While it is true GST collections are falling short of estimates and that the system has not, as yet, been able to check tax evasion, the GST Council’s decision to use the E-way bill to fix the leakage is a bad idea. Already, taxpayers are struggling with the new system and increasing compliance at this point will be counter-productive. The GST Council was to have discussed the E-way bill at the January meeting, but it has now decided the inter-state E-way bill will be launched in February 2018 rather than in 2019 as earlier envisaged, and the intra-state bill in June. The loss of momentum in GST collections, which have been falling steadily over the months, is a valid concern. Sushil Modi, deputy chief minister of Bihar, believes the state may have lost as much as Rs 10,000 crore in taxes and has attributed this to the absence of an E-way bill—since, he believes, traders/manufacturers are selling goods in cash, an E-way Bill will allow the taxman to check trucks coming into the state and stop this practice. Collections in October came off to Rs 83,000 crore from an average of Rs 90,000 crore in the past three months. However, the problem needs to be fixed within the existing system. It is true that in the absence of the GSTR1, GSTR2 and GSTR3 forms, which are now not required to be uploaded, the system is unable to match invoices to check whether the input credit and refunds being claimed by companies are correct or overstated.
However, one reason for this, as also the lower-than-expected number of returns filed, is that the IT system isn’t up to speed and that the GST procedures were too complicated and the tax slabs too many—the government must accept the blame for this. Under the circumstances, now, the only way the government can keep companies from over-invoicing claims is to threaten penal action once the invoices are matched. In fact, it is surprising the government cites trade and transporters as having asked for the E-way deadline to be brought forward as it was causing them undue hardship during the inter-state movement of goods. The entire purpose of the GST was that it would be in a sense self-regulatory—companies would upload invoices for input tax credit claimed and file returns that would then be matched by a system. An E-way bill, however, is bound to open up room for harassment by state government officials—stopping trucks at border posts may have gone, but trucks can now be stopped anywhere. This kind of inspector raj is exactly what needs to be avoided. And while it was always expected GST would take time to curb tax evasion, the fact that the government is pushing for the E-way bill suggests it is not sure the system will deliver.