E-Way Bills: How Should Businesses Prepare?
E-way bill deadline is a month away. What challenges can businesses face and how should they prepare?
To plug loopholes and boost revenue, the Goods and Services Tax Council recently decided to roll out e-way bills for interstate movement of goods two months earlier than planned. Come February, the electronic invoices – generated on the GST Network portal – will become compulsory.
But before we come to how businesses should ready themselves for this compliance, here’s a quick explainer on what E-way bills are all about
To understand how businesses should prepare for the e-way bills regime and its likely challenges, BloombergQuint’s weekly series The Fineprint spoke with Chander Agarwal, managing director at TCI Express and Badri Narayanan, partner at Lakshmikumaran and Sridharan.
In its October meeting, the GST Council had decided that e-way bills will be introduced in a staggered manner starting January and will be rolled out across the country starting April 1. They have now changed these timelines – the trial rollout will start from mid-January, for inter-state supplies the deadline is Feb 1 and for supplies within a state, it’s June. What prompted the Council to tinker with the earlier timeline?
Narayanan: The fundamental issue all the states have, and we have seen what the finance minister of West Bengal had said, is that there seems to be a difference between what was projected as revenue collection for GST in the last few months and what has actually come in. There is a significant difference and it’s not a small difference.
The states are thinking that there is significant difference between what was projected and what’s going to come in. Though the Centre has compensated them to the tune of Rs 10,000 crore for first two months for the shortfall, states also understand that they will like to have the future in their own hands rather than depend on the Center to keep giving them money.
They feel that there is lot of leakage of revenue because reporting is not going on right now. We have moved from GSTR1, 2 ,3 regime to GSTR-3B regime. Therefore, I don’t think people are reporting enough because they feel that there is no system to capture them. A lot of cash transactions are also happening.
How is this under-invoicing taking place?
Narayanan: Take an example. If your goods are going to move from Surat to Bombay, you have generated an invoice. But because you don’t have any check post to check whether the goods are going to come from Gujarat to Bombay, traders have figured that if they report 50 percent of sales, then remaining they will do by cash.
Aren’t they supposed to carry either a tax invoice or a delivery challan?
Narayanan: That’ll help only if someone is checking at a check post etc. You need a co-relation. E-way bill gives you a nice correlation between what is reported and what actually moved. The supplier has to upload the data on the system with respect to what he is going to move. So there is one data which is coming from the supplier. Then at any point, if the goods are stopped, you can co-relate that with respect to whether the e-way bill has been generated or not. Then, finally, you can co-relate with what has been reported in the summary return form GSTR-3B. E-way bill is a co-relation that the states want to figure out before time as to what their revenues are going to be. Today, if there is no co-relation and I move the goods and let’s say it has not been stopped at any checkpost, I may decide to not to report it at all. That’s why the problem is happening.
Okay. What does this early E-way bill implementation mean for logistics companies like yours and how will it impact the unorganised sector?
Agarwal: In B2B segment, most large companies and SMEs are under the GST Network; it’s the smaller guys dealing in cash who have not come under GST and they have been saying that it is not working out.
For the B2C segment, which is e-commerce, and where each consignment is of a higher value like a mobile phone can be Rs 50,000+, and they have not been embedded into the GST system, an e-way bill is the only way that the government could do it. This was the primary focus – to bring e-commerce, which was a very big question mark, under GST and it will be done now.
We have 500 offices across India, they are equipped with ERP and connect pan India. If you face a network issue, for example, if the GSTN website is not working, generating an e-way bill could be a problem. So, there could be some challenges in the beginning, just as GST implementation was a challenge. It is not so much a problem for B2B companies like us, but it is more for the last mile connects like air cargo companies and last mile delivery companies which are primarily in these businesses.
I don’t think that the processes will be a hindrance in any way. In fact, this will make things easier as long as you are compliant in filling up the GST forms. Also, your offices should be connected and you can’t work from home or something like that. But that’s how the transportation industry in India is.
What challenges do you anticipate in the implementation of e-way bills and what should businesses do to ready themselves before the February deadline?
Agarwal: I think this is a great move because it will put pressure on the logistics companies to move faster. If you are holding back the truck or consignment in any way, you won’t do that now because you will have to re-generate the e-way bill. So, it is not a problem for a company like us whose offices are across India; we will be able to re-generate the e-way bill.
The problem, I see, is with the overall implementation by the government and making sure how each company is complying. That’s a bigger challenge. And I am not sure how the government will do it. A lot of things have been overlooked and I think they might overlook this for next few months till they find another new solution.
Narayanan: Till the supplier and recipient are generating the e-way bill and supplying it to the transporter, I think it’ll be fine. The problem could be for semi-organised groups who are working from their homes and don’t have a good idea of how things need to be done. The problems they face may include wrong data being entered, not doing it on time, getting documents mixed up between transporters. They need to figure out the process by which they will not make mistakes like these, especially if they have multiple trucks. The truck driver will not be bothered about what the e-way bill says, but he will have a document set and go with it. There will be a learning period wherein this will be figured out.
In some remote parts of India, you may get stranded and there may not be any network and you just have a phone to call somebody and generate a fresh e-way bill. In India, we have jugaad. So, you find a trucker, you put some documents into it and push it. Now, they might get caught. There might be concerns of not doing it speedily enough and then there will be complaints saying the system is not working.
SMEs should learn about compliance. For them, the choices will be about the mode of delivery, are they going to do ex-works sale or a destination-based sale, who will lead in respect to generation of e-way bills. It may be easy to generate Form A but who will generate Form B from either recipient or transporter. Or recipient may be in a different state; so who will coordinate it. So, there will be issues between supplier, recipient and transporter. They will have to have a clear plan that if it will be at my factory, then this is what the recipient or transporter should provide me. So, there will be no confusion and multiple people will not do the same thing. Ideally, you should have minimum intervention with the transporter and manage this system as much as possible.
Watch the full interview here.
