The last two days of the e-way bill implementation under the Goods and Services Tax (GST) regime, has been uneventful, with over 11.18 lakh tax payers known to have registered on the online e-way bill portal till date. Gone are the days when one would see long queues of trucks outside of state borders to pay local taxes. Now there is a portal-driven payment system, which promises to not only make lives of the transporters easier, but will also help the tax authorities to efficiently track movement of goods both inter-state as well as intra-state.
So, does the implementation of the e-way bill mean an end to tax-evasion?
Well, the 11.18 lakh tax payers that have registered themselves in the e-way bill portal are largely unorganised businesses, which are used to paying taxes. But if you travel to smaller markets across the country, you will come across thousands of local businesses which are extremely successful, but have never ever paid any taxes whatsoever.
While one would logically imagine that these unorganised brands or businesses would get wiped out in the GST era, the Indian ‘jugaad’ mentality helps them tide over every conceivable tax related challenge.
Indore, the business hub of Madhya Pradesh, is well known for its local food brands. Walk into any roadside shop to buy a packet of ‘namkeen’, there would be the regular Lays and Bingo on the shop shelves, but in addition to that there will be a plethora of local namkeen brands such as Motu Patlu, Pet Pooja and All Is Well sharing shelf space. In most cases these local brands have more takers as they offer competitive pricing, more grammage of the product and also keep the retailer happier by offering higher margins. But none of these brands, says a local wholesaler, pay taxes. They don’t even do proper billing to avoid paying taxes.
When GST was first announced in July last year, many local brands panicked and went out of market for over a month, says a local retailer at Indore. But most of these brands are back now after finding loopholes in the system which they can capitalise upon.
Most of these brands have now started generating bills for 10-15 per cent of their products, but continue to sell majority in the unorganised way. “I don’t know for how long they will be able to do business this way, but none of the local brands are doing business in the organised way,” says a distributor of an established food brand, based in Indore.
While the e-way bill was still getting tested, most local brands were already trying ways to avoid getting registered on the portal. A reasonably well-known ‘namkeen’ brand, says this distributor, has started transporting its products on Volvo buses just to avoid paying taxes, while some are using milk men to distribute their products.
Similarly, a detergent maker in the town of Rau, in the outskirts of Indore, cribs that despite having a GST number, he isn’t able to do business the proper way as his raw material suppliers refuse to give him a bill. “Even the wholesalers refuse to buy my products if I insist on billing, since I am an extremely small manufacturer.”
So, does evading taxes or not doing business in the proper way actually give them higher profits. “Not really. There is hardly any difference, but people are just not used to paying taxes,” says this detergent manufacturer.
This practise of not doing bill-based transactions is rampant in larger cities too. Walk into Crawford Market, the wholesale market of Mumbai, traders are more than happy to do cash transactions without generating a bill. They insist on transacting without a bill and lure the consumer with the carrot that he/she won’t be charged GST if they don’t insist on a bill.
Will GST and the e-way bill succeed in getting these well entrenched local brands to come within the tax bracket? One has to wait and watch. As of now most local businesses are trying to find a way out.