In what threatens to upend the core characteristics of a unified pan-India goods and services tax (GST), Tamil Nadu and West Bengal have doubled the threshold value for merchandise transported across state borders requiring electronic-way (e-way) bills to Rs 1 lakh.
Tax practitioners said that the move could create confusion among taxpayers and make compliance more complex for businesses that have consumer bases in multiple states. FMCG companies, white-goods manufacturers and auto companies will bear the brunt, if more states follow suit and digress from the e-way bill norms approved by the GST Council.
“The tendency of some states to have state-wise limits for intrastate e-way bills could lead to divergent practices that businesses would need to follow in order to be complaint. It is better if all states agree to have a common threshold for intrastate e-way bills, which can be kept at Rs 1 lakh,” said MS Mani, partner, Deloitte India.
To be sure, states are legally allowed to amend these rules and also give more item-wise exemptions from e-way bill requirement, subject to ceilings. However, the tacit understanding at the council is that such digressions are best avoided. Sources said Tamil Nadu and West Bengal have also notified state-specific exemptions from e-way bill.
In the absence of a robust invoices-matching mechanism (which is delayed due to lack of comprehensive returns), e-way bills, being implemented in a phased manner from April 1, are touted to be a credible anti-evasion tool, which is expected to bolster GST collections for the Centre and the states.
In fact, even in the VAT regime that preceded GST which was introduced in July 2017, several states violated the commonly agreed principles on rates, exemptions etc, practically undermining the objectives of reducing cascading of taxes. Post-2009 (VAT came into being in most states in 2005), several states hiked tax rates by a quarter even as the Centre was still to withdraw a fiscal stimulus and many states imposed a disguised tax on interstate stock transfers and/or truncated the input tax credit (ITC) by various means.
While the e-way bill rules came into effect on April 1 for interstate movement of merchandise, all the states/UTs have implemented it for intrastate movement also by June 3. While Tamil Nadu amended the requirement for intrastate movement of goods trough a notification issued on May 31, West Bengal notified the change on Wednesday. These states were the last two states to implement e-way bill for movement within state boundaries on June 2 and 3, respectively. However, the consignment value limit for e-way bill remains at Rs 50,000 if its transported across to other states.
Abhishek Jain, partner, EY, said: “These variations/ different practices by states could entail efforts being required at industry-end on maintaining a track of threshold limits for intra- and interstate supplies. Where a similar trend is followed in other states as well, the industry, to avail benefits of such relaxations, may need to maintain a separate tracker for intrastate movements in each state.”
While invoice-matching in return-filing is primarily aimed to track business-to-business transactions, e-way bills would allow the government to detect under-reporting of sales in business-to-consumer transactions. A supplier or recipient of goods needs to intimate the common e-way bill portal about the type, value, origin and destination of goods being transported along the details of the vehicle used.
“This kind of exemption notifications would defeat the idea of ‘one nation, one tax’. It is recommended that a uniform law is implemented for all intrastate and interstate movements of goods,” said Rajat Mohan, partner, AMRG & Associates.
