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MOSL: GST-E-way bill a stern measure to improve compliance-Expect acceleration in shift of trade to organized players

GST: E-way bill a stern measure to improve compliance; Expect acceleration in shift of trade to organized players

 

Interstate e-way bill was introduced from April 1, 2018 to track the movement of goods on a technology platform. Our channel checks suggest that transporters are now hesitant to transport goods without an invoice, given increased fears of getting caught. This should ensure better compliance and gradually increase GST collections. We believe organized players in the consumer, home building, light electrical goods, auto ancillaries, metals and logistics segments will benefit.

GST collections to see an uptick with the rollout of e-way bill

• The average GST collection in the last eight months has remained at ~INR897b. To improve compliance and tax collections, the government has introduced the e-way bill mechanism for interstate movement of goods from April 1, 2018. Further, state governments are implementing it for intrastate movement of goods in a phased manner; 11 states have already rolled it out till April 20, 2018.
• Our channel checks suggest that after implementation of e-way bill, transporters have become wary of facilitating shipments for the unorganized sector (without formal invoices / documentation). This is because the technology platform leads to a higher probability of getting caught while shipping goods without appropriate documentation. In the first three weeks of implementation, there has been a significant rise in the number of trucks impounded. Compliance, and gradually, GST collections should improve.

 Organized segment to be big beneficiary

• E-way bill being implemented on a technology-based platform plugs certain loopholes in the current regime (Click here to refer to our previous note) – like unrecorded purchases/sales, using an invoice multiple times, and ‘bill to ship to’ mechanism.

The consumer (detergents, plastics, footwear, luggage), home building (plywood, paints, adh  esives, tiles), light electrical goods (fans, pumps, air coolers, switchgear and cables, electrical lighting), auto ancillaries (tyres), metals and logistics segments have significant presence of unorganized players. E-way bill is likely to benefit the organized players in these sectors.