Quick analysis of e-way bill impact

Quick analysis of e-way bill impact

Post the introduction of the e-way bill, organised sector in building materials sector hopes for volume revival with better tracking of movement of goods. However, growth may be gradual and not sudden as unorganized players could resort to increased part invoicing.

It is also observed that, since not all buyers ask for bills/invoices, a few distributors/dealers have resorted to bill selling to builders, who gain not only on input tax credits but also on higher expenses/lower tax outgo.

Unorganised sector still has some upperhand over organised sector in terms of pricing differential (10%+) and higher credit days (90+ vs. organized at 30-60) which forces distributors/ dealers to direct buyers towards the unorganized sector.

All these factors lead to only one thing – expect tax compliance to increase only gradually for building materials like tiles and ply. However, in case of plastic processors scope of tax avoidance is the least and they are also best placed to gain on e-way bill narrowing pricing differentials between organized and un-organized plays.

It should be noted that post GST, the unorganized sector in tiles and plywood benefited due to huge price differential. The government action of bringing down the GST rate to 18% in November, however, helped to level the playing field.

When GST was introduced in July, check posts were abolished which helped the unorganised sector to move goods freely within and outside the states. There were reports of undocumented invoices for transport of goods, with no clear way to reconcile the invoices. Reduced tax compliance further aided the unorganized sector with options on pricing and credit days. This could partly explain the lower volume growth reported by tiles/ ply players over the last three quarters.  However, with the introduction of e-way bill things should start changing, though gradually. 

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