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A defining feature of India’s economy has just fallen prey to the beauty of GST All that is solid melts into air, all that is holy is profaned, and man is at last compelled to face with sober senses his real conditions of life, and his relations with his kind. Those famous words were not, of course, intended as a description of the impact of the goods and services tax (GST) on India’s unorganized sector. But they would do just as well. GST will put paid to India’s informal sector, drawing most of it into the formal universe and killing off much of what is left behind. This change will erode the flexibility the economy derives from informality and has serious implications for India’s political economy. As Sure as Death Not paying taxes is the holy creed of the unorganized sector, although paying off the rare taxman or the more frequent inspector of labour/factories is accepted as part of the real conditions of life. The small producer supplies parts to other small producers, finished goods for export and to distributors for sale to consumers and parts and services to large firms. Small producer provide big credit to large producers, by way of accepting delayed payment for his supplies. He pays minimal wages to employees, makes prompt payment to his own suppliers, pays protection money to the local neta-babu-police nexus and exorbitant rate of interest to those who lend him his working capital in a hardscrabble world where banks and their loans linked to the policy rate set by the Reserve Bank of India are the stuff of dreams and fairy tales. Fierce competition with others of their ilk does not leave them the luxury of paying taxes or honestly for the power they consume. More than 90 per cent of India’s workers find employment in the unorganised sector. The Central Statistics Office defines the organised sector in manufacturing as enterprises that employ 10 or more workers, if the enterprise uses power, or 20 or more workers, without use of electricity. The rest are unorganised, naturally. The National Commission for Enterprises in the Unorganised Sector defined the unorganised sector as the totality of all unincorporated suppliers of goods or services with less than 10 total workers. These definitions matter less than the sector’s role in cushioning the impact of regulation on the economy. Large companies can sidestep laws on minimum wage and working conditions by outsourcing much of the work to small informal firms beyond the scrutiny of the state. A garment maker, for example, can be fully compliant with all laws by limiting its direct workforce to a small team that designs clothes, specifies the fabric and the time schedule, and performs quality control on what is delivered by tailors and seamstresses toiling away in much smaller units or even at home, located in the informal universe. If the garment maker grows bigger and starts supplying to global buyers whose customers are squeamish about wearing stuff made by child labour or in hazardous conditions, they then start worrying about fixed-term contracts and labour flexibility — while also renting large spaces to house the workers. Contract workers have replaced regular workers in routine jobs such as cleaning, maintenance and running small errands in most offices. Guards are almost entirely sourced from contractors. These contract workers are on the rolls of informal sector firms that pay them a pittance, whatever they receive for their services from the organised sector businesses that buy those services. Contagious Transparency What the big companies that deploy contract workers gain is not so much any saving on cost — they pay all the statutory dues, albeit to the labour supplier — as freedom from carrying on its rolls a large workforce with agrowing wage bill. The informal sector, in other words, is a source of flexibility that the hypocrisy of first-rate labour standards in a combination of third-rate capacity to enforce norms and a bounty of unskilled manpower denies Indian producers. It also serves as a sink for underemployed labour, refuge for the struggling self-employed and transit home for tiny hobby-horses of daring villagers progressing to urbanising and modernising nodes of a global division of labour. The defining feature of the informal economy is its inscrutability, that it is beyond official ken. GST is poised to rip apart that concealing veil. In the GST regime, there is a compulsion for all units to be registered with the GST Network and to file returns and upload invoices. If they do not, no one will buy from them. A bank branch that used to buy its copier paper from a stationer’s next door will shun him now, unless he can provide an invoice with GST — the bank needs it to claim input tax credit. The stationer, small as he is, would source his paper from someone who, in turn, would give him an invoice with GST, to reduce his tax outgo. This is the beauty of the tax: it has a built-in incentive to comply. Compliance with GST means revealing input purchases and sales. That reveals income as well, to the beady eyes of the taxman, who could then open up claimed expenses and verify them. If the GST-paying small producer shows huge interest expenses, the audit trail would lead to the lender, often a member of the neta-babu tribe, and his sources of income. Informality, RIP
GST’s real gain is efficiency and sustainability By all counts, GST and the demonetisation-led formalisation of the economy is as big a transformation as the 1991 economic reforms. As we navigate through the current disruption, the GST narrative will change to productivity gains, formal jobs and better competitiveness. Finance minister Arun Jaitley at the 23rd GST Council Meting, Guwahati. The effects of GST on compliance and resulting teething issues for small businesses are well documented. The implementation of the Goods and Services Tax (GST), considered to be the most important policy change in India since economic liberalisation, has the potential to bring about large-scale economic impact. The initial commentary on the GST has revolved around benefits in terms of uniformity of tax structure, removal of cascading effect, efficient tax administration and improvement in government finances. On the flip side, the short-term impact of the transition is seen as a cause of lower growth in the economy. However, as we navigate through the current period of disruption, I believe that the narrative will change to productivity gains, formal jobs and better competitiveness. There is a need to delve a bit deeper to understand the forces at play. With the benefit of hindsight, we now know that the impact of demonetisation went beyond unaccounted money; the real gain came from digitisation and formalisation of the economy, accompanied by an unprecedented move from physical to financial assets . The recapitalisation of public sector banks has been partly enabled by this tide of massive liquidity available with the banking system. Similarly, beyond efficiency transformation in taxation, the impact of the GST-led initial disruption has been underestimated because millions of enterprises are expected to make a shift in their approach towards cash, compliance and customer interaction. The GST is likely to have a positive impact by way of increase in competitiveness and productivity through improvement in quality of jobs, access to formal credit and significant reduction in the overall tax burden. The effects of the GST on compliance and resulting teething issues for small businesses are well-documented globally. Notwithstanding the pain associated with this adjustment and compliance challenges, these changes are at best a short-term phenomenon. The effect on jobs on the other hand has not been considered significant internationally. However, the key difference in India is that 85% of the enterprises are in the unorganised sector, which is much more than any of the industrialised countries which have implemented some form of the GST. First, the informal sector is almost 40% of the Indian economy and employs almost 75% of the labour force. However, a significant part of SMEs (in the informal economy) do not have economies of scale or a technological edge. They survive on the cash economy to evade taxes, provident fund liabilities and minimum wages to employees. This directly impacts competitiveness of other SMEs who do business by the rules. Too often, informal enterprises have taken advantage of an archaic tax system, impractical labour regulations and an ineffective oversight at the local administration level. The GST, therefore, shall result in a shift in business from the informal to formal sector. Quality of jobs in formal enterprises will improve, giving a fillip to the government’s Skill India initiative. Going ahead there will be an increase in demand for better skills as firms try to build sustainable enterprises. Second, with formalisation and digitisation, financial institutions would be able to cater to the credit needs of SMEs who were hitherto outside the purview of the financial system, by providing greater access to working capital. A lot of the traditionally strong sectors of the economy such as footwear, leather, textiles, plastics, chemicals and food processing shall be the early beneficiaries of this trend. Third, the measures of the government to ease the compliance burden on SMEs (single-return filing in a quarter, higher limits under the compensation scheme, significantly reduced penalties on delayed tax filing, etc) are likely to give a fillip to better-run enterprises by reducing compliance cost. Reduction in the rate of corporate tax and a one-time waiver for bringing past records of labour and production can be an additional boost. A small intervention earlier this year, allowing firms to come clean on their actual staff strength without getting penalised led to a 26% rise in the EPFO subscriber base from 38 million in December 2016 to 48.1 million by June this year. We might be underestimating formal jobs by a huge margin anyway. Fourth, relocation of productive resources, including capital, within the SMEs shall lead to immense improvement in productivity. Jobs in such enterprises would be unlike ‘subsistence’ jobs in the informal sector, with no social security benefits. In addition to direct job opportunities for the entire fraternity of tax consultants, accountants and compliance officers, the GST could lead to 11-18% growth in formal jobs in sectors including cement, logistics and e-commerce. The evolution of e-commerce has already expanded the scope of the market for these SMEs who now have a global market to cater to.
E-Way Bill under GST E-way bill compulsory from February 01, 2018: GST council 24TH GST COUNCIL MEETING HELD ON 16-12-2017 THROUGH VIDEO CONFERENCING DECIDED THAT INTER-STATE E-WAY BILL TO BE MADE COMPULSORY FROM 1-2-2018 PIB PRESS RELEASE DATED 16-12-2017 The 24th Meeting of the GST Council held today through video conference under the Chairmanship of the Union Minister of Finance and Corporate Affairs, Shri Arun Jaitley. It discussed about the implementation of e-way Bill system in the country. Till such time as the National e-way Bill is ready, the States were authorized to continue their own separate e-way Bill systems. However, it was represented by the trade and transporters that this is causing undue hardship in the Inter-State movement of goods and therefore, bringing in an early all India system of e-way Bill has become a necessity. The GST Council today reviewed the progress of readiness of hardware and software required for the introduction of nationwide e-way Bill System. After discussions with all the States, the following decisions were taken :- i. The nationwide e-way Bill system will be ready to be rolled out on a trial basis latest by 16th January, 2018. Trade and transporters can start using this system on a voluntary basis from 16th January, 2018. ii. The Rules for implementation of nationwide e-way Bill system for Inter-State movement of goods on a compulsory basis will be notified with effect from 1st February, 2018. This will bring uniformity across the States for seamless inter-State movement of goods. iii. While the System for both inter-State and intra-State e-way Bill generation will be ready by 16th January, 2018, the States may choose their own timings for implementation of e-way Bill for intra- State movement of goods on any date before 1st June, 2018. There are certain States which are already having system of e-way Bill for intra-State as well as inter-State movement and some of those States can be early adopters of national e-way Bill system for intra-State movement also. But in any case, the Uniform System of e-way Bill for inter-State as well as intra-State movement will be implemented across the country by 1st June, 2018. Why E-Way Bill ? On introduction of GST w.e.f. 1-7-2017, many States have removed the physical barriers at State border for transport of goods by road. This has speeded up movement of goods to some extent. In absence of physical restrictions on movement of goods, some control is essential to ensure that goods are not clandestinely removed and sold. Hence, a system of e-way bill is proposed to be introduced. Provisions relating to E-way Bill have been made by amending rule 138 and inserting rules 138A to 138B in CGST Rules, 2017. These rules have been inserted vide Notification No. 27/2017 - Central Tax, dated 30-8-2017. The provisions are very difficult to comply with and harassment on roads is possible. We can only hope and pray that provisions of e-way bill are made effective only after GSTN system is ready and tested. It is also doubtful whether transporters are equipped to follow these procedures. States like Kerala, West Bengal, Bihar, Odisha, Andhra Pradesh and Karnataka already had E-Way Bill System. The GST Council has allowed states to follow their existing E-Way Bill frameworks until the E-Way Bill Rules under GST are implemented. Information to be furnished prior to commencement of movement of goods and generation of e-way bill The consignor is required to furnish specified details before movement of goods commences, if value exceeds Rs 50, 000 electronically in Part A of form GST EWB-01. If the consignor is unregistered, the consignee is required to furnish the information. Every registered person who causes movement of goods of consignment value exceeding fifty thousand rupees— (i) in relation to a supply; or (ii) for reasons other than supply; or (iii) due to inward supply from an unregistered person, shall, before commencement of such movement, furnish information relating to the said goods in Part A of form GST EWB-01, electronically, on the common portal [rule 138(1) of CGST Rules]. Observation- The expression "for reasons other than supply" will include job work, removal for testing purpose, send on approval basis, etc. E-way bill even if value of consignment is below Rs 50, 000 In following cases, e-way bill should be generated irrespective of value of consignment i.e. even if value of consignment is below Rs 50, 000 – (a) Sending material inter-State for job work (b) handicraft goods transported inter-State under exemption if turnover of person below Rs. 20/10 lakhs and enjoying exemption under Notification No. 32/2017-CT, dated 15-9-2017 - first and second proviso to rule 138(1) of CGST Rules inserted w.e.f. 15-9-2017. It is really too much for such small persons selling handicrafts inter- State, to know, understand and follow these procedures. Movement deemed to be caused by consignee if goods supplier is unregistered person If the goods are supplied by an unregistered supplier to a recipient who is registered, the movement shall be said to be caused by such recipient if the recipient is known at the time of commencement of the movement of goods [Explanation 1 to rule 138(3) of CGST Rules] Generation of e-way bill if transport in own vehicle or hired vehicle or by rail, vessel or air If the goods are transported by the registered person as a consignor or the recipient of supply as the consignee, whether in his own conveyance or a hired one or by railways or by air or by vessel, the said person or the recipient may generate the e-way bill in form GST EWB-01 electronically on the common portal after furnishing information in Part B of form GST EWB-01 [rule 138(2) of CGST Rules] Though the word used is 'may', really he must generate such e-way bill. The information in Part A of from GST EWB-01 shall be furnished by the consignor or the recipient of the supply as consignee where the goods are transported by railways or by air or by vessel [Explanation 2 to rule 138(3) of CGST Rules] [Really, even otherwise, this is obvious]. 10 Generation of e-way bill by transporter if transport is by road If the e-way bill is not generated under rule 138(2) and the goods are handed over to a transporter for transportation by road, the registered person shall furnish the information relating to the transporter in Part B of form GST EWB-01 on the common portal. The e-way bill shall be generated by the transporter on the common portal on the basis of the information furnished by the registered person in Part A of form GST EWB-01 [rule 138(3) of CGST Rules] Generation of e-way bill by transporter if not generated by consignor - If the consignor or the consignee has not generated form GST EWB-01 in accordance with the provisions of rule 138(1) and the value of goods carried in the conveyance is more than fifty thousand rupees, the transporter shall generate form GST EWB-01 on the basis of invoice or bill of supply or delivery challan, as the case may be, and may also generate a consolidated e-way bill in FORM GST EWB-02 on the common portal prior to the movement of goods [rule 138(7) of CGST Rules] Option to generate e-way bill even if value less than Rs 50, 000 - The registered person or the transporter may, at his option, generate and carry the e-way bill even if the value of the consignment is less than fifty thousand rupees [first proviso to rule 138(3) of CGST Rules] Unregistered person can also generate e-way bill - If the movement is caused by an unregistered person either in his own conveyance or a hired one or through a transporter, he or the transporter may, at their option, generate the e-way bill in form GST EWB-01 on the common portal in the manner specified in this rule [second proviso to rule 138(3) of CGST Rules]. E-way Bill generated is valid all over India - The e-way bill generated under this rule or under rule 138 of the Goods and Services Tax Rules of any State shall be valid in every State and Union territory [rule 138(13) of CGST Rules] 1 Relaxation if goods transported from place of consignor to transporter and distance less than 10 Km If the goods are transported for a distance of less than ten kilometres within the State or Union territory from the place of business of the consignor to the place of business of the transporter for further transportation, the supplier or the transporter may not furnish the details of conveyance in Part B of form GST EWB-01 [third proviso to rule 138(3) of CGST Rules] Ten Kilometers relaxation not sufficient in many cases - Ten Kilometers relaxation is really not sufficient in many cases. In many cases, the railway yard or port or airport or godown of transporter may be much beyond 10 Kms. In big cities, much more allowance is required. Generation and cancellation of e-way Bill through SMS The facility of generation and cancellation of e-way bill may also be made available through SMS - Explanation to rule 138(14) of CGST Rules. Generation of e-way bill number (EBN) by GSTN Upon generation of the e-way bill on the common portal, a unique e- way bill number (EBN) will be generated by GSTN. This number shall be made available to the supplier, the recipient and the transporter on the common portal [rule 138(4) of CGST Rules]. 14 Procedure by transporter after generation of e-way bill The procedure to be followed by transporter is as follows - Transhipment of goods to another conveyance - Any transporter transferring goods from one conveyance to another in the course of transit shall, before such transfer and further movement of goods, update the details of conveyance in the e-way bill on the common portal in form GST EWB-01 [rule 138(5) of CGST Rules] Details of conveyance not required for final delivery to consignee - If the goods are transported for a distance of less than ten kilometres within the State or Union territory from the place of business of the transporter finally to the place of business of the consignee, the details of conveyance may not be updated in the e-way bill [proviso to rule 138(5) of CGST Rules] Ten Kilometers relaxation is really not sufficient in metropolitan cities. In big cities, more allowance is required. Multiple consignments in one conveyance - After e-way bill has been generated in accordance with the provisions of rule 138(1), where multiple consignments are intended to be transported in one conveyance, the transporter may indicate the serial number of e-way bills generated in respect of each such consignment electronically on the common portal and a consolidated e-way bill in form GST EWB-02 may be generated by him on the common portal prior to the movement of goods [rule 138(6) of CGST Rules] 16 Supplier can use the information to furnish details in GSTR-1 return The information furnished in Part A of form GST EWB-01 shall be made available to the registered supplier on the common portal who may utilize the same for furnishing details in form GSTR-1 [rule 138(8) of CGST Rules] Information to unregistered supplier - If the information has been furnished by an unregistered supplier in form GST EWB-01, he shall be informed electronically, if the mobile number or the email is available [proviso to rule 138(8) of CGST Rules] 17 Cancellation of e-way bill If an e-way bill has been generated under this rule 138 of CGST Rules, but goods are either not transported or are not transported as per the details furnished in the e-way bill, the e-way bill may be cancelled electronically on the common portal, within 24 hours of generation of the e-way bill. Thus, if there is accident to truck, the driver should first rush to cancel e-way bill before sending injured persons to hospital and even before informing police and owner of vehicle about accident ! An e-way bill cannot be cancelled if it has been verified in transit in accordance with the provisions of rule 138B [rule 138(9) of CGST Rules] 1 Validity of e-way bill generated An e-way bill or a consolidated e-way bill generated under this rule shall be valid as follows – (1) Upto 100 Km - one day [really only 24 hours] (2) One day for every 100 Km or part after first 100 Km [each day of 24 hours] [rule 138(10) of CGST Rules] The Commissioner may, by notification, extend the validity period of e-way bill for certain categories of goods as may be specified therein: Meaning of 'relevant date' for purposes of rule 138(1) - The "relevant date" shall mean the date on which the e-way bill has been generated and the period of validity shall be counted from the time at which the e-way bill has been generated and each day shall be counted as twenty-four hours - Explanation to rule 138(1) of CGST Rules. Fresh generation of e-way bill if validity expired - Under circumstances of an exceptional nature, if the goods cannot be transported within the validity period of the e-way bill, the transporter may generate another e-way bill after updating the details in Part B of form GST EWB-01 [second proviso to rule 138(10) of CGST Rules]. 19 Intimation of acceptance of details by recipient The details of e-way bill generated under rule 138(1) shall be made available to the recipient on the common portal, if he is registered, He shall communicate his acceptance or rejection of the consignment covered by the e-way bill [rule 138(11) of CGST Rules]. Where the recipient referred to in rule 138(11) does not communicate his acceptance or rejection within seventy two hours of the details being made available to him on the common portal, it shall be deemed that he has accepted the said details. Note that the communication is not of receipt of goods by recipient (consignee) but only acceptance of details as contained in the e-way bill. What it really means that his acceptance as the goods are meant for him only and his name, as recipient, is not false or incorrect. 20 Transport of goods for which e- way bill is not required No e-way bill is required to be generated in following cases [rule 138(14) of CGST Rules]. 21 Goods for which e-way bill not required as per Annexure to rule 138(1) Following items are included in Annexure to rule 138(10). For transport of these goods, e-way bill is not required. All items exempted under Notification Nos. 2/2017-CT (Rate) and 2/2017-IT (Rate) both dated 28-6-2017 The major among them are as follows –  Fresh Meat, Fish Chicken, Eggs, Milk, Butter Milk, Curd, Natural Honey, Fresh Fruits and Vegetables, coffee beans, wheat, rye, rice, Flour, Besan, Bread, Prasad, Salt, Bindi, Sindoor, Stamps, Judicial Papers, Printed Books, Newspapers, Bangles, Handloom, Pooja equipment, jute, khadi, national flag, raw silk.  Passenger baggage (9803)  Specified Puja samagri 22  Liquefied petroleum gas (LPG) for supply to household and non domestic exempted category (NDEC) customers  Kerosene oil sold under PDS  Postal baggage transported by Department of Posts  Natural or cultured pearls and precious or semi-precious stones; precious metals and metals clad with precious metal (Chapter 71)  Jewellery, goldsmiths' and silversmiths' wares and other articles (Chapter 71)  Currency  Used personal and household effects  Coral, unworked (0508) and worked coral (9601). Some more exemptions are required - The relaxations are good but not sufficient. Relaxations are required in following cases – (a) transporting goods from port, airport or railway yard to factory or godown of taxable person (b) Sending material for job work or repairs within the city (c) Sending cranes, bull dozers, cement mixers to site (d) Sending construction material to and from site. 23 Documents and devices to be carried by a person-in-charge of a conveyance The person-in-charge of a conveyance shall carry— (a) the invoice or bill of supply or delivery challan, as the case may be; and (b) a copy of the e-way bill or the e-way bill number, either physically or mapped to a Radio Frequency Identification Device embedded on to the conveyance in such manner as may be notified by the Commissioner [rule 138A(1) of CGST Rules] 2 Invoice Reference Number (IRN) can be obtained by supplier electronically A registered person (supplier) may obtain an Invoice Reference Number (IRN) from the common portal by uploading on the portal, a tax invoice issued by him in form GST INV-1 and produce the same for verification by the proper officer in lieu of the tax invoice and such number shall be valid for a period of thirty days from the date of uploading [rule 138A(2) of CGST Rules]. If such IRN is obtained, it is not necessary for transporter to carry physical copy of tax invoice, unless specifically ordered. 25 Commissioner can require that physical copy of tax invoice of delivery challan should be carried - Even if rule 138A(1)(b) of CGST Rules enable dispensing with carrying physical copy of tax invoice, the Commissioner may, by notification, require the person-in-charge of the conveyance to carry the following documents instead of the e-way bill- (a) tax invoice or bill of supply or bill of entry; or (b) a delivery challan, where the goods are transported for reasons other than by way of supply [rule 138A(5) of CGST Rules] Auto population of information in part A if IRN obtained - If the registered person uploads the invoice under rule 138A(2), the information in Part A of form GST EWB-01 shall be auto-populated by the common portal on the basis of the information furnished in form GST INV-1 [rule 138A(3) of CGST Rules]. 26 Radio Frequency Identification Device (RFID) by specified transporters The Commissioner may, by notification, require a class of transporters to obtain a unique Radio Frequency Identification Device and get the said device embedded on to the conveyance and map the e-way bill to the Radio Frequency Identification Device (RFID) prior to the movement of goods [rule 138A(4) of CGST Rules]. 27 Road checks and Verification of documents and conveyances The Commissioner or an officer empowered by him in this behalf may authorise the proper officer to intercept any conveyance to verify the e-way bill or the e-way bill number in physical form for all inter-State and intra- State movement of goods [rule 138B(1) of CGST Rules] The Commissioner shall get Radio Frequency Identification Device readers (RFIDR) installed at places where the verification of movement of goods is required to be carried out and verification of movement of vehicles shall be done through such device readers where the e-way bill has been mapped with the said device [rule 138B(2) of CGST Rules] The physical verification of conveyances shall be carried out by the proper officer as authorised by the Commissioner or an officer empowered by him in this behalf: Physical verification on basis of specific intelligence - On receipt of specific information on evasion of tax, physical verification of a specific conveyance can also be carried out by any officer after obtaining necessary approval of the Commissioner or an officer authorised by him in this behalf [rule 138B(3) of CGST Rules] 28 Inspection and verification of goods during road checks A summary report of every inspection of goods in transit shall be recorded online by the proper officer in Part A of FORM GST EWB-03 within twenty four hours of inspection and the final report in Part B of FORM GST EWB-03 shall be recorded within three days of such inspection [rule 138C(1) of CGST Rules] No further verification in same State if once verification done - The physical verification of goods being transported on any conveyance has been done during transit at one place within the State or in any other State, no further physical verification of the said conveyance shall be carried out again in the State, unless a specific information relating to evasion of tax is made available subsequently [rule 138C(1) of CGST Rules]. 29 Transporter can upload details if vehicle detained for more than 30 minutes If a vehicle has been intercepted and detained for a period exceeding thirty minutes, the transporter may upload the said information in FORM GST EWB-04 on the common portal [rule 138D of CGST Rules] It is not clear what action will be taken and by whom. In fact, the officer may get annoyed, and his 'rate' and 'charges' will increase! 30 Challenges for E-Way Bill 31 Consignment Value: As per the Rules, every registered person who causes movement of goods of consignment value exceeding fifty thousand rupees must generate the E-way bill before the commencement of such movement. However, the term 'consignment value' has not been defined anywhere in the Rules. This could lead to different interpretation and issues. For Example, where the multiple invoices are issued to same customer in single consignment - Whether E-way bill would have to be generated, even if value of each invoice individually is less than the threshold? Given the fact that whole GST Network is operated based on invoice, whether the system would allow to enter multiple invoice nos. against one E-way bill? Whether, the E-way bill must be generated qua HSN code? These are some of the issues which needs to be addressed. 32 Downloaded from www.gstindia.com Responsibility of the transporter: According to the Rules, where the consignor or the consignee has not generated the E-way bill and the value of goods carried in the conveyance is more than fifty thousand rupees, the transporter is required to generate one. Further, if the transporter moves goods from one mode of conveyance to another during the transit, the transporter would have to update the details of the conveyance in the E-way bill on the common portal. In such situations, the small transporters may struggle due to lack of facilities, awareness, etc. 33 Reconciliation between transport document and E-way bill: It may happen that information furnished by the registered person in the E-way bill may not match with information furnished in the transport document such as lorry receipt, goods receipt, etc. by the transporter. In such case, the officer inspecting the consignment may argue on the correctness of the information provided. This type of situations may lead to delay in the transportation of goods. Some sort of clarity should be given in this aspect, to avoid future disputes. 34 Generation of E-way bill by unregistered person: As per the Rules, the unregistered person or its transporters have an option to generate an e-way bill. This means that an e-way bill can be generated by both registered and unregistered persons. In any case, the ultimate responsibility of E-way bill compliance is on the registered recipient. Therefore, the option given to the unregistered person seems to be irrelevant, as many of them would try to shy away from this responsibility. Further, there is no clarity on the requirement of E-way bill for movement of goods between two unregistered persons. Also, the way the unregistered person would login into the GST Network and generate the E-way bill is not prescribed. This would lead to additional burden on the registered person and the transporter. 35 Validity period and generation of new E-way bill in 'exceptional nature': The validity of E-way bills depends on the distance travelled and a new E-way bill can be generated by the transporter in exceptional cases. However, the term 'exceptional nature' is neither defined or explained in the Rules. Whether, truck breakdown or change in route by the driver - would fall in the ambit of 'exceptional nature'. Such ambiguity will leave the transporter, at the mercy of the proper officers. Also, whether the time allowed on validity of the E-way bill is sufficient, considering the transport infrastructure available, specially, in the rural parts of India. There could also be challenges with the validity period, where consignments are transported on part load basis by different suppliers. 36 Cancellation of E-way bill: In cases, where goods are not transported after generation of the E- way bill or are not transported as per the details furnished in the E- way bill, the E–way bill generated can be cancelled within the 24 hours from its generation. However, no such cancellation would be permitted, if the E-way bill is verified by the proper officer in transit before 24 hours. This leads us to a question on the process for correction of the E- way bill post 24 hours of its generation. The Rules are silent on such remedy. In absence of any further clarity, the business would have to set-up a robust system, to ensure that the details incorporated in the E- way bills are correct and verified at the earliest. 37 Information relating to the transport document no. in PART-1 of E-way bill form: The Part-A of the E-way bill form, requires incorporating the details of the transport document such as goods receipt number or railway receipt number or airway bill number or bill of lading number. However, in practice, these could be provided by the transporter after the material is loaded in the vehicle for delivery. Does it mean that the consignor would not be able to furnish the details in Part-A before actual loading of material on the vehicle. If so, the whole exercise would have to be done on real-time basis and the access to the GST Network would have to be given to the logistics people working at the route level. 38 State exemptions: As per the Rules, the states are empowered to notify the area within which, the E-way bill would not be required. Hope this would not lead to different rules adopted by states for movement of goods within such area. As of now the Karnataka Government has introduced the E-way bill on its site with the similar features as mentioned in Central Rules. Several other states have also initiated such digital process where details of the consignment can be shared electronically, eliminating the use of physical bills. It may be possible that different state comes up with the different Rules. This would create trouble for industries and may defeat the purpose of having uniform process across the country. 39 Technology reliance: There is too much reliance on the technology in the new system. The transporters, especially, in smaller towns, who are not tech-savvy may fail to comply with the process. Also, given the cost involved in installing RFID devices to the vehicle, not many transporters may opt for it. Further, the logistics and transportation is still managed by the unorganized sector. Hence, the E-way bill system could come as a compliance burden on them. 40 Physical verification of the conveyance: The generally accepted belief is that the new system of E-way bill would lead to elimination of delays and long queues at check posts at state borders. But, will all the states be ready to adopt it seamlessly? Any modification in this regard by the states could lead to complete failure of the system. 41 The objective of the Government here is multi-fold i.e. to reduce the number of check-posts across the country, eliminate state-wise documentation to ensure smooth movement of goods, establish measures to avoid tax evasions and reduce corruption. While the intent of the Government is clear, the proper implementation of E- way bill system is important. For this, proper dissemination of information, training and awareness of people including developing of good eco-system should be on high priority list of the Government as well businesses. Also, sufficient time should be given to stakeholders for trying and testing the new system, so to minimize the initial hiccups. Efforts should be channelized towards reorientation of the attitude and approach of the tax administration, to achieve fundamental change in the mindset. Thank You !
All About Electronic Way Bill in GST Introduction A waybill is a receipt or a document issued by a carrier giving details and instructions relating to the shipment of a consignment of goods and the details include name of consignor, consignee, the point of origin of the consignment, its destination, and route. Electronic Way Bill (E-Way Bill) is basically a compliance mechanism wherein by way of a digital interface the person causing the movement of goods uploads the relevant information prior to the commencement of movement of goods and generates e-way bill on the GST portal. Rule 138 of the CGST Rules, 2017 provides for the e-way bill mechanism and in this context it is important to note that “information is to be furnished prior to the commencement of movement of goods” and “is to be issued whether the movement is in relation to a supply or for reasons other than supply” E-Way Bill under GST E-way bill is an electronic document generated on the GST portal evidencing movement of goods. It has two Components-Part A comprising of details of GSTIN of recipient, place of delivery (PIN Code), invoice or challan number and date, value of goods, HSN code, transport document number (Goods Receipt Number or Railway Receipt Number or Airway Bill Number or Bill of Lading Number) and reasons for transportation; and Part B comprising of transporter details (Vehicle number). As per Rule 138 of the CGST Rules, 2017, every registered person who causes movement of goods (which may not necessarily be on account of supply) of consignment value more than Rs. 50000/- is required to furnish above mentioned information in part A of e-way bill. The part B containing transport details helps in generation of e-way bill. Who should generate the e-way bill and why? E-way bill is to be generated by the consignor or consignee himself if the transportation is being done in own/hired conveyance or by railways by air or by Vessel. If the goods are handed over to a transporter for transportation by road, E-way bill is to be generated by the Transporter. Where neither the consignor nor consignee generates the e-way bill and the value of goods is more than Rs.50, 000/- it shall be the responsibility of the transporter to generate it. Further, it has been provided that where goods are sent by a principal located in one State to a job worker located in any other State, the e-way bill shall be generated by by the principal irrespective of the value of the consignment Also, where handicraft goods are transported from one State to another by a person who has been exempted from the requirement of obtaining registration, the e-way bill shall be generated by the said person irrespective of the value of the consignment. How is it generated? An e-way bill contains two parts- Part A to be furnished by the person who is causing movement of goods of consignment value exceeding Rs.50, 000/- and part B (transport details) to be furnished by the person who is transporting the goods. Where the goods are transported by a registered person whether as consignor or recipient, the said person shall have to generate the e-way bill by furnishing information in part B on the GST common portal. Where the e-way bill is not generated by registered person and the goods are handed over to the transporter for transportation by road, the registered person shall furnish the information relating to the transporter in Part B of FORM GST EWB-01 on the common portal and the e-way bill shall be generated by the transporter on the said portal on the basis of the information furnished by the registered person in Part A of FORM GST EWB-01. A registered person may obtain an Invoice Reference Number from the common portal by uploading, on the said portal, a tax invoice issued by him in FORM GST INV-1 and produce the same for verification by the proper officer in lieu of the tax invoice and such number shall be valid for a period of thirty days from the date of uploading. In the above case, the registered person will not have to upload the information in Part A of FORM GST EWB-01 for generation of e-way bill and the same shall be auto populated by the common portal on the basis of the information furnished in FORM GST INV-1. Upon generation of the e-way bill on the common portal, a unique e-way bill number (EBN) generated by the common portal, shall be made available to the supplier, the recipient and the transporter on the common portal. The details of e-way bill generated shall be made available to the recipient, if registered, on the common portal, who shall communicate his acceptance or rejection of the consignment covered by the e-way bill. In case, the recipient does not communicate his acceptance or rejection within seventy two hours of the details being made available to him on the common portal, it shall be deemed that he has accepted the said details. Purpose of E-Way Bill E-way bill is a mechanism to ensure that goods being transported comply with the GST Law and is an effective tool to track movement of goods and check tax evasion Validity of E-Way Bill The validity of e-way bill depends on the distance to be travelled by the goods. For a distance of less than 100 Km the e-way bill will be valid for a day from the relevant date. For every 100 Km thereafter, the validity will be additional one day from the relevant date. The “relevant date” shall mean the date on which the e-way bill has been generated and the period of validity shall be counted from the time at which the e-way bill has been generated and each day shall be counted as twenty-four hours. In general, the validity of the e-way bill cannot be extended. However, Commissioner may extend the validity period only by way of issue of notification for certain categories of goods which shall be specified later. Further, if under circumstances of an exceptional nature, the goods cannot be transported within the validity period of the e-way bill, the transporter may generate another e-way bill after updating the details in Part B of FORM GST EWB-01. Cancellation of E-Way Bill Where an e-way bill has been generated under this rule, but goods are either not transported or are not transported as per the details furnished in the e-way bill, the e-way bill may be cancelled electronically on the common portal, either directly or through a Facilitation Centre notified by the Commissioner, within 24 hours of generation of the e-way bill. However, an e-way bill cannot be cancelled if it has been verified in transit in accordance with the provisions of rule 138B of the CGST Rules, 2017 . The facility of generation and cancellation of e-way bill will also be made available through SMS. Finer Points An e-way bill has to be prepared for every consignment where the value of the consignment exceeds Rs.50, 000/-. Where multiple consignments of varying values (per consignment) are carried in a single vehicle, e-way bill needs to be mandatorily generated only for those consignments whose value exceeds Rs.50, 000/-. This does not however preclude the consignor/consignee/transporter to generate e-way bills even for individual consignments whose value is less than Rs.50000/- per consignment. For multiple consignments being carried in the same vehicle, the transporter to prepare a consolidated e-way bill by indicating serial number of each e-way bill, on the common prior to commencement of transport of goods. There is always a possibility that multiple vehicles are used for carrying the same consignment to its destination or unforeseen exigencies may require the consignments to be carried in a different conveyance than the original one. For such situations, the rules provide that any transporter transferring goods from one conveyance to another in the course of transit shall, before such transfer and further movement of goods, update the details of the conveyance in the e-way bill on the common portal in FORM GST EWB-01. The person in charge of a conveyance has to carry the invoice or bill of supply or delivery challan, as the case may be; and a copy of the e-way bill or the e-way bill number, either physically or mapped to a Radio Frequency Identification Device embedded on to the conveyance in such manner as may be notified by the Commissioner. However, where circumstances so warrant, the Commissioner may, by notification, require the person-in-charge of the conveyance to carry the following documents instead of the e-way bill: (a) Tax invoice or bill of supply or bill of entry; or (b) A delivery challan, where the goods are transported for reasons other than byway of supply. It is also be noted that the Commissioner may, by notification, require a class of transporters to obtain a unique Radio Frequency Identification Device and get the said device embedded on to the conveyance and map the e-way bill to the Radio Frequency Identification Device prior to the movement of goods. E-Way bill to be issued whether for supply or otherwise E-way bill is to be issued irrespective of whether the movement of goods is caused by reasons of supply or otherwise. In respect of transportation for reasons other than supply, movement could be in view of export/import, job-work, SKD or CKD, recipient not known, line sales, sales returns, exhibition or fairs, for own use, sale on approval basis etc. Exceptions to e-way bill requirement No e-way bill is required to be generated in the following cases a) Transport of goods as specified in Annexure to Rule 138 of the CGST Rules, 2017 b) goods being transported by a non-motorised conveyance; c) goods being transported from the port, airport, air cargo complex and land customs station to an inland container depot or a container freight station for clearance by Customs; d) in respect of movement of goods within such areas as are notified under rule 138(14) (d) of the SGST Rules, 2017 of the concerned State; and e) Consignment value less than Rs. 50, 000/- Consequences of non-conformance to E-way bill rules If e-way bills, wherever required, are not issued in accordance with the provisions contained in Rule 138 of the CGST Rules, 2017, the same will be considered as contravention of rules. As per Section 122 of the CGST Act, 2017, a taxable person who transports any taxable goods without the cover of specified documents (e-way bill is one of the specified documents) shall be liable to a penalty of Rs.10, 000/- or tax sought to be evaded (wherever applicable) whichever is greater. As per Section 129 of CGST Act, 2017, where any person transports any goods or stores any goods while they are in transit in contravention of the provisions of this Act or the rules made there under, all such goods and conveyance used as a means of transport for carrying the said goods and documents relating to such goods and conveyance shall be liable to detention or seizure. Enforcement The Commissioner or an officer empowered by him in this behalf may authorise the proper officer to intercept any conveyance to verify the e-way bill or the e-way bill number in physical form for all inter-State and intra-State movement of goods. The physical verification of conveyances may also be carried out by the proper officer as authorised by the Commissioner or an officer empowered by him in this behalf. Physical verification of a specific conveyance can also be carried out by any officer, on receipt of specific information on evasion of tax, after obtaining necessary approval of the Commissioner or an officer authorised by him in this behalf. A summary report of every inspection of goods in transit shall be recorded online by the proper officer in Part A of FORM GST EWB-03 within twenty-four hours of inspection and the final report in Part B of FORM GST EWB-03 shall be recorded within three days of such inspection. Once physical verification of goods being transported on any conveyance has been done during transit at one place within the State or in any other State, no further physical verification of the said conveyance shall be carried out again in the State, unless a specific information relating to evasion of tax is made available subsequently. Where a vehicle has been intercepted and detained for a period exceeding thirty minutes, the transporter may upload the said information in FORM GST EWB-04 on the common portal. Conclusion The e-way bill provisions aim to remove the ills of the erstwhile way bill system prevailing under VAT in different states, which was a major contributor to the bottlenecks at the check posts. Moreover different states prescribed different e-way bill rules which made compliance difficult. The e-way bill provisions under GST will bring in a uniform e-way bill rule which will be applicable throughout the country. The physical interface will pave way for digital interface which will facilitate faster movement of goods. It is bound to improve the turnaround time of vehicles and help the logistics industry by increasing the average distances travelled, reducing the travel time as well as costs.
How to Determine Supply of Goods vs Supply of Services in GST Schedule-II of the model GST law provides clarity on determining the type of supply as supply of goods or supply of services. This aims at eliminating the dilemma that exists in the current indirect tax system, for example, Service Tax Vs. VAT on works contract, AC Restaurant Service, Software, etc. It is, therefore, important for businesses to know whether supply amounts to supply of goods or supply of services, and treat supply accordingly. The law broadly lists transactions related to transfers, land and building, treatment or process (applied on third party’s goods), and transactions related to construction and works contact, renting, etc. Let us discuss some important supplies with examples. Forms of supply Treated as supply of? Example 1 Any transfer of the title in goods Goods Furniture House sold furniture to Mr. Ganesh. This will be treated as supply of goods, because on sale, the title of the furniture is transferred to Mr. Ganesh. 2 Any transfer of goods without transfer of title Services Furniture House supplied furniture to Mr. Rakesh, on rental basis, for a period of 3 months. This amounts supply of service because furniture is transferred for Mr. Rakesh’s usage, and the title of the furniture is still with Furniture House. 3 Any transfer of title of goods under an agreement which stipulates that property in goods will pass at a future date upon payment of full consideration as agreed. Goods Furniture House supplied furniture to Mr. Ramesh in an agreement to receive payments in 6 instalments. This amounts supply of goods, because the title of the furniture will pass on to Mr. Ramesh on completing the payment of 6 instalments. Typically, all hire purchase will qualify under this section. 4 Any lease, easement, tenancy, and licence to occupy land Services Mr. Suresh lets out land on lease to Furniture House. The letting out of land on lease is considered as supply of services. 5 Any lease or letting out of the building including a commercial, industrial or residential complex for business or commerce, either wholly or partly Services Mr. Suresh lets out a building to Furniture House. Furniture House used the building for display and sale of furniture. This is a supply of services. 6 Job work – Any treatment or process which is being applied to another person’s goods Services Furniture House also undertakes repair works and polishing of the furniture of their customers. The repair and polishing activity will be treated as supply of service. 7 Permanent transfer or disposal of business assets transferred with or without consideration Goods We have discussed this in detail in this blog post GST Impact on Supply without Consideration & Importation of Services 8 Business assets put to private use or non- business use whether or not for a consideration Services Car used for business is put to private use. This is a supply of services. 9 Renting of immovable property Services Renting of shop premises is considered as supply of services. 10 Development, design, programming, customisation, adaptation, up-gradation, enhancement, implementation of information technology software Services Max Technologies Ltd developed a payroll software for Furniture House. The development of software is a supply of services. 11 Works contract, including transfer of property in goods (whether as goods or in some other form) involved in the execution of a works contract of immovable property Services Murali Construction Ltd constructed a commercial complex involving material and labour. This is a supply of services.
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