The Indian government is risking a tighter noose on 'tax evaders' as GST collections remain short of target

The Indian government is risking a tighter noose on 'tax evaders' as GST collections remain short of target
A supporter of India's ruling Bharatiya Janata Party (BJP) holds a placard during a rally to support implementation of the Goods and Services Tax (GST) in Mumbai, India, June 30, 2017. REUTERS/Shailesh Andrade/File PhotoReuters
  • Companies won’t be allowed e-way bills if they fail to file their GST returns for 6 months.

  • The e-way bill is required for businesses transporting goods worth in excess of ₹50,000 across state borders.

  • The move is aimed at plugging a shortfall in GST receipts.
The Indian government is planning to prohibit companies from generating e-way bills for the transport of goods in the event that they fail to file their GST returns for six months in succession, or two consecutive filing cycles, officials told the news agency, Press Trust of India (PTI).

The e-way bill, or electronic way bill, came into force in April 2018. It is required for businesses that are transporting goods between states with a value in excess of ₹50,000. The e-way bill system will also be implemented into the National Highway Authority’s Fast Tag programme, an electronic toll system, in order to prevent trucks from making multiple trips on the same bill.

The Goods and Services Tax authorities are currently in the process of developing the IT infrastructure to enable the revocation of e-way bill privileges. A formal notification is reportedly expected soon.

The move is aimed at preventing businesses from evading taxes. Since the GST was implemented in April 2017, there have reportedly been over 3,600 instances of tax evasion and a violation of compliance norms.

The policy will likely help plug the leakages as the government tries to bridge a shortfall in GST receipts. At ₹968 billion, the monthly average collections between April and December 2018 have consistently come in below the government’s target of ₹1.06 trillion owing to both evasion and reductions in tax rates on various products.

A similar attempt to penalise alleged tax evaders by the then government in Madhya Pradesh (MP), led by the Bharatiya Janata Party (BJP), led to severe unrest from the state’s business community.


A lobby representing nearly a million truck operators, the All India Motor Transport Congress, called for a nationwide strike in July 2018 against the MP government’s hefty penalty of ₹1.35 lakh crores ($19.2 billion) for lapses in e-way bills.

Less than six months later, the incumbent state government under Shivraj Singh Chauhan lost the elections to rival Indian National Congress (INC).

The Narendra Modi government may want to avoid the risk of losing further ground among its core voter base, the trading community, in an election year. Therefore, there is a chance that the policy to penalise non-compliance with e-way bills may be enforced after general elections.

The issue with e-way bill is at times more than an intent to evade taxes. “Currently, in many companies, there is a confusion as to whether these compliances should be undertaken by the supply chain team or the finance/ tax teams and in the process, chances of error is high. Given these developments, treating the e-way bills as merely a ‘procedural’ requirement would be fraught with risk,” Pratik Jain, Indirect Tax Partner at PwC, told the Financial Express in July 2018.

The government is trying to secure the votes of small business owners with rate cuts and less stringent filing norms. Earlier this year, the GST Council decided to double the minimum revenue threshold for compliance with the tax to ₹4 million for producers of goods.

At the end of 2018, Finance Minister Arun Jaitley also said the government was mulling the possibility of merging two tax rates on standard items, which are 12% and 18%, into a single rate of 15% to make the filing of returns easier.

India’s Finance Minister moots the possibility of a single tax rate on standard items amid continued criticism of the government’s GST regime

Here’s how the proposed changes to GST could affect businesses