MARCH 19, 2018

By Shailesh Sheth, Advocate and Founder, SPS LEGAL

5. E-Way Bill – 'With you …always…all the way….!"

Council's recommendations:

The Council has recommended that:

- E-way bill for inter-state movement of goods across the country be introduced w.e.f. 1 st April, 2018 and

- for Intra-State movement of goods, e-way bill be introduced w.e.f. a date to be announced in a phased manner but not later than 1 st June, 2018.

The Council has also approved the following major improvements over the last set of rules:

- E-way bill is required to be generated only where the value of the consignment exceeds Rs. 50000/-. For smaller value consignments, no e-way bill is required.

- The provisions of sub-rule (7) of Rule 138 will be notified from a later date. Therefore, at present there is no requirement to generate e-way bill where an individual consignment value is less than Rs. 50,000/-, even if the transporter is carrying goods of more than Rs. 50,000/- in a single conveyance.

- Value of exempted goods has been excluded from value of the consignment, for the purpose of e-way bill generation.

- Public conveyance has also been included as a mode of transport and the responsibility of generating e-way bill in case of movement of goods by public transport would be that of the consignor or consignee.

- Railways has been exempted from generation and carrying of e-way bill with the condition that without the production of e-way bill, railways will not deliver the goods to the recipient. But railways are required to carry invoice or delivery challan etc.

- Time period for the recipient to communicate his acceptance or rejection of the consignment would be the validity period of the concerned e-way bill or 72 hours,whichever is earlier.

- In case of movement of goods on account of job-work, the registered job worker can also generate e-way bill.

- Consignor can authorize the transporter, courier agency and e-commerce operator to fill PART-A of e-way bill on his behalf.

- Movement of goods from the place of consignor to the place of transporter up to a distance of 50 Km [increased from 10 km] does not require filling of PART-B of e-way bill.They have to generate PART-A of e-way bill.

- Extra validity period has been provided for Over Dimensional Cargo (ODC).

- If the goods cannot be transported within the validity period of the e-way bill, the transporter may extend the validity period in case of transshipment or in case of circumstances of an exceptional nature.

- Validity of one day will expire at midnight of the day immediately following the date of generation of e-way bill.

- Once verified by any tax officer, the same conveyance will not be subject to a second check in any State or Union territory, unless and until, specific information for the same is received.

- In case of movement of goods by railways, airways and waterways, the e-way bill can be generated even after commencement of movement of goods.

- Movement of goods on account of Bill-To-Ship-To supply will be handled through the capturing of place of dispatch in PART-A of e-way bill

Comments:

It is claimed that "GST" will usher in 'One Nation-One Market-One Tax' era in the country. If this fundamentally reformative indirect tax policy has to achieve this objective, even while curbing the tax evasion, the introduction of 'E-way Bill system' across the country is considered to be inevitable. In fact, E-way Bill may prove to be the most crucial document under GST regime, both, from the operational perspective as well as preventive perspective.

GST Council had, at its 22 nd Meeting held on October 6, 2017, decided to roll out nationwide E-way Bill system from April 1, 2018. The trade and industry felt relieved as they got sufficient time to familiarize and equip themselves with the system.

However, only a couple of months later, a 'bolt from the blue' hit the taxpayers with the GST Council, at its 24th Meeting held in December, 2017, advancing the introduction of E-way Bill system by a full two months i.e. February 1, 2018. Undeterred by the sounds of protest, the trial run began on January 15, 2018 with most States rushing for the registration on the E-way Portals. The generation of over two lakh E-way Bills on a daily basis raised the hopes that the situation is well under control! However, on February 1, 2018, when the Nation was anxiously listening to the Budget Speech of the FM on one hand and also frantically laboring to generate E-way Bills, the Portal crashed and the introduction of E-way Bill was deferred yet again, till further notice.

Thereafter, there have been some announcements about the re-introduction of E-way Bill on March 1, 2018, but it really didn't take off. At the same time and in a significant move, a Notification No. 12/2018-Central Tax dated 7th March, 2018 was issued substituting Rule 138 of the CGST Rules, 2017 and introducing substantially modified provisions governing the E-way Bill. However, the Notification was not made effective immediately and it was provided that the same will come into effect from a date to be notified in the official gazette.

The Council has now recommended the introduction of the E-way Bill from the originally announced date i.e. April 1, 2018. Simultaneously, the Council has also made the above substantial recommendations concerning E-way Bill system and its operation. It is evident that the Council is conscious of the fact that the E-way Bill, in the initial period, may prove to be a cumbersome and time-consuming process for the taxpayers. The endeavors are therefore to make the E-way Bill system as simple, convenient and hassle-free as possible. The key objectives of the E-way Bill are: effective dissolution of the State borders, seamless inter-state transportation of goods with minimal loss of time at check points, effective and easier tracking of the movement of the goods and control over the tax evasion. The E-way Bill system is also expected to be an effective tool in the hands of the revenue officers for the cross-border verification of the transactions when the invoice-matching mechanism is yet to be implemented.

It appears that the stage is seriously set for the introduction of E-way Bill from April 1, 2018 and the four key stakeholders viz. suppliers, recipients, transporters and revenue officers may brace themselves to embrace the system after a couple of weeks!

6. Exemption/Refunds to the Exporters - Oh! that ever-elusive refund …!"

The Council appears to have dwelt at length on the serious issues of exemptions and pending refunds concerning the exporters and has made some significant recommendations/announcements aimed at providing comforts to the harried exporters and soothing the ruffled feathers of the exporting community. The Council has considered the issues relating to the existing export promotion schemes available to the exporters and its validity period, the status of pending refunds to the exporters and the introduction of E-wallet scheme as a permanent solution to address the woes, particularly the problem of cash blockage on account of upfront payment of GST/IGST on the procurement, of the exporters. The recommendations of the Council on these issues are summarized below:

a. The exporters presently availing various export promotion schemes can now continue to avail the tax exemptions on imported goods for a further period of six months beyond March 31, 2018 i.e. upto October 1, 2018 by which date an E-wallet scheme is expected to be in place to continue the benefits in future.

b. The Council reviewed the progress in grant of refunds to exporters of both, IGST and ITC and appreciated that the pace of refund has picked up. The Council further directed GSTN to expeditiously forward the balance refund claims to the Customs/Central GST/State GST authorities, as the case may be, for their immediate sanction and disbursal.

c. The Council had earlier agreed that a permanent solution to the various difficulties of cash blockage being experienced by the exporters was to introduce an E-wallet scheme w.e.f. April 1, 2018.The Council reviewed the progress made by a Working Group constituted on 16.12.2017 with representatives of Central and State Governments, to operationalize the E-wallet scheme and took note of the preparatory work done so far by the Working Group. The Council observed that more needs to be done to address a large number of technical, legal and administrative issues that have been identified which would require more time. With a view to not cause any disruptions that may affect the exports, the Council has agreed to :

- defer the implementation of the E-wallet scheme by six months i.e. upto 01.10.2018; and

- extend the present dispensation in terms of exemptions, etc. which is available upto 31.03.2018, for a further period of six months i.e. upto 01.10.2018.

Comments:

GST, as a 'destination based-consumption tax' is always perceived to be a 'shot in the arms' for the exporters as it is expected to substantially relieve the exporters of the domestic tax burden and make them competitive in the international markets. This objective is to be achieved by the grant of refunds to the exporters of the GST paid and/or ITC accumulated on account of exports made by them.

Unfortunately, for varied reasons - the prime reason being the technical glitches -, the refunds were not forthcoming to the exporters in time at all. This resulted into the huge cash blockage for the exporters who found themselves in a dire strait, since, on one hand, they were being forced to pay upfront the GST/IGST on their domestic and imported procurements and on the other hand, to face the problem of delayed refunds. The situation has been worsening by the day and the Council had to take a very serious note of the problems facing the exporters. As an interim solution, the Council, at its 22nd Meeting held on 06.10.2017, recommended the re-introduction of the pre-GST tax exemptions on imports for the exporters. Additionally, for Merchant-exporters, a special scheme of payment of GST @ 0.1% on their procured goods was introduced. Further, domestic procurement made under Advance Authorisation, EPCG and EOU schemes were recognized as 'deemed exports' with flexibility for either the suppliers or the exporters being able to claim a refund of GST /IGST paid thereon. All these benefits were made available upto 31.03.2018.

However, as the introduction of the E-wallet scheme is being deferred till 01.10.2018, the aforesaid interim avenues made available to the exporters are also being continued till 01.10.2018.

On the refund front, the Council has reviewed the progress made in the clearance of huge backlog of the refund claims and appreciated that the pace of grant of refund has picked up. However, this self-congratulatory gesture may not console or provide any comfort to the exporters as the ground reality appears to be quite different so far as the issue of pending refund claims is concerned. The exporters, across the various sectors, are extremely upset over their long pending refund claims and finding it extremely difficult to carry on their business with massive blockage of their interest-bearing working capital in upfront payment of tax or accumulated ITC. Under these circumstances, much more concrete action than mere perfunctory words of appreciation and directions would be required to 'save the day' for the exporters.

Interestingly, the CBEC has decided to intensify the efforts to liquidate all pending IGST/ITC refund claims by observing a Special Drive-"IGST/ITC Exports Refund Fortnight" beginning from 15.03.2018 to 29.03.2018 across the country. One may hope that this gallant attempt on part of the Board will bear desired fruits!

7. Data Analytics – "Proceed with caution…!"

The Council took note of the following revelations from the examination of data of Returns filed by the taxpayers:

- that, there is a variance between the amount of IGST and Compensation Cess paid by importers at Customs ports and input tax credit of the same claimed in GSTR-3B

- that, there are major data gaps between self-declared liability in Form GSTR-1 and Form GSTR-3B.

Council has directed for further analysis of the discrepancies and to initiate appropriate action.

Comments:

Barely a couple of days after the Council's Meeting held on 10.03.2018, almost all the major newspapers were dotted with front-page headlines that 'the Government is staring at Rs.34000 Crore GST mop-up puzzle'. This was reportedly based on the analysis of the data of Returns filed by the taxpayers and the above preliminary revelations thrown up by the analysis. These revelations have led the Revenue officers to believe that one, the importers including big companies are resorting to under valuation or paying IGST but not claiming ITC or refund of the same and two, a massive tax-evasion has been taking place in the trade and industry. The Revenue authorities have apparently concluded that the importers are deliberately forgoing the ITC or refund of IGST as well as Compensation Cess paid by them on the imports with a view to supply the imported goods to domestic channels without invoices. The tax department armed with technology and big data available under the GST Returns, is, thus, reportedly gearing for stricter enforcement of law.

However, a word of caution here! GST, like any other tax legislation is, no doubt, quite susceptible to frauds and tax evasion.' 'Invoice-credit method' and 'low threshold' are two prime reasons for the ITC related frauds and non-reporting of actual revenue under GST regime. However, before whipping the cord, it will be advisable that the Data reflected by the Returns are analysed in depth and objectively. Any precipitative and high-handed action based on premature conclusions will only 'backfire' in the long run! For instance, there could be perfectly justifiable and valid reasons for the mismatch between the details in GSTR-3B and GSTR-1 Returns. Similar could be the case for the presumed non-claim of ITC or refund for IGST by the importers. A need of the hour is to apply caution and to not look for 'potential tax evader' in every 'taxpayer' !

As per a Finance Ministry's reply to the Lok Sabha, GST collections for the period July, 2017 to January, 2018 was as under:

- July, 2017 - Rs. 93,950 cr.

- August, 2017 - Rs. 93,029 cr.

- September, 2017 - Rs. 95,132 cr.

- October, 2017 - Rs. 85,931 cr.

- November, 2017 - Rs. 83,716 cr.

- December, 2017 - Rs. 88,929 cr.

- January, 2018 - Rs. 22,047 cr.

A Kotak Economic Research Report released in February, 2018 had pointed out that for July-January period, the average monthly GST collection was about Rs.88000 crore, but this needs to be over a quarter more at Rs.1,10,000 crore to be able to meet the budgetary target. The Government will, therefore, certainly look for 'ways and means' to boost the GST revenue collection. But the action to identify the potential tax evaders and catch and punish them, inevitable as it is, should not become a mere 'revenue generation exercise'….!

Summing up…

The country has embarked upon the ambitious GST journey barely eight months back. However, in such a short period of time, the journey is turning out to be quite torturous and tumulus! But it is still early days and a 'course correction' undertaken with objectivity, pragmatism and vision at this crucial juncture will certainly make this journey much smoother and safer for all the stakeholders. The inherent fault lines in the design, structure and business processes have made the GST implementation a 'messy affair ' necessitating frequent amendments, extensions and clarifications by the Council. It is turning out to be a herculean task even for the tax professionals, not to speak of the ordinary taxpayers, to keep themselves abreast of such frequent developments! It is, therefore, absolutely essential that whatever solutions are found on the above and other vexed issues, they are viable, stable, practical and do-able and would not require frequent tinkering…!

"Rule a Kingdom as if cooking a small fish; if you interfere with
it too much while cooking, it will fall apart and be inedible."

(Lao Tzu)

See Part –I

(The views expressed are strictly personal.)