All you wanted to know about E-way bill

The E-way bill, an accompaniment to the nationwide Goods and Services Tax (GST), has got almost as much media attention as the term input tax credit in the last few months. But after being rolled out on February 1, 2018 with much fanfare, the E-way bill has met with the same fate as some of return filings on the GST. It been deferred indefinitely after taxpayers complained of technical glitches that stymied all their attempts to generate it online.

What is e-way bill?

The E-way bill, short form for electronic way bill, is a document to be generated online under the GST system, when goods of the value of more than ₹50,000 are shipped inter-State or intra-State. The E-way bill must be raised before the goods are shipped and should include details of the goods, their consignor, recipient and transporter.

The transporter has to carry the invoice and the copy of E-way bill as support documents for the movement of goods. He can also carry the E-way bill number, mapped to an RFID (radio frequency identification device).

Though check-posts have been abolished under GST, a consignment can be intercepted at any point for the verification of its E-way bill, for all inter-State and intra-State movement of goods. If a consignment is found without an E-way bill, a penalty of ₹10,000 or tax sought to be evaded, whichever is greater, can be levied.

GST laws flexibly allow any of the parties to a transaction — the consignor or the recipient — to generate the E-way bill, provided they are registered. Whether goods are transported on one’s own or hired conveyance, by air, rail or road, the E-way bill has to be generated. Where the goods are handed over to a transporter for conveyance by road and neither the consignor nor the consignee has generated the E-way Bill, the transporter becomes liable to generate it.

When the consignor or transporter generates the E-way bill, the recipient for the consignment has to either accept or reject it on the portal. If no action is taken by the recipient in 72 hours, it shall be taken as accepted.

Why is it important?

One of the key arguments in favour of GST was its ability to unify India as a market and do away with bothersome inter-State check-posts. Data from the Ministry of Road Transport and Highways, tells us that a typical truck in India spends 20 per cent of its time in inter-state check points. This varies from 20-30 minutes in some States such as Rajasthan and Maharashtra, but goes upto to two hours in Bihar or Jharkhand.

Both the GST levy and the E-way bill were expected to root out such transit delays, while at the same time plugging tax evasion. Every E-way bill generated by a sender or buyer of goods is to be automatically updated in the outward sales return (GSTR1) of the supplier, leaving little scope for tax evasions on shipments. In the previous tax regime, tax officials had to manually cross-check the way bill with the tax returns filed, to verify if all the consignments came within the tax net.

Also, a single electronic way bill for the movement of goods throughout the country was expected to save tons of paperwork and sidestep various inter-state clearances for buyers, sellers and transporters. In the previous tax regime, each State framed its own rules for the movement of goods from and to it.

Why should I care?

Logistical speed-breakers cost the Indian economy an extra $45 billion or 4.3 per cent of GDP every year, a McKinsey report says. Therefore, any change in the system that brings about even small benefits is to be welcomed. If you are a retail investor in the shares of manufacturing companies, remember, seamless shipments perk profits and returns. The LPI Survey by World Bank in 2014 put logistics costs at 14 per cent of the total value of goods in India, while it is only 6-8 per cent in other major countries. The GST E-way bill combination was expected to trim logistics costs by 20 per cent.

While all this looks pretty good on paper, it is contingent on the GST backbone working flawlessly to root out errors and mismatches, even when deluged by traffic.

The bottomline

Teething problems are inevitable. In implementing the E-way bill, we shouldn’t let the perfect be the enemy of good.

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Published on February 19, 2018
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