The e-way bill mechanism is at the forefront of government efforts in India to tackle tax evasion and the corruption menace. Though the initial launch of the e-way bill was marred by technical glitches and inadequate portal infrastructure, today the portal is up-to-speed and running smoothly.
The e-way bill mechanism seeks to tackle tax evasion through invoice matching. Matching invoices will help reduce the possibility of tax evasion through bribery and corruption, and has the added benefit of reducing delivery times as well.
E-way bill and seizure of goods
Violating the provisions of an e-way bill or not generating an e-way bill when one’s required can result in both monetary and nonmonetary losses to the taxpayer.
- Monetary penalty
As per section 122 (1) of the Central Goods and Services Tax (CGST) Act, 2017, any movement of goods without the generation of an e-way bill constitutes an offence and a penalty of either Rs. 10,000, or the amount of the tax sought to be evaded (whichever is greater).
- Detention or seizure
Pursuant to the provisions of section 129 of the CGST Act, any vehicle found to be transporting goods without a valid e-way bill can be detained or seized by an officer. The vehicle will be released only after payment of appropriate taxes and penalties. Goods can be released in one of two ways.
The first is by paying the penalty given below or Rs. 25,000 (whichever is lesser), plus the tax payable. The second is by providing a bond along with security in the form of a bank guarantee equal to the total amount due.
Person paying tax & penalty | Type of goods | Penalty (% of the tax payable) |
Owner | Taxable | 100% |
Exempted | 2% | |
Transporter | Taxable | 50% |
Exempted | 5% |
Furthermore, if the owner or transporter does not pay the appropriate taxes and penalties within seven days, further legal proceedings will be initiated. At that time, the vehicle, as well as the goods, can continue to be detained.
The seizure of goods comes not only with a hefty monetary penalty, but also affects the supply chain of the taxpayers due to delays in clearances of vehicles and goods.
Process of seizure of goods
In addition to the penalties listed above, the provision for the seizure of goods in the e-way bill mechanism is also intended to deter owners and transporters from flouting e-way bill rules. The documentation and procedures related to this provision, including e-way bill inspection, detention, confiscation, and the release of goods and vehicles, is presented below.
Document type | Reason for issuance | Timeline |
MOV – 01 | Recording of the statement by the person in charge of conveyance if he or she fails to provide an e-way bill or other supporting documents |
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MOV – 02 | Order for conducting a physical inspection of goods, vehicle, or documents | Within 24 hours of issuance of MOV – 02, the concerned officer shall prepare a report in Part A of GST EWB – 03 and upload it to the portal |
MOV – 03 | Order for extension of time for inspection beyond three days |
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MOV – 04 | Final inspection report | Needs to be issued within 72 hours of issuance of MOV – 02, if MOV – 03 is not issued |
MOV – 05 | Release order if no discrepancy is observed |
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MOV – 06 | Detention order if a discrepancy is observed |
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MOV – 07 | Notice to the taxpayer specifying taxes and penalties |
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MOV – 08 | Bond provided by the owner to release the goods against security |
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MOV – 09 | Order of demand for taxes and penalties | Goods will be released if owner pays taxes and penalties, and if these are reflected in the electronic liability register |
MOV – 10 | Notice to the owner regarding confiscation of goods, if taxes and penalties are not paid within seven days of issuance of MOV – 07 |
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MOV – 11 | Confiscation order for goods or conveyance | A period not exceeding three months is given for payment as per the confiscation order, and if the payment is still not made, the title of such goods/conveyance will be transferred to the government |
It is worth noting that up until MOV – 09, owners and transporters can avoid the seizure of goods or vehicles. However, if owners and transporters do not make the proper payments (inclusive of the appropriate taxes and penalties) within seven days, the goods and the vehicle are subject to seizure and, subsequently, auction by the government.
Conclusion
Experts agree that the e-way bill mechanism will continue to be a boon to the logistics sector as well as the economy in general as it speeds up delivery times for interstate consignments and cuts down on corruption. Noncompliance with the e-way bill provisions will result in paying penalties above the tax that owners and transporters already owe. Hence, taxpayers will want to be mindful of generating e-way bills properly and complying with relevant rules if they wish to control costs and minimize shipment delays.
Avalara is an experienced application service provider (ASP) and partner of authorized GST Suvidha Providers (GSPs). To understand how our cloud-based application, Avalara India GST, can help you with GSTR-1 to -9, as well as e-way bill generation, contact us through https://www1.avalara.com/in/en/products/gst-returns-filing.html.
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