E-way bill adds to companies' woes on GST

Firms, traders fear there could be increased harassment of truck drivers in absence of a bill

Burdened with greater documentation and compliance, consumer goods companies say the issue of interstate transfer of goods has not got easier with the e-way bill.

On Saturday, the Goods and Services Tax (GST) Council decided to make the e-way bill compulsory for interstate movement of goods from February 1, replacing the transit pass system followed by individual states.

The move is expected to act as an electronic surveillance of factory output and actual consumption of goods. But companies Business Standard spoke to argue the system may actually not aid smooth transfer of goods.

An e-way bill, for the uninitiated, is a transport document showing whether goods have reached their destination or not. Companies and traders fear there could be increased harassment of truck drivers in the absence of a bill, coming at a time when firms in general have been grappling with challenges pertaining to stock transfers between states.

Stock transfers here pertain to movement of goods from factory or place of manufacturing in one state to depot or warehouse in another state. While companies have to pay integrated GST (IGST) in full for this interstate movement of goods, they receive input tax credit only on sale (of these goods), implying their working capital remains blocked till then.

"The pressure to clear inventory in warehouses grows as a result of this and I am not sure whether firms are happy about the situation," Sumit Malhotra, managing director, Bajaj Corp, the maker of Bajaj Almond Drops Hair Oil, says.

A senior executive from a consumer goods company says that slow-moving items in a firm's portfolio are particularly impacted on account of the stock transfer regime under the GST as opposed to fast-moving items. The introduction of e-way bills now has added to the confusion, he says.

"The GST Council had initially decided that the e-way bill system would be rolled out in a phased manner from January of next year. The endeavour was to give businesses time to adjust to the system. But that clearly doesn't seem to be happening now," Sachin Menon, partner and head, indirect tax, KPMG, says, adding that while accountability would grow there was need to simplify the process at the same time.

This point is endorsed by the Confederation of All India Traders, an apex body of general traders, which says the e-way bill should be introduced in April rather than in February.

"There is frequent supply of goods and not all of this has to do with actual sale. Goods sometimes are shipped for sample purpose or could be returns on account of excess quantity or quality issues. How will such movement of goods be treated?" asks Praveen Khandelwal, general secretary, CAIT.

Transporters and traders instead have proposed introduction of a quick response code to be printed on every invoice, which can be validated by scanning it. "This mechanism can be self-generated and can ensure smooth transfer of goods," Khandelwal says.