What is the Purpose of an E-Way Bill?

The GST Council recommended introducing the e-way bill system on April 1, 2018. Before its implementation, the transportation of goods was regulated by a system of waybills or road permits (issued by individual states). 

Each state had its own set of rules and documentation requirements. As a result, transporters often had to obtain separate permits for each state through which their goods passed. This used to result in:

• Complexity: Obtaining multiple permits was cumbersome.

• Delays: There were frequent stoppages at state borders for verification of documents.

• Tax Evasion: There were revenue losses as monitoring the movement of goods was tough.
  

By introducing the e-way bill system, the government addressed these challenges. Want to know in detail how this system helps? In this article, let’s understand what an e-way bill is and its real purpose.

What is an e-way bill

An e-way bill is an electronically generated document. It is mandatory to create an e-way bill when the value of transported goods is more than Rs. 50,000. A bill of the prescribed EWB-01 format is divided into two parts and contains the following details:

It is worth mentioning that e-way bills must be generated before the commencement of goods movement. They are required even if the transportation is not directly related to a sale (say goods sent for job work). 

Moreover, the physical copy of the e-way bill should always accompany the goods during transit to ensure compliance with GST regulations.

Why was the e-way bill system introduced

The primary purpose of an e-way bill is to bring transparency and simplify the transportation processes. For a better understanding, let’s check out its various advantages:

1. Reduced documentation requirements

As discussed before, earlier transporters had to carry state-wise permits. They were supposed to carry documents, which varied from state to state. This made the process highly complex.

Now, with the e-way bill system, this process is centralised. It has eliminated the need for multiple permits. As per the current rules, transporters only need one e-way bill. It will be valid across all states.

Moreover, vehicles used for transporting goods regularly can now have RFID (Radio Frequency Identification) devices installed. These devices automatically communicate the e-way bill details to checkpoints without requiring the driver to produce physical documents. 

This makes verification faster as authorities can electronically check the e-way bill through the RFID system.

 2. Cost reduction

In the traditional invoicing methods, businesses were required to prepare and verify multiple documents at checkpoints. The e-way bill system has eliminated much of this manual work.

By generating and printing a single e-way bill, businesses have significantly reduced their administrative and management costs. This has particularly helped high-frequency sellers active on online marketplaces.

 3. Reduced tax evasion

Due to the use of RFID technology, the e-way bill system also allows for real-time tracking of goods. Let’s see how it works:

• Before transporting goods, the consignor (supplier) or transporter generates an e-way bill on the official portal.

• Vehicles used for transporting goods are equipped with RFID devices or tags.

• These tags store information about the e-way bill and the consignment.

• At various checkpoints along transportation routes, authorities have installed RFID readers.

• As an RFID-tagged vehicle passes through these checkpoints, the readers automatically capture data from the RFID tags.

• The captured data is transmitted in real time to a centralised system managed by tax authorities.

• This system cross-references the information with the details provided in the e-way bill.

Such real-time tracking, allows authorities to monitor the movement of goods across states. This leads to better compliance and reduces the chances of tax evasion.

Conclusion

The e-way bill system has been in force since April 1, 2018. It replaced state-specific permits with a centralised system. Also, the use of RFID technology enables real-time tracking. Such monitoring ensures better compliance and reduces tax evasion.

Additionally, the e-way bill system has reduced paperwork. Now, there is no need for businesses to prepare multiple documents and get them verified at every checkpoint. This has significantly lowered administrative costs and has helped all the stakeholders like sellers, transporters, government authorities, banks, and NBFCs.