The delay on the part of the Union government in notifying and formalising a Goods and Services Tax Council’s decision permitting State governments to continue their own monitoring mechanism to check tax evasion till the introduction of e-Way Billing, has taken a heavy toll on the State’s finances.
Anticipating the possibility of inter-State smuggling of goods and the resultant revenue loss, Kerala cautioned the 17th council meeting held on June 17 against scrapping the border check-posts before introducing the e-Way Billing system proposed for transporting goods valued at over ₹50,000. Finance Minister T.M. Thomas Isaac reiterated that it would have a direct bearing on the States’ revenue.
The council discussed the issue and decided to draft a one-sentence rule enabling Kerala as well as other States to continue their own monitoring systems to check smuggling and tax evasion. The State government then resolved to revive the system of e-declaration that was in vogue under the Value Added Tax (VAT) regime.
e-declaration
As per VAT norms, inter-State goods movement was regulated through e-declaration made in separate forms for air, rail, water and road transport. Based on the council decision, the State government also prescribed the documents to be carried with the consignments from outside the State, whose value exceeds ₹50,000.
On the strength of the council decision, squads were reactivated. An intelligence squad of Mattancherry intercepted a goods- laden vehicle without the prescribed documents and imposed a penalty. The consingnor challenged the legislative competence of the State government to prescribe documents to regulate inter-State goods movement post-GST in the High Court. The court ruled that the power to prescribe documents for inter-State trade vests with the Centre and it had not issued any notification empowering the State to regulate the trade. It also ruled that the penalty notice was not legally sustainable.
Thus the State government was forced to remain a mute spectator to smuggling of goods through various routes and the dip in tax revenue has started derailing the functioning of the treasury. Dr. Isaac is understood to have flagged the problems in delaying the notification a number of times during the past five months, but to no avail. Further delay in issuing the notification would even affect the committed government expenditure, but the Centre does not seem to be keen on resolving the crisis, sources said.