E-way bill system reform to ease logistics, push trust-based compliance

Economic Survey 2025-26 outlines a shift in the GST e-way bill system from enforcement to a trust-based, technology-driven framework aimed at improving logistics efficiency and easing compliance

Not too far in the recent past, it was not uncommon to see a conga line of trucks at every major toll checkpoint across India, especially interstate ones, waiting patiently for their papers — and sometimes, cargo — to be checked before being let through. It was a slow, manual system, increasing both transport time and compliance costs.

 

Then, in April 2018, came the Goods and Services Tax (GST) e-way bill system that linked invoice details, vehicle information, and transporter data through a digital document generated on the e-way bill portal. Conceived as a key digital pillar of the GST framework, the system mandated businesses transporting goods valued above Rs 50,000 to generate the document through the e-way bill portal, allowing authorities to verify shipments electronically. This quickly eliminated tortuous manual checks and allowed shipments to move seamlessly across state borders.

 

In fact, the e-way bill played a crucial role in improving logistics efficiency in the early years of GST. Removal of physical barriers at state borders and standardisation of documentation significantly cut waiting time for trucks and helped create a more unified national market.

Evolution of e-way bill system under GST reforms

Now, the e-way bill system is reaching an inflection point: from being a mere tool of enforcement, the Economic Survey 2025–26 sees it as part of the next wave of GST reforms wherein it becomes the facilitator of smooth logistics and supply chains.

 

The e-way bill system has also emerged as an important high-frequency indicator of economic activity. Because it captures the movement of goods across the country in near real time, trends in e-way bill generation are closely watched by policymakers and economists as an early signal of changes in trade flows, manufacturing output, and consumption demand.

 

"Over the past two years, the e-way bill has standardised and digitised the information relating to the movement of goods within India. This has ensured the traceability of all goods from their consumption destinations, providing better information and control across the logistics ecosystem. This has naturally resulted in the e-way bill becoming a reliable barometer for economic activity involving supply of goods within the country," said MS Mani, partner with Deloitte India, adding that increased e-way bill activity reflects growing economic activity, which could lead to higher GST collections in the ensuing month.

Numbers show increased adoption of e-way bill system

According to the Comptroller and Auditor General (CAG), the number of e-way bills generated rose from about 249 million in 2018–19 to over 341 million in 2021–22, marking an increase of roughly 37 per cent over the period. The number of unique GST registrations generating e-way bills also rose by around 8 per cent, indicating wider adoption of the system across businesses and sectors. The audit also noted that nearly 98 per cent of consignments were transported by road, underscoring the central role of road logistics in India’s supply chains. More recently, monthly e-way bill generation has continued to rise, with the system touching record highs of around 138.4 million in December 2025, as per GSTN data.

 

At the same time, the CAG also flagged significant discrepancies between e-way bill data and GST returns, including cases of non-filing of returns, under-reporting of turnover, and mismatches in input tax credit claims, with the irregularities involving potential revenue implications of nearly Rs 870 crore from FY19 to FY22.

Eco Survey pushes for trust-based compliance

The Economic Survey 2025–26 has also suggested that the next phase of reforms should move the system away from an enforcement-heavy approach towards a technology-driven and trust-based compliance framework. The Survey noted that the e-way bill system has functioned as an effective digital alternative for monitoring the movement of goods without reinstating border barriers. However, it noted that enforcement through mobile checks in the countryside, away from more formal border checkposts, can occasionally lead to avoidable delays and increase compliance friction for businesses and transporters.

 

The Survey also said that state governments will play a crucial role in enabling the transition of the system from mere enforcement at the state level to a supply chain lubricant, and that enforcement should increasingly rely on risk-based, system-generated alerts while cutting back on discretionary physical checks.

Roadblocks ahead for businesses, still

However, businesses and tax practitioners say that operational challenges persist. In particular, frequent roadside inspections and strict enforcement actions during transit continue to create uncertainty for transporters and companies operating in logistics-intensive sectors.

 

"Many disputes arise from minor documentation discrepancies — such as typographical errors in vehicle numbers, small mismatches in invoice details, or delays that cause e-way bills to expire during transit. While such lapses may not necessarily indicate tax evasion, they can still trigger detention of goods and imposition of penalties," said Manoj Mishra, partner with Grant Thornton Bharat.

 

The enforcement framework governing such cases is primarily contained in Section 129 of the Central GST (CGST) Act, 2017, which deals with detention and release of goods and conveyances in transit. Amendments introduced in 2021, effective from January 1, 2022, rationalised the penalty structure but retained its strictest provisions.

 

If the owner of the goods comes forward, the penalty for taxable goods is 200 per cent of the tax payable, while for exempt goods the penalty is 2 per cent of the value or Rs 25,000, whichever is lower. If the owner does not come forward, the penalty increases to the higher of 50 per cent of the value of the goods or 200 per cent of the tax payable in the case of taxable goods, and 5 per cent of the value or Rs 25,000 for exempt goods.

 

Authorities must issue a notice within seven days of detention and pass an order within the next seven days, but only after having given the taxpayer an opportunity to be heard. If the penalty is not paid within 15 days, confiscation proceedings can be initiated under Section 130 of the CGST Act.

 

"Despite these procedural safeguards, disputes relating to e-way bill enforcement have increasingly reached courts, highlighting concerns that enforcement action is sometimes triggered by procedural lapses rather than deliberate tax evasion," pointed out Bimal Jain, partner with A2Z Corp LLP.

Courts, policy to play key role in reform

Judicial scrutiny has reinforced the need for clearer administrative boundaries in transit enforcement. In the batch of cases led by Golden Traders and Others vs The Deputy Assistant Commissioner of State Tax and Others, the Andhra Pradesh High Court observed that goods in transit cannot be detained merely on suspicion without a proper inquiry. The court emphasised that authorities must first establish a violation of statutory provisions under Section 129 before initiating confiscation proceedings under Section 130. It also noted that officers stationed at checkposts do not have the authority to question valuation issues during transit, as such matters fall within the scope of regular assessment proceedings.

 

"Such rulings have strengthened the argument that the next phase of GST administration should rely more on risk-based monitoring and data analytics rather than routine physical verification of goods," Jain said.

Experts call for compliance behaviour-based framework

Abhishek A Rastogi, a constitutional and GST law expert, believes the recommendation in the Economic Survey to recalibrate the e-way bill regime towards a trust-based system is a step in the right direction.

 

He suggests introducing a ‘trusted dealer’ framework under which businesses with strong compliance records would face minimal intervention, while enforcement efforts are concentrated on high-risk transactions.

 

Mani echoes this view, emphasising the need to categorise taxpayers based on their compliance behaviour.

 

“There is a definite need to segregate compliant and non-compliant GST taxpayers,” he said. “A trusted dealer framework, incorporating elements of the Authorised Economic Operator (AEO) programme used in customs, could reward compliant taxpayers with less intrusive oversight and faster movement of goods.”

 

Mani also points out that the GST law had originally envisaged a taxpayer rating mechanism when the tax was introduced in 2017, a system that is yet to be implemented. A rating model based on parameters such as return filing, payment behaviour, and audit outcomes could allow authorities to provide compliance relaxations to highly rated taxpayers.

How can technology integration improve the system?

At present, the e-way bill portal functions alongside the GST return filing system and the e-invoicing platform, with only partial linkages between them. As the e-invoicing ecosystem matures, experts believe greater integration could also reduce duplication of compliance.

 

Prashanth Agarwal, partner with Price Waterhouse, said the government should work towards merging certain requirements under the GST systems.

 

“With the maturity of the e-invoicing system, the government should work towards merging e-invoicing, GST Network and e-way bill requirements. This would help reduce the real-time compliance burden businesses face when goods are transported,” Agarwal said. He also suggested exploring voluntary B2C e-invoicing frameworks that would eliminate the need to carry physical invoices during transit, while giving authorities greater visibility into transactions.

 

Saurabh Agarwal, partner with EY, highlighted the need to review operational provisions such as short-distance exemptions, which allow certain local movements of goods without e-way bills. While these exemptions were introduced to reduce compliance burden on small transport operations, practitioners say they can sometimes be misused. He suggested that technology-driven safeguards could address this challenge without imposing additional compliance requirements on genuine businesses.

 

“With vehicle tracking, electronic seals and automated risk-based alerts, a trusted dealer framework for consistently compliant taxpayers becomes very achievable,” Agarwal noted. Such a system would significantly reduce transactional interventions around valuation or movement verification at toll points while allowing enforcement agencies to focus on genuine risk indicators.

 

Adoption of this new set of reforms could help the e-way bill system evolve into a true enabler of seamless trade, boosting India’s logistics performance index and supporting the vision of a $5-trillion economy, experts said.

 

"This trust-centric approach would not only minimise compliance costs, potentially saving businesses billions in delays and penalties, but also reinforce voluntary adherence, ultimately strengthening the GST regime’s credibility and efficiency," said Rastogi.

 

Mishra projected that as the system matures with integrated technologies like AI and blockchain, it could pave the way for real-time cross-border trade facilitation, aligning India more closely with global best practices in supply chain management.