Why business across India came to a virtual stop on February 1
As Finance Minister Arun Jaitley presented the Union Budget for 2018-19, millions of manufacturers, dealers, traders and logistics player across the country faced a harrowing time. The first day of compulsory application of E-way bill saw massive disruptions as the site crashed and taxpayers could not generate the document.
Late evening the Government in a tweet said the trial period for E-way bill has been extended, but did not give a date when it would be again compulsorily applicable.
“The trial has been extended, but the period has not been specified and neither has the government specified when it would be enforced. On January 31, the site did not work for over two hours and many became very anxious,” says MS Mani, Partner, Deloitte India.
However, a non-functioning site was not the only problem. In addition, there were few specific situations where people were struggling with E-way bills. “If you are transporting capital goods, say a boiler, it will not fit into one truck and may need to be transported part-by-part across 10 large trucks. However, there would be only one invoice for this boiler, but there is no way you can generate an E-way bills for 10 trucks with one invoice. People had not anticipated such situations and many were struggling,” says Manii.
The GST Council had mandated that E-way bill for inter-state movement of goods will come into force from February 1, and states would have time till June 1 to move ahead with intra-state E-way bill. Possibly no one in business imagined that 15 odd states would start intra-state E-Way bills also from the same date.
“When you talk about E-way bills for intra-state movement, you are talking about huge volumes since transporting goods, even across cities within the same state needs an E-way bill to be generated. Many movements of goods in smaller cities are within the same entity, but in different cities,” says Mani.
In the GST law, if you move goods within the same entity and within the same state, there is no tax associated with it. IGST kicks in only when there is inter-state movement of goods and therefore no one was expecting that there would be an E-way bill from February 1 for movement of goods within a state.
“It was a nightmare where for the first time it became a virtual business bandh. There was no dispatch of goods and millions of businesses were struggling since early morning. I know of thousands of businesses that had to close early because raw materials could not reach them. Similarly, I could not dispatch goods to customers across India. I am sure if he Government takes a look, they would see February 1 would be the day when minimum business took place,” says Rajiv Chawla, Chairman of JaiRaj Group and President of Faridabad Small Industries Association.
Chawla adds that till now the pain was limited to 6-7 days of returns filing, but it would be disastrous if businesses have to go through the same ordeal every day. “The entire supply-chain and movement of goods had snapped and this has given us the shivers,” says Chawla.
Developed by National Informatics Centre (NIC), an E-way bill will always be more in number compared to what gets generated in returns by GSTN. One consignment could typically have five sets of movement – manufacture to consignor, consignor to stockist and others in that chain.
When the trial started on January 15, it appeared that it would only apply to inter-state movement of goods, which in terms of volume is defiantly lower. However, notifications that came out from around January 23 stated that E-way bill would apply for intra-state in 15 states.
“A lot of people who only carry out intra-state movement of goods may have not tested the portal during the initial 10 days and only in the last few days people may have started flocking the portal. A sudden surge in traffic could have led to the site crashing,” says Mani.
The GST council had pushed for an E-way bill in an emergency meeting in December last year, where the council took it up as the sole agenda through video-conferencing, suggesting the urgency of the issue. GST collections for the month of November had come in abysmally low and this had led to panic in the Government. There was a fear that there were transactions where GST had to be paid, but was not paid. The application of E-way bill was moved forward to February 1 to arrest this issue.
“This is possibly the reason no date has been given for the extension because they would want to be absolutely clear that this will work and everything is going well. They would certainly not like what happened with GSTR 1 where extensions were given repeatedly,” says Mani.
Chawla says the Government cannot repeatedly make incorrect assumptions on server loads. “Businesses will start losing faith in the system if this keeps happening,” says Chawla.