E-Way Bills Under GST- APPLICABILITY AND ITS EFFICIENCY WHILE COMPARING IT WITH THE ERSTWHILE REGIME
The goods and services tax (hereon refereed as GST) was introduced by the parliament of India on 1st July 2017 replacing a bunch of indirect taxes separately levied by the Central and State governments. The underlying purpose of this was to incorporate the idea of ‘One Nation, One Market, One Tax’ which would in turn improve the ease of conducting businesses for taxpayers along with bringing in transparency. In the erstwhile regime, multiplicity of indirect taxes being levied by the Central and the State governments created a havoc for the businessmen and the consumers. The application of GST has also assisted in mitigating the obstacles present in the erstwhile regime such as double-taxation and cascading effect due to the availability of Input Tax Credit at each level of the supply chain.
One such reform launched under the new GST regime is the country wide implementation of Electronic Way Bill (E-Way Bill) system. E-Way Bill is a unique document/bill, which is electronically generated on the GST portal evidencing the specific consignment/movement of goods from one place to another, either inter-state or intra-state and of value more than Rs. 50,000. This is a compliance mechanism where the information regarding the consignment must be uploaded on the GST portal before the commencement of the movement of goods. However, if the movement of goods is done via railways, airways or waterways, the bill can be generated even after the commencement of the movement of the consignment. The 24th GST council meeting decided to implement this nationwide E-Way Bill system from 1st February 2018 along with a trial run from 16th January 2018 to smoothen the transition from the erstwhile regime. This paper will discuss the implementation of E-Way Bills in detail and the obstacles it faces in its initial years of applicability.
The actions of an elected government are always under huge scrutiny which in turn keeps the spirit of democracy alive. Taking a massive decision such as implementation of Nationwide E-Way bills was expected to be scrutinized. So, this paper will try to analyze these shortcomings and weigh it against the benefits arising out of the new regime.
E-WAY BILLS (IN DETAIL)
The rules pertaining to the generation of E-Way bills is provided in Chapter XVI of CGST Rules, 2017 as rule no. 138 which provides for the information necessary to be furnished for the generation of an E-Way bill. Rule no. 138 says that an E-Way bill must be generated whenever there is movement of goods of value greater than Rs. 50,000 in a vehicle whether in relation to a supply or not, even including an inward supply from an unregistered person and the ‘supply’ in this rule could be with or without consideration, inside the course of business or outside by filing form GST EWB-01.
The initial responsibility of generating an E-Way bill for a particular consignment is placed on the registered persons (i.e. generally the supplier or the receiver). If both these fail to comply with process, then the responsibility of generating the bill lands on the shoulders of the transporter, the extent of which will be discussed later in this paper. As per Rule 138(3) explanation 1,If an unregistered person is transferring goods to a registered person, then the receiver will be deemed as the person transferring the goods having responsibility to apply for an E-Way bill along with the transporter and if an unregistered person is transferring to a fellow unregistered person, then the onus falls on the person transferring or the transporter. The generation of an E-Way bill is mandatory as per the proviso under Rule 138(1) irrespective of the value of the consignment if a principal sends goods from one state to a job worker located in another state or if the consignment contains handicraft products. These provisions were brought in to curb evasion by blocking the minute loopholes that traders used to create.
For an E-Way bill to be generated any of these abovementioned individuals must produce an invoice/ bill of supply/ challan with respect to the consignment. The transporter, if the goods are being transported by road will have to get a Transporter id and with the new update on Vahan-E- Way bill integration, the transporter must validate the vehicle registration number at the time of generating the E-Way Bill by filling Part-B of form GST EWB-01. In the case of a ‘Bill to-Ship to’ model, either the consigner(supplier) or the consignee(buyer) can generate the E-Way bill. All these measures have been taken up to avoid any mishaps and evasions in the context of transport of goods as more specific the details provided are, the chances of an evasion becomes scarcer. When the bill is generated, a unique E-Way bill Number (EBN) is provided to the supplier, recipient, and the transporter.
Rule 138A specifies that the person in charge of the conveyance shall always carry (a) the invoice/delivery challan/bill of supply along with (b) a copy of the E-Way bill. this provision aids in any random inspection being conducted by the relevant authorities. Rigidness in the system will ensure compliance, that is the intent behind such a measure.
Rule 138B and 138C specifies that an authorized officer can intercept any consignment to check the availability and the validity of the E-Way bill, these random interceptions are key to effective compliance of the new system. A summary report of every such check must be submitted online by such officer within 24 hours and the final report must be recorded within the next three days. This provision not only aids the compliance of the system by the transporting parties, in addition it keeps a check and pressure on the relevant authorities to comply by their duties in an effective and swift manner.
Another such aid to the transporting parties is Rule 138D which specifies that if the transporting vehicle has been detained exceeding 30 minutes, then the transporter may upload such information on form GST EWB-04. This is a ‘sword’ in the hands of the transporters as they now have a right to complain against any unfair measures taken by authorities whilst inspecting the consignment.
The idea behind incorporating such a radical change was to fulfill the moto of ‘One Nation, One Market, One Tax’ as the government thought that uniformity is the key to sustainability. While proposing the idea of a nationwide E-Way bill, the legislature thought it would abolish the check-posts that was prevalent in the erstwhile regime as every detail will be available on the online portal, it would provide a seamless movement of the consignment across borders along with reducing the traffic on major transportation routes. The ministry of finance reportedly said that the decision of implementing the E-Way Bills was brought up due to several complaints received from traders/ transporters regarding the undue hardships they faced in abiding by the erstwhile Way bill system implemented by each state separately. However, this reasoning has also faced a lot of backlash as many industrialists especially MSME’s have fallen prey to the apparent complexities involved and fear the return of the inspector Raj system. However, when it comes to intra-state transportation, the central government has given some residuary power to the state governments to tamper with the threshold limits for all or specified items. For example, the Tamil Nadu government has exempted its people from the compulsion of generating an E-Way bill for intra-state transport if the value of the consignment is below Rs. One Lakh. This acts as a conflict of interest between the Centre and the State. If you provide such auxiliary powers to the State governments to increase/decrease the threshold limit for intra-state transportation, it could result in defeating the purpose behind the moto of ‘One Nation, One Market, One Tax’. Now if the market sustains the suppliers have an additional motive to favour intra-state transportation over inter-state to curb the necessity of an E-Way bill.
COMPARING IT WITH THE ERSTWHILE REGIME
The concept of having Way bills is not Latin to India, it was prevalent under the erstwhile Value Added Tax(VAT)/Central Sales Tax regime as well under different brackets. Earlier, each consignment had to be accompanied by a ‘delivery note’ issued by the VAT offices. The purpose of the erstwhile Way bill system was similar to the present system to check tax evasion. But, at that time, the blank ‘delivery notes’ had to be physically procured from the TAX offices multiplying the compliance workload on the suppliers, earlier the power pertaining to way bills was provided to the state governments so, each state had specific rules and the bill had to be generated through different portals. This created a havoc for inter-state transportation of goods.
In the erstwhile regime, these bills were not linked to the Tax Returns which used to curtail the power of relevant authorities to verify such movement of goods and link it with the relevant taxpayer. Bottlenecks at check-posts resulting in traffic congestions and compliance with different state procedures and documentations were the reasons which prompted the government to bring about the new E-Way bill system which by linking the tax returns to the bill has provided an effective tool to minimize tax evasion, also by having one centralized portal, the government has extended aid to the relevant authorities to effectively track the movement of the consignments. The new system has also minimized corruption opportunities. In the erstwhile regime, the transporters used to bribe the authorities at the check-posts in order to allow their consignment to pass even if they were without a Way bill or if their Way bill contained falsified information.
ISSUES REGARDING THE NEW SYSTEM
It’s not a myth when we say that every positive thing comes with some baggage, same applies when we talk about the new E-Way bill system. Since it was first conceptualized there has been a lot of issues that have been raised to counter the overall benefit of the system. However smooth it was perceived to be by the government a few challenges and roadblocks have been raised which needs swift removal for the optimal functioning of the system. Some of the major drawbacks of the system are discussed below:
1. TECHNOLOGICAL PROBLEMS
With the aim of shifting all data to an online portal, the first thing that the government needs to take care of is the proper functionality of the portal. Just when the traders were getting accustomed to handle the new system, the portal crashed on the very day E-Way bills had to become compulsory, this potentially raised quite a few eyebrows behind the competence of the relevant authorities to handle this system in an effective manner. Traders weren’t able to update the details on the site which created a havoc for traders as they didn’t have any other choice except complying to a ‘fault prone’ system. These issues could and should be rectified by using robust technological upgrades in order smoothen the transition into the new system. The issue is not just with the technological glitches, another major issue raised is the fact that majority of the population in the transporting business might not be so tech savvy. The need of the hour is to develop and maintain properly an effective system which is simple and could be adopted by not only a fully automated business but, also by independent transporters who even though aren’t tech-savvy but are a huge contributor to the transporting industry.
2. STRINGENT MEASURES
At the onset the government prescribed the intent behind implementing the new system as a tool to ease transportation of goods however, with the power the authorities have been provided to intercept the consignment and cross-check the E-Way bills could very well bring back the inspector raj system. The seizure of the consignment on mere technical glitches is too stringent a measure to be applied on traders. In the case of M/s Ramdev Trading Company vs State of U.P and 3 others, the Allahabad High Court held that merely because of technical issues in the absence of any intention to evade tax such as the availability of the details of the transport vehicle being handwritten rather than printed is not a tenable reason for the seizure of the goods by the authorities. The emphasis was laid on the execution of mandatory requirements under GST, rather than merely procedural faults. The abovementioned judgement shows clearly the intent of the Hon’ble Court to guard the traders from procedural non-compliances in situations which do not hinder government’s revenue.
3. PROCEDURAL FLAWS
Rule 138(10) of the CGST Rules,2017 provides the validity period of an E-Way bill. The bill once generated is valid for one day and for a distance of 100km towards the place the consignment has to be transported. The validity of the bill is subject to increase by one extra day for every additional 100kms. Judging this rule by the comparing it with the deficient transportation infrastructure facilities prevalent in most parts of the country, this limited validity appears impractical and many traders may be stuck renewing their E-Way bill recurrently, increasing the burden of compliance rather than decreasing in turn defeating the legislative purpose of the new system. Also, the time provided for an extension of the bill is 4 hours before and after the expiry of the bill which was later extended to 8 hours, which still seems quite short considering the difficulties that can stem through at any end of the traders. The government has the power to change the validity period when necessary as we recently saw due to the corona virus (COVID 19) outbreak, the Central government has extended the validity of all E-Way bills to 31st May, 2020 whose expiry date fell between March 20 to April 15th 2020. This was done to aid the transporters in such troubled times especially those transporting essential goods to and from different parts of the country. The above example shows that if the government functions at its optimal level it can provide aid to these transporters by increasing the validity of an E-Way bill during normal times too. It should also plan to increase the timeline available to extend the validity to aid the traders. Earlier the extension of the validity of E-Way bills resulted in generation of new bills which created multiple bills for a single invoice number which caused a havoc for both the authorities as well as traders. Recently the government has taken the decision of removing the issuance of multiple E-way bill numbers against the same invoice to defeat duplication as well as to curb malpractices by traders.
The other major issue raised by the traders is regarding the threshold limit of Rs. 50,000 for the generation of an E-Way bill. Many traders feel that this is a very low threshold and there is a dire need to increase the same. They feel that if curbing evasion and corruption is the reason they came up with this system then, the threshold of 50,000 won’t majorly satisfy that. As even small scale goods such as single piece of furniture would cross that threshold and this would majorly impact small scale traders who either aren’t qualified enough to be accustomed with the online system or even if they are, their business can’t afford to have such a mechanism to generate such bills. For e.g. a furniture shop on the roadside next to the DND flyover, they might be transporting goods worth slightly more than the prescribed amount but won’t have the necessary facilities to generate a bill. In the erstwhile regime, each state had different threshold so, it was difficult to analyze what the adequate threshold could be. Therefore, in the new regime where the government plans on having a single portal, a decision should be taken for the betterment of these individual traders by increasing the threshold at least for the near future till India in it’s entirety becomes a technical powerhouse, including small scale traders.
Another issue is with the time limit prescribed for the cancellation of the E-Way bill under Rule no. 138(9). The prescribed time limit to cancel the said bill if the goods cannot be transported due to many uncertain reasons is of 24 hours from the time of generation of the bill. This time limit is very narrow and is in dire need of an expansion as many a times, it might take more than a day to for an issue to arise due to which the transportation stands unconcluded. The legislature should have a flexible ideology whilst dealing with such practical issues in order to develop a fool proof system.
4. IMPACT ON TRANSPORTERS
Under Rule no. 138(7) the transporter who is carrying the goods by road is responsible for the generation of the E-Way bill if the registered person(traders) have not generated it. He must generate the bill on the information provided by the supplier through invoice/challan. In such a circumstance as per Section 122(xiv) of the CGST Act, 2017, if the transporter fails to generate the E-Way bill he may be liable to pay a fine worth up to Rs 10,000 or tax sought to be evaded greater of the two will be considered. In such a circumstance the consignment is liable to be confiscated and the transporting vehicle could be seized. This is a superfluous burden on the shoulders of the transporter as in most cases the transporters are independent parties and there is no adequate reasoning why the transporters should suffer for not completing a requirement that had to be initially done by the supplier. The transporter is merely a third party aiding this transaction. One of the first things that the government needs to look at is the undue weightage of responsibility on the shoulders of the transporter.
Other additional responsibilities of the transporters include, that if a transporter has one vehicle in which he is carrying goods of multiple invoices, then also an E-Way bill needs to be generated if the collective value of the goods cross Rs. 50,000. Now in such a case if the transporter is carrying goods from different suppliers whose individual invoices is not of value more than 50,000, then the supplier feels that he has no responsibility to generate an E-Way bill causing the registered person to transfer the burden of generating the bill on the transporters as the transporter is carrying more goods from other traders, the transporter will anyways have to apply for a consolidated E-Way bill. So, the traders feel that it is an additional burden which could be avoided as the transporter will have to anyways log in on the portal to update the vehicle number registration. All these additional responsibilities on the transporter has made it a very complicated job. This has a multifold impact, as it not only affects transporters in general but, it makes a lasting impact on the small scale/ individual transporters. As the present circumstances are such these traders feel that small/individual transporters will not be able to comply with these requirements due to the scarcity of resources. They end up approaching these big transporting companies as they have assurances present there. These are situations that can be avoided if the government takes the right steps towards reducing the burden on the transporters in general and by also providing a level-playing ground for the small-scale transporters.
A class of transporters are required to insert a unique RFID code on their vehicle and link it with the E-Way bill. This is huge excessive cost of burden on the transporters which raises the possibility of harassment by the authorities if any digression is noticed or caught by them. To achieve the motive behind implementation of the new E-Way bill system, the government has to eradicate these issues.
In addition to these issues another thing that the government needs to keep an eye on are the loopholes that are present in the prevailing system and correct them as soon as possible. For e.g. Rule 138(14)(b) says that there is an exception provided to non-motorized vehicles while inter-state transporting. Here, if an electric company located in East Delhi is transporting an Air conditioner or a fridge to Noida, Uttar Pradesh which is a different state. However, the distance between the two could be as less as 10 Km so, if the company decides to hire a cycle rikshaw puller to do the job, the company could be taking advantage of two situations, one- optimal usage of the availability of cheap labour in India and two- escaping from the liability of generating an E-Way bill.
Then main actions pertaining towards the E-Way bills by the government in the coming time should be focused on rectifying or at least find a suitable middle ground for these issues.
The new system comes with a lot of complexities and issues that needs solutions on an urgent basis, the authorities should keep a check on these issues and should implement this only with the availability of adequate preparations and robust technology, any rash decisions could lead to a catastrophically dangerous situations for traders in the country along with independent transporters. Then main actions pertaining towards the E-Way bills by the government in the coming time should be focused on rectifying or at least find a suitable middle ground for these issues.
Even with these abovementioned issues being present, there is no denying the fact that the new system has been able to achieve most of its basic desired outcomes. It has effectively dissolved the state boundaries with no compulsion of verifying the documents on each and every state borders crossed, it has also developed a single unilateral system to generate the E-Way bills instead of state wise bills in the erstwhile regime which was in obvious terms a stumbling block for traders who wanted to expand beyond their state boundaries. With the decrease of human intervention, the scope for tax evasion and corruption has also minimized. The new system has brought the receiver, supplier and even the transporter together on one platform, with joint participation of all three in generating one document valid through the entire country.
The steps taken to curb black marketing and false showcasing has also aided the compliance process, such as, blocking of the generation of an E-Way bill for taxpayers who have failed to file their tax returns for previous two consecutive month/quarters as mentioned in Rule no. 138(E)(b), only when the taxpayer subsequently files the return can the generation of the E-Way bill could be unblocked. All the accepted E-Way bills are linked with the tax returns of the taxpayer. Goods without an invoice/ tax invoice/ actual movement of goods cannot be transported anywhere.
This policy change has shown glimpses of what it can achieve when properly implemented, with the gradual eradication of the stumbling blocks that come in the way, the new E-Way bill system could benefit all the stakeholders together i.e. suppliers, recipient, transporters and the department officers.
SUGGESTIONS AND COMMENTS
I feel that none of the big policy changes across the world are foolproof, there will be present some loopholes or issues that pop up. However, those issues only arise after we implement the said policy. Just because you come across some problems along the way, it doesn’t mean that you can’t defeat the problem. The present situation should not be the cause behind turning a blind eye towards the long-term benefits of the E-Way bills, and the pathway it provides towards achieving the important goal of One Nation, One Market, One Tax. For e.g. while driving if we come across a RED LIGHT, you don’t stop the car and return back because you can’t move ahead, you wait till the light turn GREEN (i.e. the problems are resolved) and then move forward again. The same logic should be applied when we implement the E-Way bill system, we should try to rectify the small issues that arise and move in the right direction to achieve our goal. The new system also has an added benefit of being environment friendly along with other things as everything is online, there is no wastage of paper. To conclude it can be said that as soon as all the traders across different states accept and implement E-Way bills in their lifestyle, India would become a unified nation with an unimaginable swiftness in growth.
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