12 February 2018

E-way bill provisions and valuation of goods

by Tushar Mittal


The objective of plugging revenue leakage or tax evasion will take a step ahead with the introduction of E-way bill rules as the tax administration can keep track of every movement of goods above the specified value. E way bill which is required to accompany every movement of goods barring some exceptions, is expected to improve the logistic operations by eliminating interception by the respective authorities at multiple check posts.

As the rules stipulate, an e-way bill is required to be generated for every movement of goods if value of the consignment moved exceeds Rs. 50,000. The obligation for generation of e-way bill is not contingent only on supply of goods but also on all kinds of movement of goods irrespective of whether any supply is involved or not. One possible situation is where there is movement of goods from principal to a job worker premises for getting job work done. In such case, there is no invoice raised but only a delivery challan is issued which shall be the supporting document for e-way bill.

However, obligation to generate an e-way bill is contingent on value of the consignment of the underlying goods for which a reference has been made in the CGST Rules to valuation provisions contained in Section 15 of the Central Goods and Service Tax Act (CGST Act), 2017. However, it is pertinent to note that the marginal note to Section 15 mentions ‘Value of taxable supply’ and the provision essentially seeks to lay down the statutory basis for taking transaction value which is the price actually paid or payable for supply of goods or services. It may, therefore, be argued that Section 15 may not cover situations when taxable supplies are not made i.e. Section 15 is not applicable for valuation of goods in cases other than supply. Hence, in cases of job work where delivery challan is issued and no tax invoice is generated, determination of value as per Section 15 may neither be required nor feasible. 

It is understood that delivery challan contains fields for disclosing the taxable value of the underlying goods, tax rate and tax amount, but the question arises as to why taxable value is required to be disclosed in the delivery challan at the first place for the reason that no supply is involved in such cases. There can be few situations where if there is a sale in transit, the need for ascertaining the value as per Section 15 might crop up but until such event happens there may not be any requirement to determine value of such goods in advance as it is one off rare situation and assesses may not come across it usually. Even if, it is assumed that value for delivery challan can be determined as per the provisions of Section 15 by deeming as if it were a taxable supply made to unrelated buyer, the same will unnecessarily add on to the burden of assessee in valuing the semi-finished goods sent for job work which they might not intend to sell as it is.

Another pertinent point to be noted is while Section 15 seeks to exclude GST payable from taxable value, Rule 138 on e-way bill seeks to include GST also for the purpose of reckoning consignment value. It is ironical that while for value, Section 15 is made applicable for e-way bill provisions, for the purpose of inclusions or exclusions, divergent provisions have been made. As e-way bill is a document to cover movement of goods which includes movement not involving supply (sale), it will be prudent to exclude GST from consignment value.

GST is expected to be business friendly tax regime but multiple issues keep cropping up every now and then resulting in compliance havoc. There is an urgent need for the tax administration to resolve such issues at the earliest.

[The author is an Associate, GST Practice in Lakshmikumaran & Sridharan, New Delhi]


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