Numerous technical glitches held Centre back from implementing the e-way bill system as part of the new Goods and Services Tax (GST) last July. However, it soon became evident that not only would the entire country see economic improvements once the new system was in place, but that the success of the logistics industry depended on the efficient processing of documents that the system promised.
In fact, during a trial run of the e-way bill mechanism in January, companies generated over two lakhs e-way bills daily, proof of how important document processing is in the GST era. An e-way bill is an electronic documentation detailing the movement of goods valued at Rs 50,000 or higher.
Well, the good news is that the wait is over. The e-way bill requirement for goods transported interstate took effect April 1, with the requirement for intrastate movement on hold until 1st June.
With the new system now in place, let’s look at some of the benefits that are expected to follow.
Effective dissolution of state borders
The founding principle of GST hinges on the concept of ‘one nation, one tax.’ The e-way bill aims to unify India into a single market for logistics purposes. By doing so, it paves the way for smoother movement of goods across states and union territories by ensuring that economic borders are virtually abolished.
Similarly, as companies incorporate radio frequency identification devices (RFID) tags for transport vehicles, and inspectors begin using RFID readers, industries will experience much shorter wait times at checkpoints. Many also expect a reduction in the number of checkpoints.
Reduction in documentation
In the era before the e-way bill, every state had its own set of required documentation consisting of multiple declaration forms, permits, and waybills, resulting in a framework littered with human intervention at every level. Reliance on such a structure opened doors for tax evasion, and the price of goods reflected the additional cost businesses naturally incurred as a result of corruption.
The e-way bill mechanism is expected to counter corruption problems effectively by bringing together the supplier, the recipient, and the transporter on the same platform, and by allowing all relevant entities access to a single document. Taxpayers can now generate e-way bills with the government’s approval accompanying all consignments, with the approval being valid countrywide.
Digitization will also increase accountability and allow inspectors to verify documents easier. The e-way bill, as the name suggests, is an electronic document that relevant entities can access from anywhere, and this will make e-way bills difficult to manipulate for those who might want to conceal the identity of goods being transported or avoid paying taxes.
Reduction in logistics costs
Currently, costs associated with logistics in India are rather high. Recent figures show them lingering between 13-14 percent, as compared to logistical costs in the U.S., which hover at 9.5 percent, and Germany, at 8 percent. Likewise, a study by ASSOCHAM-Resurgent India stated that India could save $50 billion by trimming logistics costs from 14 per cent down to just 9 percent of its GDP. Hence, in that respect, there is a dire need for a mechanism that will reduce these costs— the e-way bill is it.
The e-way bill will reinforce proper invoicing, and along these lines will reduce tax evasion and curtail corruption, which, in the long run, will be a substantial factor in bringing down the logistics cost-to-GDP ratio. Likewise, any reduction in logistics cost is translated into cheaper goods for consumers and higher returns for logistics companies.
The e-way bill is an excellent proposal that aims to plug multiple loopholes currently hampering the logistics industry in India. The benefits of the e-way bill mechanism should immediately translate to cheaper goods and higher profits.
However, automation is the only way to ensure that the e-waybill initiative is truly successful. Avalara TrustFile GST, a one-stop solution for GST compliance needs, is prepared to help companies in India generate e-way bills using the sophisticated and easy-to-implement software.
The views expressed in this article are of Harshad Shinde, Product Manager, TrustFile GST, Avalara.
Source: Elets – The Banking and Finance
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