Penalty for E-Way Bill Non-Compliance

In India’s GST (Goods and Services Tax) system, the E-Way Bill plays a vital role in ensuring hassle-free movement of goods and preventing tax evasion. If a business fails to follow E-Way Bill rules, it can face heavy penalties which lead to major disruptions and financial losses. Staying compliant is crucial for smooth operations. In this blog, you will learn everything about the Penalty for E-way Bill Non-Compliance.

What is an E-Way Bill?

The Goods and Services Tax (GST) system in India requires the use of an electronic way bill, or E-Way Bill. It is generated electronically for the movement of goods valued at more than Rs. 50,000. This process helps maintain transparency, ensures tax compliance, and makes the movement of goods smoother and more accountable.

When is an E-Way Bill Required?

The CGST Rules of 2017 regulate the need to create an E-Way Bill (rule 138).

Here are the key situations requiring an E-way bill:

• Consignment Value Exceeding Rs. 50,000: An E-Way Bill must be generated when the value of goods being transported exceeds Rs. 50,000. This applies to supplies of goods (interstate or intrastate), Return of goods, and Inward supply from an unregistered person.
• Interstate Movement of Goods: An E-Way Bill is mandatory for all interstate transportation of goods that is irrespective of the value.
• Intra-State Movement: The E-Way Bill requirement for moving goods within a state depends on the state’s rules. For example, Bihar mandates that an E-Way Bill is needed for goods worth over Rs. 1,00,000 within the state. This rule, effective since January 21, 2019, aims to ensure transparency and prevent tax evasion in the movement of goods.
• Job Work and Handicraft Goods: An E-Way Bill is mandatory for job work and handicraft goods, even if the consignment is worth less than Rs. 50,000. This applies when goods are sent by a principal to a job worker in another state or when handicraft goods are transported interstate by someone exempt from GST registration.
• Movement for Reasons Other Than Supply: An E-Way Bill is required when goods are transported for purposes other than supply. It can include exhibitions, fairs, transferring between branches, or when the goods are for personal use.
• Transport by Unregistered Persons: If an unregistered person transports goods to a registered recipient, the recipient must ensure that an E-Way Bill is generated.
• Modes of Transport: An E-Way Bill is required for the movement of goods, whether they are transported by road, rail, air, or waterways (vessels).
• Multiple Consignments in One Vehicle: When a vehicle carries several consignments, and each consignment is individually valued below Rs. 50,000, in most cases, an E-Way Bill is not necessary. However, if the total value exceeds Rs. 50,000, generating an E-Way Bill becomes mandatory.
• Distance-Based Requirements: If the goods are being moved from the consignor’s location to the transporter’s place within the same state, and the distance is less than 10 kilometers, there is no need to generate an E-Way Bill. This rule helps simplify short-distance transportation.

 E-Way Bill Not Required: There are several products that do not require an E-Way Bill. These include live animals, fresh fruits and vegetables, unprocessed milk, salt, and a few other items listed in the annexure to Rule 138 of the CGST Rules.

Common Types of E-Way Bill Non-Compliance

Here are the common types of E-way Bill Non-Compliance:

1. Failure to Generate an E-Way Bill

Transporting goods without creating an E-Way Bill when it is required is a clear violation. This applies when the consignment value is over Rs. 50,000 or in special cases like interstate job work or handicraft goods, no matter the value.

2. Incorrect or Incomplete Information

If there are errors in the details like GSTIN, HSN code, invoice number, or quantity, the E-Way Bill will be invalid. Once generated, it cannot be edited. The only option is to cancel and regenerate it within 24 hours, as long as it has not been verified during transit.

3. Non-Generation of Part B

An E-Way Bill consists of two parts including Part A with consignment details and Part B with vehicle details. If Part B is missing, the E-Way Bill is considered incomplete, and the goods will be treated as transported without a valid E-Way Bill.

4. Expired E-Way Bill

Each E-Way Bill comes with a specific validity period, determined by the distance the goods need to travel. If goods are transported beyond this period without renewing the E-Way Bill, it is considered non-compliance.

5. Multiple E-Way Bills for the Same Invoice

Generating more than one E-Way Bill for a single invoice can cause discrepancies and is considered non-compliant. The system restricts multiple E-Way Bills for the same document to prevent misuse.

6. Mismatch Between E-Way Bill and Actual Movement

If there are differences between the details in the E-Way Bill and the actual goods being transported, such as quantity or description. It is considered a violation and can result in penalties.

7. Transportation Without Valid Documents

The person responsible for the transportation must carry both the invoice or bill of supply and a copy of the E-Way Bill. Failing to present these documents during an inspection is considered a compliance violation and can lead to penalties.

8. Transporting Goods Without Updating Vehicle Details

If goods are transferred to a different vehicle during transit, the transporter must update the E-Way Bill with the new vehicle details. Neglecting this update is non-compliant.

9. Transporting Goods Without E-Way Bill When Required

Some goods or types of movement may be exempt from E-Way Bill requirements. However, if goods that require an E-Way Bill are transported without generating one, it becomes a violation. This can lead to penalties.

10. Non-Cancellation of E-Way Bill When Goods Are Not Transported

It is necessary to cancel an E-Way Bill within 24 hours if it is created but the products are not transported. Not doing so is regarded as non-compliance.

Significance of the E-way Bill

Here are the significances of the E-way Bill:

• Facilitates Seamless Movement of Goods: The E-Way Bill system eliminates the need for physical check-posts and allows goods to move freely between states. This speeds up logistics and shortens transportation time along with improving efficiency.
• Enhances Tax Compliance: The E-Way Bill system requires businesses to report the movement of goods above a certain value. This helps track transactions properly and plays an important role in reducing tax evasion.
• Promotes Transparency in Transactions: The electronic nature of the E-Way Bill provides real-time data to tax authorities. It grants that the movement of goods is transparent and traceable.
• Reduces Documentation Burden: The system combines several documents into one electronic form. This helps to make the paperwork easier and saves time for both businesses and transporters.
• Improves Operational Efficiency: Reduced checkpoints and streamlined procedures help businesses deliver goods faster. This makes the entire supply chain more efficient and smoother.
• Enables Real-Time Tracking: Authorities can monitor the movement of goods in real-time. It helps to make timely interventions in case of discrepancies or violations.
• Supports Data Analytics and Decision Making: The data collected through E-Way Bills can be analyzed to understand trade patterns. This aids in policy formulation and business decisions.
• Integrates with Other GST Systems: The E-Way Bill system works together with other GST modules. It grants that the data stays consistent and helps businesses to avoid repeating the same information.
• Reduces Logistics Costs: By minimizing delays and streamlining processes, the system contributes to cost savings in logistics and transportation.
• Strengthens the Formal Economy: Businesses are encouraged to formally disclose their transactions via the E-Way Bill. This promotes the growth of the formal economy by increasing transparency. It also ensures better accountability in the movement of goods.

Legal Provisions Governing Penalties

In India, following E-Way Bill rules under GST is essential for legally transporting goods. Failing to comply can result in hefty penalties, legal issues, and disruptions to business operations making compliance a top priority for businesses. The legal provisions governing these penalties are primarily outlined in the Central Goods and Services Tax (CGST) Act, 2017, and the accompanying CGST Rules, 2017.

Here are the legal provisions Governing Penalties:

1. Section 129 of the CGST Act, 2017: Detention, Seizure, and Release of Goods and Conveyances

Situations where commodities are carried in violation of the Act or its regulations are covered by Section 129. Key provisions include:

• Detention and Seizure: Goods and the conveyance used for transportation can be detained or seized if found in violation.
• Release of Goods: If goods are detained for violating GST rules, they can be released after paying the applicable tax and penalty. For taxable goods, if the owner comes forward, they must pay the tax and a penalty equal to 100% of the tax payable. If the owner does not come forward, the penalty is 50% of the value of the goods, minus the tax already paid. For exempted goods, if the owner comes forward, they need to pay a penalty of 2% of the value of the goods or Rs. 25,000, whichever is less. If the owner doesn’t come forward, the penalty increases to 5% of the goods’ value or Rs. 25,000, whichever is less. These measures ensure accountability and compliance with GST regulations.

2. Section 130 of the CGST Act, 2017 – Confiscation of Goods or Conveyances and Levy of Penalty

In cases where there is an intention to evade tax, Section 130 empowers authorities to:

• Confiscate Goods and Conveyance: If goods are supplied or received in contravention with the intent to evade tax, both the goods and the conveyance can be confiscated.
• Levy Penalty: In addition to the confiscation, there may be a penalty equal to the amount of tax avoided.

3. Rule 138 of the CGST Rules, 2017 – E-Way Bill Requirements

Rule 138 mandates the generation of an E-Way Bill for the movement of goods exceeding a specified value. Key aspects include:

• Mandatory Generation: An E-Way Bill must be generated before the commencement of the movement of goods valued at more than Rs. 50,000.
• Part B Details: The vehicle number and transporter details must be filled in Part B of the E-Way Bill.
• Validity: The E-Way Bill has a validity period based on the distance to be covered.

Non-compliance with these provisions can lead to penalties under Sections 129 and 130.

4. Circular No. 41/15/2018-GST – Clarifications on Penalty Provisions

This circular provides clarity on the imposition of penalties in cases of minor discrepancies in E-Way Bills:

• Minor Errors: Penalties may not be imposed for minor errors such as small mistakes in the E-Way Bill, minor spelling errors in the consignor's or consignee's name, slight mistakes in the PIN code with the correct address, or errors in one or two digits of the document number, usually do not lead to penalties.
• Major Errors: Significant discrepancies can lead to penalties under Section 129.

5. Circular No. 64/38/2018-GST – Procedure for Interception and Detention

This circular outlines the procedure for interception of conveyances and detention of goods:

• Inspection: Proper officers are authorized to intercept and inspect conveyances to verify E-Way Bills and other documents.
• Detention: If discrepancies are found, goods and conveyances can be detained, and proceedings under Section 129 can be initiated.

6. Circular No. 61/35/2018-GST – Clarifications on E-Way Bill Provisions

This circular clearly explains how the demand and penalty rules under the CGST Act, 2017, apply to cases involving fake invoices. This helps businesses understand their responsibilities better.

Penalties for E-Way Bill Non-Compliance

Non-compliance can lead to significant penalties and operational disruptions. Here is the list of penalties for E-way Bill Non-Compliance:

1. Penalty for Transporting Goods Without an E-Way Bill

According to Section 122(1)(xiv) of the CGST Act, Any taxable person who transports taxable goods without the required paperwork, such as the E-Way Bill, faces a penalty of Rs. 10,000 or the amount of tax they failed to pay, whichever is greater.

2. Detention and Seizure of Goods and Conveyance

Under Section 129 of the CGST Act, if goods are transported without proper documents, officials can detain both the goods and the vehicle. This ensures businesses follow GST rules during transit. The release of such goods and conveyance is subject to payment of applicable tax and penalty:

• If the owner comes forward:

For taxable goods, the owner must pay the tax along with a penalty equal to 100% of the tax payable. For exempt goods, the penalty is 2% of their value or ?25,000, whichever is less.

• If the owner does not come forward:

For taxable goods, if the owner does not claim the taxable goods, a 50% penalty is charged on their value after subtracting any tax that was already paid. For exempted goods, the penalty is 5% of the goods' value or Rs. 25,000, whichever amount is lower.

3. Confiscation of Goods or Conveyance

Section 130 of the CGST Act gives authorities the power to confiscate goods and vehicles if they are supplied or received in violation of the law to avoid paying tax. This includes cases where goods are moved without proper documents such as an E-Way Bill that leads to penalties.

4. Penalties for Minor Errors in E-Way Bill

The Central Board of Indirect Taxes and Customs (CBIC) issued Circular No. 64/38/2018-GST to address penalties for minor discrepancies in E-Way Bills. In cases of minor errors, such as:

• Spelling mistakes in the name of the consignor or consignee provided the GSTIN is correct. Errors in the PIN code provided the address is correct.
• Mistakes in one or two digits of the document number.

A nominal penalty of Rs. 500 under the CGST Act and Rs. 500 under the respective State GST Act (totaling Rs. 1,000) may be imposed.

5. General Penalty for Contravention

Section 125 of the CGST Act states that if someone breaks any provision of the Act or its rules, and no specific penalty is provided, they can face a fine of up to Rs. 25,000. This ensures that accountability is maintained for general violations not explicitly addressed by other penalties.

6. Recent Judicial Interpretations

Courts have consistently supported strict penalties for failing to comply with E-Way Bill rules. For example, if an E-Way Bill was not renewed while goods were still in transit, penalties as high as 200% of the tax amount have been charged.

How to Avoid E-Way Bill Non-Compliance?

Here are the key practices to avoid E-way Bill Non-Compliance:

1. Timely Generation of E-Way Bills

Before starting the movement of goods, it is important to generate an E-Way Bill. As per the rules, goods worth more than Rs. 50,000 cannot be transported without a valid E-Way Bill, which must be created on the official GST E-Way Bill system portal. Any delay or failure in generating it can result in heavy penalties and even seizure of the goods.

2. Accurate Entry of Information

It is very important to carefully check all the details entered in the E-Way Bill, such as the GSTINs of both the consignor and consignee, invoice or challan numbers, HSN codes, value of goods, transporter ID, and vehicle number. Mistakes can lead to penalties. As per Circular No. 64/38/2018-GST, minor errors can attract a Rs. 1,000 (Rs. 500 under CGST and Rs. 500 under SGST) penalty.

3. Monitor E-Way Bill Validity

E-Way Bills come with a set validity period depending on the distance to be traveled. For example, one day is allowed for every 200 kilometers of movement. It is important to transport goods within this period. If the E-Way Bill expires, you must either generate a new one (if allowed) or complete transportation in time.

4. Maintain Proper Documentation During Transit

The person responsible for the vehicle carrying goods must have a copy of the E-Way Bill, either in printed form or stored electronically, along with the invoice or delivery challan. If these documents are not shown during the inspection, it can result in detention and heavy penalties.

5. Stay Updated with Regulatory Changes

Regularly monitor official sources such as the CBIC website and the GST Council portal for updates on E-Way Bill rules and regulations. Being informed about the latest changes ensures timely compliance and helps avoid inadvertent violations.

6. Implement Standard Operating Procedures (SOPs)

Develop and enforce SOPs for E-Way Bill generation and management within your organization. This includes assigning responsibilities, setting timelines, and establishing checks to ensure accuracy and timeliness. Training staff on these procedures is essential to maintain compliance.

7. Utilize Technology for E-Way Bill Management

Leverage software solutions that integrate with your billing and logistics systems to automate E-Way Bill generation and tracking. Automation reduces manual errors and grants that E-Way Bills are generated promptly and accurately.

8. Understand State-Specific Requirements

While the E-Way Bill system is standardized across India, certain states may have specific rules or exemptions. Familiarize yourself with these state-specific provisions to ensure compliance during intra-state movements.

9. Regular Audits and Compliance Checks

Conduct periodic internal audits to assess compliance with E-Way Bill regulations. Identify and rectify any discrepancies or lapses promptly to avoid penalties.

10. Seek Professional Advice When Needed

If uncertainties arise regarding E-Way Bill requirements or compliance, you can consult with tax professionals or legal advisors. Their guidance can help navigate complex scenarios and ensure adherence to regulations.

By implementing these practices, businesses can effectively manage E-Way Bill compliance, minimize the risk of penalties, and ensure smooth operations under the GST framework.

Conclusion

Non-compliance with E-Way Bill regulations under GST can result in significant financial, operational, and reputational damage. Penalties can be very high, and authorities have the power to detain, seize, or even confiscate goods. However, by understanding the rules, implementing proper systems, and maintaining discipline in transport practices, businesses can easily stay compliant and avoid such issues. If you want to register GST E-waybills for your business, contact Online Legal India. They have experts to guide you.