The Indian taxation system introduced GST (Goods and Services Tax) in 2017 to systemize the tax structure. Various components of GST are crucial for compliance. Amongst these, the GST E-way bill is an electronically generated document. This document is mandatory for the movement of goods across India under Sec No. 68 of CGST Act’17, with rules 138, 138A, 138B, 138C, 138D, and 138E. It is necessary to create e-way bill for goods valued at more than INR 50,000, with some exceptions. Otherwise, a business may face an e-way bill penalty.
While generating a GST E-way bill, each consignment will have a unique GST E-way bill number. The vehicle driver then carries the e-way bill with them. E-way billing became mandatory for all inter-state and intra-state movement of goods except in a few states since April 2018.
In case of non-compliance, E-way bill penalty will apply according to the nature of non-compliance. The department will then carry audits for any suspicious case. What are the different E-way bill penalty and audit scenarios? Let’s discuss it!
Why Audits and Penalties are necessary?
- Tax Compliance: Audits and penalties are essential for tax authorities to ensure that businesses comply with tax regulations. E-way bills help ensure that correct payment of the Goods and Services Tax (GST) happens for the movement of goods. Without audits and penalties, some businesses could underreport their transactions or evade tax.
- Revenue Protection: Audits assist tax authorities in identifying irregularities and recovering unpaid taxes. When departments do not audit the businesses or do not impose penalties, it risks losing significant revenue.
- Fair Competition: Ensuring compliance across all businesses promotes fair competition. When some businesses evade taxes or violate regulations, it creates an uneven playing field. Audits and penalties keep all businesses accountable to the same standards.
- Transparency and Accountability: Audits improve transparency and accountability in the transportation of goods. Tax authorities can verify that there is legal transportation of goods. They also ensure accompanying tax payments are correct by examining GST E-Way Bills and associated documents. Transparency is critical for fostering trust in the tax system.
- System Integrity: Audits help maintain the integrity of the GST E-way Bill system itself. By identifying and addressing non-compliance issues, the system can continue to function effectively.
E-way bill: Penalty for Failure of Generation
Failure to issue GST e-way bills in accordance with Rule 138 will imply a violation of the rules. Under Section 122(1)(xiv) of the CGST Act, 2017, any taxable person who transports taxable goods without the required specified documents, which include the GST e-way bill, may face an E-way bill penalty of ₹10,000/- or the amount of tax evasion involved, whichever is higher.
Furthermore, in accordance with Section 129(1) of the CGST Act, 2017, if any person transports or stores goods in transit in contravention of the Act or its related rules, those goods, the conveyance used for transportation, and the associated documents may be subject to detention or seizure.
E-way bill Penalty in case of minor mistakes
Circular No. 64/38/2018-GST, issued by CBIC on the 14th of September 2018, provides clarification regarding the accompanying documents for consignments of goods. According to this circular, a compliant consignment of goods is accompanied by a tax invoice, delivery challan, and a GST e-way bill. However, in specific situations, there is no need for initiation of proceedings under Section 129 of the CGST Act. These situations include:
a) Minor spelling mistakes in the name of the consignor or consignee, provided the GSTIN is correct.
b) Errors in the PIN Code, as long as the consignor and consignee addresses are accurate, with the caveat that the PIN Code error should not extend the GST e-way bill’s validity period.
c) Address errors for the consignee, with the condition that the locality and other details are correct.
d) Minor errors in the document numbers mentioned in the GST e-way bill (one or two digits).
e) Errors in the 4 or 6-digit level of HSN, where the first 2 digits are correct, and the tax rate is accurate.
f) Minor errors in one or two digits or characters of the vehicle number.
| > In cases where the above situations apply, an E-way bill penalty of ₹500/- each should be imposed under Section 125 of the CGST Act and the respective State GST Act (or ₹1,000/- under the IGST Act) for every consignment. > This E-way bill penalty should be levied using FORM GST DRC-07. |
Read in-Depth:- Common E-Way Bill and E-invoicing Rules
E-way bill Penalty for Transporting goods without documents
The department can seize or detain any conveyance seen transporting goods in violation of the provisions outlined in this Act and its accompanying rules. Following such detention or seizure, both the goods and the conveyance can be released in accordance with Section 129 of the CGST Act’17 and Notification 39/2021-CT, which designates the 1st of January 2022 as the effective date for several amendments introduced by the Finance Act, 2021.
In essence, irrespective of the Act’s provisions, if any individual transports or stores goods while they are in transit in contravention of this Act or its related rules, all such goods, the conveyance employed to transport them, and the associated documents will be susceptible to detention or seizure. Subsequently, the release of these items is contingent upon the following conditions:
| * Goods: Payment of an E-way bill penalty equal to Two hundred percent (200%) of the tax due on the goods. * Exempted Goods: In the case of exempted goods, payment of an amount equal to Two percent (2%) of the value of the goods or Twenty-five thousand rupees(Rs. 25,000), whichever is lower, provided the owner of the goods steps forward to pay the tax and penalty. |
| * Goods: Payment of an E-way bill penalty equal to Fifty percent (50%) of the value of the goods or Two hundred percent (200%) of the tax due on the goods, whichever is greater * Exempted Goods: in the case of exempted goods, payment of an E-way bill penalty equal to Five percent (5%) of the value of the goods or Twenty-five thousand rupees, whichever is less if the owner of the goods fails to pay the penalty. |
The option to provide security in the prescribed manner is equal to the amount payable under clause (a) or clause (b).
It is important to note that the department can not detain or seize goods or conveyances without an order of detention or seizure to the person in charge of transporting the goods.
| Additional provisions state: The procedures outlined in sub-section (6) of section 67 shall apply, with necessary modifications, to the detention and seizure of goods and conveyances. [Section 129(2) is omitted from the 1st of January, 2022.] The officer responsible for the detention or seizure of goods or conveyance must issue a notice within seven days of the event detailing the penalty due. Subsequently, an order must be issued within seven days from the date of notice service for the payment of the penalty under clause (a) or clause (b) of sub-section (1). No penalty can be determined under sub-section (3) without granting the concerned person an opportunity to be heard. Upon payment of the amounts referenced in sub-section (1), all proceedings related to the notice specified in sub-section (3) are considered concluded. |
If the person transporting goods or the owner thereof fails to make the penalty payment under sub-section (1) within fifteen days from the receipt of the order issued under sub-section (3), the detained or seized goods or conveyance may be sold or otherwise disposed of, as specified, to recover the E-way bill penalty due under sub-section (3). Notably, the government will release the conveyance upon payment by the transporter of the E-way bill penalty as per sub-section (3) or one lakh rupees, whichever is less.
Furthermore, in cases of perishable detained or seized goods, hazardous, or goods likely to depreciate over time, the aforementioned fifteen-day period will reduce by the appropriate authorities.
Conclusion
To conclude, GST E-Way Bill audits and penalties are integral to the tax system’s effectiveness and fairness. By leveraging technology, businesses can streamline their compliance efforts and reduce the risk of non-compliance. Invest in GSTrobo®, maintain accurate records, and stay informed about the latest updates in the E-Way Billing system.
With the right approach, commitment to compliance, and ample use of GSTrobo, businesses can navigate the E-Way Billing system successfully, minimize penalties, and contribute to a more transparent and efficient business environment.
