GST: Karnataka shows way for goods tracker system

The government plans to implement in all states an e-way bill system to track the movement of goods under the new indirect tax regime, bolstered by a "successful" project being carried out in Karnataka.

The system will be put in place by March, as part of the goods and services tax (GST) regime. The government claims the bill system will help check GST evasion and will not work against honest taxpayers. Experts say it will increase compliance burden for companies.

The GST Council had deferred implementation of the e-way bill, which was to be put in place by November. The bill covers only goods valued at more than Rs 50,000 and being transported beyond 10 km.

Karnataka has since 2010 a mechanism mandating dealers who ship goods of more than Rs 20,000 to upload registration numbers of vehicles carrying the products. This helps keep track of the goods.

The Simple Uploading of Goods Arrivals and Movements, or e-Sugam, programme ensures transparency, officials say. "We saw revenue rising 25 per cent in the first year as there were fewer chances for tax evasion," says K S Basavaraju, joint commissioner in the Karnataka commercial taxes department. 

The national e-way bill system is based on e-Sugam. Basavaraju is leading the initiative for Karnataka for the GST regime, to build a nationwide system to track delivery of goods.

The state government is testing the system with large organised dealers. Dealer have to upload the GST Network identification of the transporter and the registration numbers of the vehicles carrying the goods. Small-scale operators who don't have a GSTN number can register on the portal and get a unique id. "Most concerns have been from transporters over technical issues. We have tried to make the process as simple as opening an e-mail ID," says Basavaraju.

Karnataka transport department has mandated all transport vehicles have radio-frequency identification (RFID) cards, which will help track vehicles. This will also reduce the burden on companies that distribute goods from one region to another.

Tax experts say the bill is against the very idea of GST, which aims to create a common market. The Centre claims it will help plug GST evasion.

Revenue Secretary Hasmukh Adhia says, "Most honest people say unless you bring in an e-way bill, they will be at a disadvantage. It is the only system by which you can stop the movement of goods without bills."

He says the e-way bill is not new to the country. "It is tried and tested. Most states have seen an increase in value-added tax revenue after e-way bill was introduced. Tax evasion was curbed."

To the question why an e-way bill, as the GST itself plugs evasion, Adhia says: "It is quite possible that the entire stock from production to retail goes out of the GST chain and goes around the country. Then it will be difficult to catch it." GST will record a transaction, he explains, only when a person in the chain shows relevant documents.

M S Mani of Deloitte says the bill will lead to significant documentation and logistic challenges for businesses. "Since the rates of taxes on goods are now uniform across states, a tax invoice could have been a sufficient document for interstate movement of goods. The GSTN database would, in any case, be able to track goods based on supplier and customer locations mentioned on the invoice." The government should seriously reconsider the need for these bills in the GST regime as the objectives fulfilled by the erstwhile e-way bills can be achieved by the electronic submission of tax invoices on the GST portal, he adds.

Aditya Singhania of Taxmann, however, says an e-way bill has a hidden compulsion force that will compel economic agents to do business in a transparent manner.

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