTR1 (sales return) of the supplier, thus providing minimal scope for tax evasion on shipments. In the earlier tax regime, officials used to cross check the way bills with the filed tax returns to verify whether all the consignments were covered within the tax net or not.
On the other hand, a single EWay Bill for the movement of goods throughout the country is expected to save lot of paperwork and do away with various inter-state clearances for consignors, consignees and transporters. Earlier, every state used to frame its own rules for the transportation of goods from one place to another.
Is it relevant to me?
As per a McKinsey report, logistical hurdles cost the Indian Economy an extra $45 billion or 4.3 per cent of GDP every year. Hence, any change in the existing regime that can provide even small benefits is appreciable. Also, the LPI Survey by World Bank states that the logistical costs in India are much higher (14%), compared to other major countries (6-8%). With the integration of GST E-Way Bill, it is expected that the logistics costs would get trimmed by 20 per cent. While the picture looks rosy on paper, it is completely dependent on the GST backbone to work perfectly to overcome any errors and mismatches, even when encountering heavy traffic.
What we expect is a smooth sailing for businesses through introduction of this new E-Way Bill, despite minor glitches. This should become another milestone in the economic progress of the country, ensuring tax compliance at the highest level.