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Published on:

September 18, 2024

Alankar Mishra

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Basics of GST

What are the different Transaction Types in e-way bills?

Implementation of the e-way bill system in India under the Goods and Services Tax (GST) has simplified the tracking of goods in motion. As per instructions regarding the e-way bill, it is necessary if the product being transported is worth more than ₹ 50,000. The purpose of an e-way bill is to contain information related to the transportation of goods.

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One of the important features of the e-Way bill is the categorization of Transaction type which talks about the movement of goods. Various transaction types are used depending on the type of the transfer, like sale, job work supply, stock transfer, etc. In this blog, we shall examine the various transaction type in e-way bill and their role in achieving compliance under GST laws.

What is an E-way Bill?

An e-way bill is a document that has to be generated electronically on the GST platform when goods are shipped or transported from one place to another within India. This is a crucial aspect of the GST ecosystem aimed at enhancing the movement of goods with adequate visibility and accountability. E-way bills must be created by businesses, transporters and e-commerce businesses for parcels whose threshold of value is reached or crossed.

Key components of the e-way bill include:

1. Invoice details: These are all information that pertains to the goods that are being moved.

2. Consignor and consignee details: Details about the seller and the buyer.

3. Transporter details: It encompasses the vehicular and the driver details, that is, who carries out the movement of goods.

Transaction type classification is one of the very critical components of an e-way bill.

Importance of Classification of Transaction Types in the E-way Bill

A focus on the transaction type within an e-way bill is an indication of goods movement to address a specific activity or for doing a certain business. In this case, it assists GST officials in evaluating and confirming the legality of the transportation. Improper tax transaction type classification may bring about penalties, noncompliance problems and even delays in goods movement.

‍Here are some reasons why it is important to correctly classify the transaction type in an e-way bill:

1. Tax Calculation: Proper classification allows the calculation of the tax and GST limitation more accurately.

2. Compliance: Misclassification of a transaction falls within the provisions of the law and avoids penalties for non-compliance with GST-related requirements.

3. Transparency: Classifying the transaction type accurately allows authorities and persons who are parties in the transaction to comprehend the scenario.

Different Transaction Types in an E-Way Bill

In the realm of Indian Goods & Sellers’ taxes, e-way bill transactions are classified into two parts: supply and non-supply. There are types within these two main transaction pans to explicate the transaction apparatus.

Supply-Based Transaction Types

In these transactions, the movement of goods is involved for sale, barter, exchange or any other commercial supply activities.

a. Regular Supply (Outward Supply)

This type of transaction occurs when goods are transferred from the supplier towards the intended recipient, and this action flow is a part of a sale transaction. In most situations, this is the most common transaction type utilized for selling goods to customers, dealers or distributors.

Examples:

Selling finished goods to a retailer.

Selling goods in bulk to a dealer.

Shipping goods out to a foreign customer.

b. Supply for Job Work

Job work can be defined as the transfer of raw or semi-finished goods to another party to do a certain job. The customer provides the job worker with certain goods, and when the job worker completes the task, he either sends the goods back or directly to the customer.

Examples:

Sending ready-made clothes to a tailor.

Sending off fabricated metal items to an outside company for plating.

c. Supply Type of goods on approval.

This type of transaction involves the movement of goods that are solely for sale but under the approval form. Under this type, the goods under question are forwarded to the other party, and this other party has the opportunity to either consent to the goods forwarded or oppose them after inspecting them.

Example:

Sending product samples to a customer gives an option of approving them or not before actually selling them.

Sending machines to the dealer with the option of taking them on trial.

d. Supply of goods for Export/Import.

When goods are Intended for export to other countries or imported into India, they should be categorized under the home-to-export or import transaction Category. This is not limited within states to the inward or outward movement of goods that are intended for export markets only.

Example:

Export of textiles to the US from India.

Import of items to India. Electronics from China.

‍e. Supply between Principal & agent.

This type of transaction takes place between the principal and his agent in the case that the goods are supplied between these parties. The principal dispatches goods to the agent who is entitled to sell them on behalf of the principal.

Examples:

Goods are sent from a manufacturer to a salesperson.

Goods received by the distributor from the principal for sale in specific geographical regions.

Non – Supply – Based Transaction Types

A non–supply transaction involves the transfer of goods that do not qualify as a supply under the GST legislation. Such transactions are often of a non–business character.

a. Stock Transfer

Stock transfer occurs when there is an inter-branch or inter-warehouse transfer of goods within the same company but which has branches in more than one state. Though the transfer does not involve any sale, an e-way bill in this case is mandatory.

Examples:

Transfer of inventory from a company’s Mumbai warehouse to its Delhi warehouse.

Movement of goods between different branches of the same retailer.

b. Supply for Own Use

This type is adopted, when goods are being moved internally for the business, for instance carrying machinery between the different units of a company.

Examples:

Transporting office furniture from one branch to another.

Moving equipment from the head office to a regional office.

‍c. Supply for Exhibition or Fair

This transaction type relates to the carrying of goods in anticipation of display or exhibition and not for sale. It applies to the scenario of goods being taken to a trade fair, exhibition or any other such fair.

Examples:

Displaying products at an exhibition or trade fair.

Sending machinery to an industry expo.

d. Goods Sent for Repairs

This is a transaction type where goods are either sent or forwarded to a vendor or a service provider for repair and the goods will return to the original sender after some time. This type also applies when repaired goods are delivered back to the customer.

Examples:

Taking machines to the repair shop.

Taking electronic items to the vendor for repair.

e. Return of Goods

In matters like that of rejected goods, or in the case where such has been returned by the buyer, the transaction must be classified as a return of goods. This ensures that such goods are marked and looked at within the boundaries of the seller’s inventory.

Examples:

That of a customer returning his suspecting products.

That of a dealer who has extraneous stock returning to the supplier.

How to Select the Right Transaction Type in E-Way Bill

Choosing the right transaction type in an electronic waybill is necessary to facilitate compliance and mitigation of sanctions. Here is a procedure for selecting the appropriate transaction type: Here’s a step-by-step guide to help you choose the correct transaction type:

Step 1: Identify the Transaction

Establish whether the goods are being transported for sale, for domestic consumption, for job work, or others. If it is for business purposes, place it under the “Supply” heads. If it is for other than business purposes, select out of the “Non-Supply” heads.

Step 2: Choose the Right Transaction Sub-Type

By the type of transaction, choose the appropriate sub-type. Say if you are moving goods from one branch to another within the same company then click on “Stock Transfer.” If the goods are being returned choose “Return of Goods.”

Step 3: Validate the Information Provided

Lastly, before e-way bill generation ensure that all details including type of transaction, invoice details and transporter details have been properly set. Confirm that all the expectations are met to prevent challenges in the course of transport.

Common Mistakes to Avoid When Choosing Transaction Types

Selecting an inappropriate transaction type while generating an e-way bill can lead to the problem of compliance, incurring fines or at times, causing delays in delivering the goods. Here are some of the common errors that one must avoid:

1. Incorrect Classification: Classifying a transaction as a non-taxable supply when it is indeed a taxable supply or the other way round.

2. Omitting Important Details: Excluding certain key details such as the specific goods movement purpose or the connection/relationship between the consignor and consignee.

3. Delayed Generation of E-Way Bill: Generating the e-way bill later than expected or generating one that has various inaccuracies hence causing a fine.

Penalties for Incorrect Classification of Transaction Types

Failure to classify the type of transaction in an e-way bill correctly will lead to penalties. Under GST law, non-possession of a valid e-way bill or having incorrect bill details invites a penalty to the tune of 10,000 rupees or the value of revenue sought to avoid, depending on which figure is higher. Additionally, the vehicle which is carrying the goods may be seized which may cause interruptions in the supply chain.

Conclusion

It cannot be overstressed how important it is to classify correctly the transaction type of an e-way bill concerning adhering to GST compliance as well as the need to avoid penalties. Especially for businesses that have numerous transactions, it is critical to note the differences between various transactions, be it a supply or non-supply as it aids in making sure that logistics are in order and that movement of goods is smooth without delays or penalties.

You will be able to avoid legal issues and operate transparently while also ensuring the proper classification as well as the accurate documentation of the different transaction types which is key towards making sure that the provision of the GST Act is adhered to.

FAQs

What products are classified under HSN code 6307?

Transaction type in e-way bill is a category that enables the user to describe the purpose of the movement of the goods. Thus it may enable the authorities to find out the reason behind the transportation and may also help in correct tax assessment.

What is the GST rate for products under HSN code 6307?

Transaction types may further be subdivided into two major types which are as follows: Supply-based (which are for selling, job work other commercial paid for) and Non-supply (for activities or movements which do not require payment such as stock transfers or repairs).

How does the Bill to Ship to concept work in e-way bills?

In the Bill to Ship to e-way bill scenario, the billing address and the shipping address are different. The supplier issues the invoice to the buyer (Bill To) while the goods are shipped to a third party (Ship To). In such cases, the e-way bill needs to reflect both the billing and shipping details for compliance.

What are the GST implications in a Bill to Ship to transaction?

Under Bill to Ship to GST provisions, the first buyer is responsible for paying GST even though the goods are shipped to a third party. The tax liability arises based on your billing address, but the e-way bill must include both the billing and shipping locations to align with GST rules.

How to generate an e-way bill for a Bill to Ship to transaction under GST?

For generating an e-way bill under the combination of 2 and 3 in e-way bill, you must enter the details of the buyer in the "Bill To" section and the recipient’s address in the "Ship To" section. This ensures that the e-way bill reflects both the billing and shipping parties in line with GST compliance.