Background: The Central Board of Indirect Taxes and Customs (CBIC) has notified that non-filers of the GST returns for two straight months will be barred from generating e-way bills for transporting goods with effect from 21 June 2019. Businesses under the GST scheme will be barred from filing the e-way bill if tax returns are not filed within two consecutive periods which is six months in their case. Under the GST regime, businesses will have to file their monthly taxes by the 20^th of every month. However, businesses opting for composition scheme have to file quarterly returns by the 18^th day of the subsequent month following the end of a quarter. This move is believed to curb the GST evasion that is rampant in the country. If correct figures are to be given, 3,626 cases of GST evasions/violations were reported which involved nearly INR 15,278 crore. Vikas Khannah in his previous article shared his insights on CBIC allowing businesses to revoke their cancelled GST registrations. In this article he shares his thoughts on the recent move by CBIC to bar the generation of e-way bill for non-filers of GST returns.

As an anti-evasion measure, the government of India had rolled out the e-way bill system on 1 April, 2018, for moving goods worth over INR 50,000 from one state to another. The same was made mandatory for intra state movement of goods with effect from 15 April 2018.

CBIC vide notification dated 23 April, 2019, has notified that Rule 138 E (as introduced in vide notification No. 74/2018–Central Tax, dated the 31 December, 2018) will be effective from 21 June, 2019. The said rule essentially states that any ‘consignor, consignee, transporter, e-commerce operator or courier agency’ would be prohibited from submitting information in PART A of FORM GST EWB-01 in case they have failed to file two consecutive tax returns as applicable and as mentioned in the GST rules 138E. The relevant notification can be accessed at CBIC site.

This is an excellent step that has been taken by the government especially considering the high level of fake invoicing scams that are being detected.

Introduction of e-invoicing

With the objective of keeping the track of every transaction on a real time basis on the GST Network, the government of India is seriously contemplating introducing E-invoicing. These steps are under consideration in order to curb the growing menace of tax evasion and fake invoice scam.

In order to introduce e-invoicing at the earliest, GST council has appointed a 13 member committee and has also constituted a sub-group to examine all issues related to e-invoice, operational feasibility, a tentative timeline for roll out, execution and more. The group will examine and recommend on the business process and policy and legal aspects for generation of e-invoice.

Also read: GST Council announces tax cuts in real estate

The Terms of Reference (ToR) for the Committee of Officers (COO) on generation of electronic Invoice through GST Portal shall be as follows:

I. To study and examine the electronic tax invoice system of South Korea, Latin America other relevant countries.

II. To examine and suggest the target taxpayers and threshold limit, either on the basis of turnover of the registered person or value of invoice, for generating invoice number capturing invoice detail through GST Portal or any other method.

III. To examine and suggest whether implementing a system of generating electronic invoice number would help in dispensing with the requirement of e-way bill modification/simplification of e-way bill or combining both invoice & e-way bill.

IV. To examine and suggest integration of e-invoice numbering with different accounting systems and challenges that may be faced in this regard.

V. To examine feasibility of gradual progression from generating electronic invoice number to generating electronic tax invoice or generating e-invoice for high thresholds.

VI. To examine ease of return filing through auto population and invoice matching by means of generating electronic invoice number.

VII. To assess capability of GST portal for generation of invoice numbers and subsequently generation of electronic invoice in future; and

VIII. To suggest measures, if any, to incentivise use of electronic invoicing amongst the taxpayers.

The COO so appointed for this project may submit its interim report within a period of three weeks.

The office memorandum on COO on generation of electronic Invoice on GST Portal can be accessed at GST Council Site

8 Square Advisor comments

This is an excellent step that has been taken by the government especially considering the high level of fake invoicing scams that are being detected. Huge amount of GST is being lost on account of such fake invoicing being resorted to by unscrupulous persons.

The step wise and phased manner of going through the generation of electronic invoice on GST portal after considering the prevalent tax systems in countries like China, Korea is a very welcome step.

We are of the opinion that though this is a very positive step, yet GST Council must take into consideration the challenges surrounding the Information Technology network, the speed, bandwidth and accessibility of Internet especially in remote areas and the server capacity to handle high volume of invoices at peak hours. The GST council may also consider introducing this in a phased manner viz targeting large B2B companies having less number of invoices with high value till the system stabilises and glitches if any are ironed out.

Businesses are advised that they should also start looking at their IT systems, network, configuration with GSTN, changes if any required in the ERP system, apart from their accounting and operational practices especially of billing in the last day of the month.

Also read: GST annual return and audit related considerations

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