The new bill will present bigger challenges than even the GST roll out

While the goods and services tax (GST) roll out itself has proved to be a challenge, a bigger hurdle awaits the government as it embarks on implementing the e-way bill early next year. Before the one-year term of GST implementation is over, the e-way bill would’ve been implemented across the country. E-way bill is an electronic way bill for movement of goods, which can be generated on the goods and services tax network (GSTN). Any movement of goods of more than Rs 50,000 in value cannot be made without an e-way bill. In India, the challenge lies not just in implementation of a law, but also in managing the perception of what that law will do to the stakeholders when implemented.

The fact that the GST law would change the whole indirect tax system and in the medium to long term would be beneficial for all small traders and manufacturers has been missed in the din, which certain vested interests have been able to create around its implementation. Policy makers would be well advised not to forget this lesson, when the transition happens on the e-way bill. The fact remains that only after the implementation of this e-way bill would small retail traders and manufacturers feel the Ease of Doing Business. The two are the main opponents of GST citing increased compliance. With an e-way bill in place, the multiple bills, which traders could get only after greasing the willing palms of government officials, will no longer be required. Goods produced in Punjab could be sent to Kerala with just one single e-way bill. While the bill will marginally increase the workload of manufacturers and traders, it will significantly reduce their ability to evade the GST. It, therefore, makes sense for policy makers to communicate with stakeholders on all aspects of the bill. Even more than GST, this information becomes vital because its implementation would involve state governments, some of whom have been finding it difficult to adjust to a regime where their discretionary powers have gone down drastically. Under the new law, state revenue department officials would be empowered to check goods in transportation to examine whether there is under or over invoicing. The trouble here is that if state tax officials are accorded unhindered powers, there is the possibility that they would harass transporters and related parties, mainly small manufacturers and traders, on slightest non-compliance.

It would be better for policy makers to provide a framework to state officials on the manner of their operations, irrespective of the evasion quotient. There should be, for example, a sample checking method that they could use. Three or four out of 1,000 e-way bills generated daily should be checked and the samples re-routed to various geographies within the country. Policy makers need to ensure that the status of inspections conducted, both for inter-state and intra state movement of goods, should be reported online within an hour so that central authorities are fully aware of what’s happening on ground. This will have a twin impact. First, state officials will know that their work is being monitored, making it difficult for them to harrass traders or transporters. In addition, it would help create a database, which can be used to identify segments of the industry where there is scope of evasion and introduce necessary changes to plug those loopholes at the starting point of the manufacturing chain itself.