Consequences of not generating an e-way bill
E-way bill is an electronically generated document mandatory to be carried for movement of goods across India. It is necessary for movement of goods whose value is exceeding Rs 50,000 with some reservations.
The consequences of not generating an e-way bill may be both in monetary as well as non monetary terms.
#1 Monetary Penalty
There is no tax-related implication if an e-way bill is not generated and tax is paid on the invoice raised. However, movement of goods without generating an e-way bill constitutes an offence (read non-compliance of GST) and attracts a penalty of Rs 10,000 or the tax sought to be evaded.
#2 Non-monetary Penalty
The vehicle that is found to be transporting the goods without an E-way bill can be detained or seized and would be released only on the payment of appropriate tax and penalty as specified by the officer. After this, two kinds of situation arises.
- If the owner wishes to pay the penalty, he must pay 100% of the tax payable.
- If not, the penalty will be equal to 50% of the value of goods.
It can lead to several other consequences which are discussed below.
Working Capital Blockage
The first and foremost would be payment of an upfront penalty will lead to outflow of funds. The same would lead to shortage of working capital.
Supply chain disruptions
The biggest impact for any business if its goods (or vehicle) are seized during transit is that the routine operations of business are disrupted.
Impact on other GST assessments
Any proceedings by the tax department in case of one non-compliance with the e-way bill provisions may lead to initiation of action by the authorities on other GST assessments. This could also increase the chances of future consignments being checked by the authorities, considering the history of non-compliance.
Dent to business reputation
Any action taken by the tax authorities against the business, such as initiation of litigation on account of tax evasion, could result in damage to the reputation of the businesses as an honest taxpayer.