When transporting goods across state borders, the first thing businesses ensure is adherence to regulatory laws. They need to ensure everything is within compliance to avoid any delivery delays or complications. Businesses often face a range of challenges, from tax issues to fines, which can slow down the transportation process. The E-way bill addresses this, acting as a digital permit that ensures smooth transportation. This electronic document guarantees that all your shipments are in order, simplifying the process and speeding up delivery. It also prevents tax evasion in GST system
Let’s explore how the E-Way Bill works and why it’s essential for every business.
Need for the E-way bill
Under the GST regime, all the check posts across the country were eliminated. This was done to facilitate smooth movement of goods. However, this change made it harder to monitor the movement of goods, creating opportunities for tax evasion. To address this issue, the E-Way Bill system was introduced. As per Section 68 of the CGST Act and Rule 138 of the CGST Rules, 2017, businesses are now required to carry an E-Way Bill for any consignment valued over ₹50,000.
How Does an E-way bill Work?
The E-Way Bill is a crucial tool for tracking the movement of goods. It is simple to generate. The taxpayer must provide the transaction details to the tax department and receive a unique 12-digit E-way bill number. This number serves as a valid government document and must accompany the goods during transport. The tax officials can thus easily track and verify the document.
Key requirements to Generate an E-way bill
The following is required to generate an e-way bill:
- The value of the goods must be above Rs. 50,000
- The taxpayer shall be a registered individual
- Generated by the supplier or the transporter on behalf of the supplier
- For interstate or intrastate movement of goods.
- GSTIN, HSN details, transporter details and vehicle number
- For goods involving multiple modes of transport
How does E-way bill help in reducing tax evasion in GST?
The E-way bill system plays a significant role in reducing tax evasion under the GST regime in India through several mechanisms. Here’s how it helps curb tax evasion:
- Audit Trail: One of the key features of E-way bill is the ability to track the movement of goods in real time. The bill contains details of origin, destination and transporter details. This makes it easier for tax authorities to track goods during transit and ensure their legal transportation. This also reduces the chances of misdeclared goods.
- Prevention of fake invoices: Before the E-Way Bill system, creating fake invoices was one of the easiest ways businesses could evade taxes. Fraudulent businesses would generate false invoices for non-existent goods to claim tax credits or hide income. The E-way bill system links the movement of goods to invoices and challans. This reduces the chances of fake invoices and unaccounted goods, as cross-checking happens with the GST records.
- Automatic detection for fraud: If a taxpayer constantly generates E-way bill for low value goods, it raises concerns within the tax department. With the help of E-way bill system, the tax authorities can spot unusual patterns or discrepancies in reporting by the businessmen. This also discourages businesses, since the system easily flags such instances. If any business contravenes any provision, the tax authorities can impose fines, seize the goods or consider any other enforcement actions.
- Prevention of ghost firms and unregistered businesses: Earlier, it was easy for unregistered businesses to bypass GST rules and avoid tax payments. However, E-way bill system ensures that only registered businesses with valid GSTINs can generate such bills. If an unregistered or suspicious transporter (e.g., one that has a history of fraud or irregularities) transports any goods, the system can flag such shipments. This enables authorities to intervene in cases of false transport claims, thus alerting authorities to easily identify the violation.
- Alerts for non-compliance: The E-way bill system generates alerts for non-compliance for missing e-Way Bills or discrepancies in invoicing. For instance, if the taxpayer is trying to generate an e-way bill without filing his GST returns, the system alerts the user. These alerts trigger automated audits, investigations, and scrutiny from the tax authorities which quickly addresses any potential tax evasion. Since it is also important to ensure e-way bill validity and timely extension if required, the government can keep a proper track of all non-compliant activities.
Conclusion:
The E-way bill process is important in streamlining the movement of goods and ensuring tax compliance during the transportation process. By adhering to the E-way bill process and regulations, businesses can avoid penalties and ensure tax -compliant operations. To simplify and automate your GST compliance, consider leveraging GSTrobo®, a robust e-way bill software designed to manage E-way bill generation and compliance seamlessly.
