FEBRUARY 02, 2018

By Nitum Jain

AFTER exactly seven months from the rollout of the Goods and Service Tax regime in the country, the electronic waybill system is set to replace the myriad road permit/ waybill setups in India's various States. While many States have embraced the system, there are still several States which are yet to implement the e-waybill system for intra-state movement of goods and have issued deferment notifications/ alternative arrangements to this effect. The success of the working of this system is dependent upon the robustness of the electronic setup and its quick response time. However, considering the crash of the E-waybill portal on the very first day of the system's implementation does not bode well for the Government.

What the provisions say:

The scheme of the e-waybill system, deriving power from Section 68 of the Central Goods and Services Tax Act, 2017 and enshrined in the Rule made thereunder, i.e. Rule 138 of the Central Goods and Service Tax Rules, 2017, is based on a simple principle: movement of goods should be accounted for, as must be evinced from the prescribed documents carried by the person in charge of the conveyance.

A plain reading of the aforementioned provisions leads to the measured view that the document prescribed in the relevant rule, i.e. the e-waybill is qua the movement of goods wherein such e-waybill is to be generated by person causing the movement of goods and it should be available for inspection during such movement of goods. A logical corollary which follows is that, ordinarily, when there is a single movement of goods from one point to another, an e-waybill shall accompany the same.

What the authorities say:

The wrinkle in this line of thought appears in the form of an FAQ issued by the department, as available on the new E-way bill platform [http://164.100.80.180/ewbnat9/Others/faq.aspx] as regards bill-to-ship-to transactions. The same is reproduced as under:

“If the addresses involved in 'Bill to' and 'Ship to' in an invoice/bill belongs to one legal name/taxpayer as per GSTIN within the state, then one e-way bill has to be generated. That is, if the 'Bill to' is principal place of business and 'Ship to' is additional place of business of the GSTIN or vice versa in an invoice/bill, then one e-way bill is sufficient for the movement of goods.

If the addresses involved in 'Bill to' and 'Ship to' in an invoice/bill belongs to different legal names/taxpayers, then two e-way bills have to be generated. One e-way bill for first invoice, second e-way bill is from 'Bill to' party to 'Ship to' party based on the invoice/bill of the 'Bill to' party. This is required to complete the cycle of transactions and taxes will change for inter-state transactions.

For example, A has issued invoice to B as 'Bill to' with C as 'Ship to'. Legally, both B and C are different taxpayers. Now, A will generate one e-way bill and B will issue invoice and generate one more e-way bill. As goods are moving from A to C directly, the transporter will produce both the invoices and e-way bills to show the shortcut movement of goods."

A bill-to-ship-to transaction (in case all three parties are distinct registered persons) is unique in the sense that while there is only one single movement from the supplier's location to consignee's location, there are two underlying supplies, i.e.

- first supply from supplier to the recipient; and

- second supply from the recipient to the consignee.

As per the above FAQ, in the event of a bill-to-ship-to transaction wherein the recipient and the consignee are distinct registered persons, the Government is of the view that not only two e-waybills are to be generated pursuant to each supply, and the single movement of goods to the consignee is to be carried out under the cover of both invoices and the corresponding two e-waybills .

This deliberate attempt to marry the e-waybill system to the supply of goods rather than the movement of goods seems to have been conceived out the desire to link the e-waybills to the outward supply returns. However, this ambitious plan suffers from a myopic viewpoint wherein it has not accounted for the ground reality of bill-to-ship-to transactions and other similar transactions which involve single movement but multiple underlying transactions.

Herein lie the problems:

In case of bill-to-ship-to transaction itself, the following gaps in the authorities' view are easily identifiable:

- Presently, the chances of availability of the recipient's invoice (raised on the consignee) before the goods are moved from the supplier's location are slim to none, unless the goods are moved by the recipient himself or through his transporter. Similarly, its nigh impossible for both the e-waybills to be generated (by the supplier and the recipient each) before the goods begin movement.

- Further, even if the industry works out practices whereby the recipient makes available his invoice to the supplier(or the supplier's transporter), the same would only be an additional hassle and a cause for delay in the movement of goods.

- Moreover, if the invoice/ e-waybill for the second supply is made available to the supplier, the disclosure of the sale price charged by the recipient from the consignee would be deathblow to the common trade practice.

- It is not uncommon for companies to have central procurement systems wherein the Head Office places the order for supply of goods and instructs delivery to a branch office in another State, i.e. the Head Office is the recipient of the supply made by the supplier wherein the branch office is the consignee. Here, there might be cases where in case of ex-works contracts , the consignee-branch office may cause movement of goods. At this juncture, it may be noted that the rules affix the liability of furnishing an e-waybill on the person who causes movement of goods, providing for the registered person as the consignor or the recipient as consignee or the transporter, whoever may move the goods. However, there is no clarity as regards procedure in case of movement caused by the consignee, in strictosensu being neither supplier or recipient or transporter, in the bill-to-ship-to transaction.

Other transactions in peril:

As stated above, it can be seen from the FAQ that the authorities are of the view that e-waybills are to be generated per supply/ transaction and not per movement of goods. Such a view not only imperils bill-to-ship-to transactions but other transactions as well, such as:

- In-transit sales: Supply of goods by way of transfer of documents of title during the movement of such goods is another common transaction in trade. Not unlike bill-to-ship-to, the said transaction also involves two supplies with only single movement of goods. In such a case, as the second supply is yet to take place, the issuance of e-waybill by the recipient before the commencement of movements is not possible. Further, it is not clear as to how the E-way bill would be generated in case of in-transit sale for the second leg of the transaction.

- Sales return to branch unit: In case goods sold by a unit in State A to a customer in State B are returned to a branch unit in the same State (establishment of distinct person) for logistics purposes, again there would be two transactions, i.e. sales return by customer to the supplier-unit and deemed supply by the unit to its branch unit in other State. Going by the understanding of the authorities, two e-waybills would be required in the instant case and the supplier-unit would have to make available his invoice and e-waybill to the customer/ branch unit (who would cause the movement of goods).

As the e-waybill system is in its nascent stages, such issues are expected to be soon brought to the authorities' notice and we anticipate that quick and effective relief by way of clarifications/ amendment would be given by the Government. Moreover, aspeedy resolution of the problems being faced by the industry due to implementation of E-way bill system would also go a long way to reflect the commitment of the Government towards its initiative of ‘Ease of Doing Business in India'.

Stop Press:

(The author is an Associate with Lakshmikumaran & Sridharan, New Delhi and the views expressed are strictly personal.)