The GST law mandates that vehicles carrying goods can be intercepted by designated field officers during movement of goods for verification of documents such as invoices and e-way bills. And since fixed check posts have been abolished, the verification process can be conducted by mobile squads anywhere and anytime on the road.
Not generating and carrying an e-way bill is considered as non-compliance with the provisions of the GST law and can result in both monetary as well as non-monetary losses to the taxpayer, as the tax authorities have already started issuing notices to businesses.
Since the e-way bill is a document that pertains to compliance (and is an additional requirement after the issuance of an invoice), there is no tax-related implication for non-generation of the e-way bill if tax has already been paid on the basis of an invoice raised. However, in such a case, a penalty of 10,000 INR may be levied by the authorities.
What is important to note is that if goods are transported without an e-way bill, the authorities can allege that the consignor of the goods sought to evade payment of the applicable tax and consequently levy a penalty that is equivalent to the tax amount payable.
Hence, in case goods are moved without generating a valid e-way bill, the authorities may impose a penalty of 10,000 INR or amount of tax sought to be evaded, whichever is higher.
In case it is found that goods are being transported without an e-way bill, such goods and the vehicle conveying them can be detained or seized and will be released only on payment of the appropriate tax and penalty specified by the concerned officer.
Non-compliance with the e-way bill provisions can also lead to confiscation of goods and the vehicle conveying those goods, in case the person transporting the goods or the owner of goods/conveyance fails to pay the tax and penalty within seven days of detention or seizure.
In short, non-compliance with the e-Way bill provisions can lead to the following consequences:
Payment of an upfront penalty can lead to the outflow of funds. While there is a possibility of recovering the same at a later stage through litigation (for which relief is expected at a higher forum only), the same can create a working capital issue for the businesses.
Any proceedings by the tax department in case of one non-compliance with the e-way bill provisions may lead to initiation of action by the authorities on other GST assessments, including asking for reconciliation between the supplies reported for e-way bill generation and the supplies reported in GST returns. This could also increase the chances of future consignments being checked by the authorities, considering the history of non-compliance.
The biggest impact for any business if its goods (or vehicle) are seized during transit is that the routine operations of business are disrupted. Businesses may not be able to afford any delay in delivery or receipt of goods on account of the same being confiscated during transit due to mere non-compliance with the e-way bill mandate.
Any action taken by the tax authorities against the business, such as initiation of litigation on account of tax evasion, could result in damage to the reputation of the businesses as an honest taxpayer.
The above consequences of non-compliance with e-way bill mandates can be mitigated if it can be established through invoices and other documents that applicable GST has been duly accounted for and paid. Given the stringent compliance-related requirements, allocating responsibilities to various stakeholders, making appropriate changes in contracts, evaluating the need for technology-based solutions, etc., are the steps which businesses need to take if they wish to avoid any business disruptions on account of mere procedural non-compliances.
Partner and Leader, Indirect Tax, PwC India
Tel: +91 124 3306507
Partner and Deputy Leader, Indirect Tax, PwC India
Tel: +91 22 6689 1455