The Karnataka government has notified the introduction of the ?E-sugam? process for the purchase and sale of goods in and out of Karnataka, as also for all job work to be done in Karnataka. The ostensible objective is to arrest the haemorrhage of sales tax revenue by ensuring that all goods and services flow in and out of the state with transparency. Central to this system is to have a unique number incorporated in all incoming and outgoing invoices and job work documents, to ensure capture of revenue and traceability. While the objective is laudable, how does this work?
Every seller to Karnataka must submit the details of goods being despatched to the Karnataka buyer and, among others, this includes invoice references, the number of the truck bearing the goods and the expected date of arrival at the border. After logging in these details into a special site, the buyer should obtain a unique number. This should be conveyed to the seller, who, in turn, should display this in the invoice. A corresponding process operates for job work, as well.
The catch-22 will be obvious. Since the invoice must carry the unique number, it must be generated after getting the number. However, the unique number itself can be obtained only by quoting the invoice number. Hence, the invoice must already have been generated. There is, of course, a convoluted method to circumvent this impasse, which is to generate a temporary invoice, get the unique number, feed this in and get the final invoice. Apart from being laborious, error prone and unorthodox, this exposes the seller to other complications. Excise regulations stipulate that goods must be removed by 10 pm on the date of the invoice. Since manufacturing concerns operate round the clock and often on holidays, can goods wait to get unique numbers from buyers beyond working hours?
The largest irritant will be the fact that the dispatch of every single item to Karnataka will be contingent on the efficiency of connectivity of the buyer with the Website precisely at the time of dispatch of the item and the uninterrupted functioning of the site itself. If we factor in possible down time of the site due to technical and other reasons, it will be seen that sales to Karnataka will now depend on the status of the state?s infrastructure, a nightmare prospect.
Transshipment of cargo is standard procedure in logistics with a view to aggregate and optimise truck loads. Hence, how can the truck number be given while raising the invoice? Further, based on distances, the state has stipulated permissible time limits between the time of allotting unique numbers and the entry of goods at the border. A tight limit of seven days has been fixed for over 500 km and this will apply, for instance, for the Jalandhar-Mysore run. With route diversions, night halts and the odd vehicle breakdowns, late arrivals at the border cannot be ruled out.
In its current form, the scheme will cause a bedlam at the borders and spawn an industry of touts. Further, if other states also bring out similar schemes, it will be the end of the country as a single entity for commerce and industry. Though well intentioned, the exercise appears to be an amateurish and bureaucratic attempt to harness technology. The root cause perhaps lies in either not taking all partners on board or brushing aside their concerns during the design phase.
A cardinal point in the design of systems is to minimise or eliminate confusing entries and requirements in individual transactions from at least three distinct viewpoints: (a) to facilitate operators with minimum education and competence at the tail end of the grid to perform error-free transactions, (b) enhance accuracy and speed in the exchange of information through direct system-to-system data transfers, and (c) avoid complexities that could slow down logistics.
As an example, the automotive industry in the country, consisting of suppliers and customers, has certain legacy practices that are not conducive to accelerated transactions. Recognising this, the industry has recently come together in unison to explore the design of an ideal system.
To contain inflation, the Prime Minister has exhorted the states to break down barriers to inter-state trade through revolutionary, through eminently sensible steps such as abolition of octroi, mandi and taxes and dovetailing of supply chain to accelerate the flow of goods.
In this instance, there is sound top-level thinking but tangential translation. The South Block may be thinking out of the box, but the state may be opening the Pandora?s box.
Author is an executive in a leading manufacturing concern. Views are personal