Though the GST was conceptualised as a comprehensive code to replace most indirect taxes, the law is being implemented in instalments. The need for an e-way bill to accompany every supply of goods is an example. As per the latest missive from the GST Council, e-way bills will be introduced in a phased manner by March 2018- till then the exist laws of the individual States would apply.

This would create a great deal of confusion when a truck starts its journey in one State, travels through three other States before completing its journey in a Union Territory. A GST invoice, an e-way bill from the originating State and a delivery challan mentioning the destination seems to be doing the trick at present. However, complications can arise if the goods are sent on approval basis since there would be no invoice. A government circular issued on October 18 (Circular No 10/10/2017-GST) attempts to clarify these issues.

What it says

The circular starts off by referring to communications received particularly from the suppliers of jewellery regarding issue of invoices when goods are sent on approval basis. Though paragraph 5 of the circular states that this clarification would be applicable to all goods supplied under similar situations, it appears that the draftsman has kept only jewellers in mind. With a special tax rate of 3 per cent, an exemption from the Prevention of Money Laundering Act and now a relaxed scheme for movement of jewellery, jewellers could be one of the few who would not moan the hurdles that GST appears to have imposed.

The circular clarifies that goods which are taken for supply on approval basis can be moved from the place of business of the registered supplier to another place within the same State or to a place outside the State on a delivery challan along with the e-way bill wherever applicable and the invoice may be issued at the time of delivery of goods.

The person can carry the invoice book with him and issue the invoice once the supply is fructified. All such supplies will be inter-state supplies and attract integrated tax in terms of Section 5 of the Integrated Goods and Services Tax Act, 2017.

Still, there are some questions. To how many suppliers (apart from, maybe, jewellers) can send the invoice book along with the vehicle in which the goods are transported? Even if they do, who would be the person to authorise and issue an invoice once the supply is fructified? Under the GST law, invoices are supposed to be serially numbered. If invoice books are sent through transporters, maintaining serial numbers could pose a numerical challenge during invoice uploading and subsequent assessments since one set of invoices will be at the head office and the other in a remote location.

The circular assumes that acceptance or rejection of goods sent on approval will be done instantaneously (again, this could be a practice in the jewellery industry). A machining part sent by a supplier to a first time customer would take a few weeks to be approved. Some parts may be approved while others rejected. The circular is silent on such scenarios. An solution would be to provide for suppliers to issues invoices that are clearly marked “for approval”. These can accompany the goods and can have a validity of, say, 90 days after which they should either be approved or returned.

The writer is a chartered accountant

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