Inspection of Goods in Transit Under GST: Complete Guide to Section 68 of the CGST Act, 2017

Section 68 of the CGST Act, 2017, is a critical enforcement provision that governs the inspection of goods in transit to ensure GST compliance and prevent tax evasion.

It mandates that transporters carry prescribed documents—primarily the e-way bill—and empowers tax authorities to intercept and inspect conveyances. Supported by detailed rules like Rule 138 and associated forms (EWB-01 to EWB-06), this framework ensures the legitimacy of goods movement. Non-compliance can lead to penalties, detention, or confiscation, making it essential for businesses to understand and follow these guidelines diligently.

Inspection of Goods in Movement: A Detailed Analysis of Section 68 of the CGST Act, 2017

Introduction

The implementation of GST brought a revolutionary shift in India’s indirect tax system, and Section 68 of the CGST Act, 2017 plays a vital role in strengthening its enforcement framework. This provision empowers tax authorities to intercept goods in transit, verify their documentation, and prevent potential tax evasion.

In essence, Section 68 forms the backbone of logistics compliance under GST by ensuring goods are moved with transparency and legality. Understanding its scope and procedure is crucial for every GST-registered business.

Section 68: The Legal Framework

Before diving into the operational nuances, it’s essential to grasp the legal foundation of Section 68. The section is strategically structured into three subsections, each serving a unique purpose within the inspection and compliance mechanism under GST.

It addresses the documentation responsibilities of transporters, the verification rights of officers, and the obligations of all parties involved in the supply chain.

Section 68(1): Documentation Requirement

This subsection empowers the government to specify the documents or devices required during the movement of goods. It mandates that the person in charge of a vehicle must carry an e-way bill, which serves as proof of compliant goods transportation.

This requirement applies when the consignment value exceeds a prescribed threshold, ensuring high-value movements are traceable and accountable.

Section 68(2): Validation of Documents

Carrying documents isn’t enough—they must be validated in a prescribed manner. This ensures authenticity and prevents the misuse of fake invoices or bills. Validation is often linked with system-generated records such as the e-way bill portal, helping tax officers verify details quickly and efficiently.

Section 68(3): Power of Inspection

Perhaps the most powerful tool under this section, subsection (3) authorizes a proper officer to intercept, inspect, and verify any conveyance suspected of non-compliance. The transporter must produce documents on demand, failing which the vehicle may be detained. This power acts as a strong deterrent against fraudulent practices in goods movement.

Relevant Rules and Forms: The Operational Backbone

The enforcement of Section 68 is supported by a series of detailed rules and prescribed forms. These define the exact procedures, documents, and officer responsibilities, ensuring uniformity across jurisdictions and transport scenarios. Here’s how each rule contributes to a seamless enforcement framework.

Rule 55A: Accompanying Tax Invoice or Bill of Supply

Under this rule, the transport of goods must be accompanied by a tax invoice or bill of supply. These commercial documents form the first layer of validation and help confirm the legitimacy of the goods being transported.

Rule 138: E-way Bill and Furnishing Information

This is the most pivotal rule in the context of Section 68. It requires every consignment above a specified value to be covered by an e-way bill (FORM GST EWB-01). For consolidated shipments, FORM GST EWB-02 is used. The e-way bill must be generated before the movement begins and includes details of the consignor, consignee, transporter, and nature of goods.

Rule 138A: Documents and Devices to be Carried

Rule 138A outlines what must be physically or digitally available with the person in charge of the conveyance. This includes:

• The e-way bill (either physical or via QR code)
• Invoice or bill of supply
• Delivery challan, if applicable

These serve as the basis for verification by enforcement officers.

Rule 138B: Interception and Verification

A proper officer can intercept a vehicle at any place to verify the e-way bill and corresponding goods. This helps curb under-invoicing, illegal supply chains, and other tax evasive practices. Officers may use RFID readers and other technology tools for quicker checks.

Rule 138C: Physical Inspection Report

If a vehicle undergoes physical inspection, officers must upload findings in FORM GST EWB-03. This formalizes the inspection and helps in auditing and appeal processes later. It adds an accountability layer to the enforcement procedure.

Rule 138D: Reporting of Detention

In cases where the vehicle is detained for more than 30 minutes, the transporter can report the same using FORM GST EWB-04. This promotes transparency and reduces the chances of undue harassment by enforcement officers.

Rule 138E: Restriction on E-way Bill Generation

If a taxpayer fails to file GST returns for two consecutive periods, they may be barred from generating e-way bills under Rule 138E. To lift this restriction, an application in FORM GST EWB-05 must be submitted. The officer will respond with an approval or rejection in FORM GST EWB-06.

Key Data and Procedural Aspects

These technical parameters shape the day-to-day compliance needs for businesses engaged in transporting goods. Being aware of the rules helps companies avoid unnecessary penalties or business disruptions.

Value Threshold

• ₹50,000 for inter-state movement (fixed threshold)
• Intra-state thresholds may vary by state but often align with the ₹50,000 mark.
• Exceptions exist for certain goods (e.g., handicrafts, job work items) which require e-way bills regardless of value.

Validity Period of E-way Bill

The validity of an e-way bill depends on the distance to be covered:

• 1 day for every 200 km (or part thereof)
• Longer durations for over-dimensional cargo (ODC)

Timely updates are essential if the journey extends beyond the validity.

Powers and Responsibilities of the Proper Officer

Officers from both Central and State GST departments have the power to:

• Intercept and inspect any conveyance
• Verify goods and documents
• Detain goods and issue penalties
• Initiate confiscation proceedings under Section 129 and Section 130 if needed

Consequences of Non-Compliance

Failing to comply with Section 68 can lead to:

• Detention of goods and vehicle
• Penalty equal to the tax amount payable or higher
• Seizure and confiscation under extreme circumstances
• Litigation and delayed deliveries impacting business reputation

Practical Tips for Businesses and Transporters

Smooth compliance with Section 68 depends on proactive planning and procedural accuracy. Here are some best practices:

• Always generate e-way bills before dispatch.
• Ensure the driver or person in charge has all required documents and understands how to produce them on demand.
• Monitor e-way bill expiry closely to extend validity if necessary.
• In case of inspection, cooperate with officers and record all communications for transparency.

Conclusion: Compliance is the Key to Smooth Movement

Section 68 of the CGST Act, 2017, is more than just a legal provision—it’s an essential safeguard ensuring accountability in goods transportation under GST. The robust e-way bill system it introduced enhances visibility, reduces tax leakage, and supports fair trade practices.

For businesses, transporters, and tax professionals, understanding and complying with this provision ensures seamless logistics, reduced risks, and better supply chain management.

✅ Stay compliant, stay ahead.
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FAQs on Section 68 of CGST Act 2017

What is Section 68 of the CGST Act, 2017?
Section 68 empowers GST authorities to inspect goods in movement, verify documentation, and ensure compliance with GST rules during transportation.

Why is Section 68 important under GST?
It helps prevent tax evasion, ensures proper documentation, and promotes accountability in the movement of goods across India.

Who is authorized to inspect goods under Section 68?
A proper officer of either Central or State GST can intercept and inspect any vehicle transporting goods.

What documents must be carried during goods transportation?
The person in charge must carry an e-way bill, tax invoice or bill of supply, and a delivery challan if applicable.

When is an e-way bill mandatory?
An e-way bill is mandatory when the consignment value exceeds ₹50,000 for inter-state movement and varies for intra-state movement.

How is the validity of the e-way bill calculated?
It is valid for one day for every 200 km or part thereof, with extended validity for over-dimensional cargo.

What happens if documents are not produced during inspection?
Failure to produce required documents can lead to detention of goods and vehicle, imposition of penalties, and possible confiscation.

What is FORM GST EWB-01?
FORM GST EWB-01 is the standard e-way bill generated for movement of goods exceeding the specified value threshold.

What is FORM GST EWB-02?
FORM GST EWB-02 is used to generate a consolidated e-way bill for multiple consignments in a single conveyance.

What is FORM GST EWB-03 used for?
It is used by the proper officer to record details of physical inspection of goods and the conveyance.

What is FORM GST EWB-04?
This form is used by the transporter to report detention of a vehicle for more than 30 minutes during transit.

What is FORM GST EWB-05?
It is an application form used to request unblocking of e-way bill generation if it was restricted under Rule 138E.

What is FORM GST EWB-06?
This is the order issued by the tax officer in response to FORM GST EWB-05, either approving or rejecting the request.

What is Rule 138 under GST?
Rule 138 mandates the generation of an e-way bill before the commencement of movement of goods.

What is Rule 138A under GST?
This rule specifies the documents and devices the person in charge must carry during the transportation of goods.

What is Rule 138B under GST?
Rule 138B empowers officers to intercept and verify e-way bills and related documents during transit.

What is Rule 138C under GST?
This rule outlines the procedure for physical inspection and recording of findings in FORM GST EWB-03.

What is Rule 138D under GST?
It allows transporters to report vehicle detention exceeding 30 minutes by filing FORM GST EWB-04.

What is Rule 138E under GST?
This rule restricts the generation of e-way bills if the registered person fails to file returns for two consecutive tax periods.

What are the consequences of violating Section 68?
Violations can result in detention of goods and conveyance, monetary penalties, and possible confiscation proceedings.

Can a vehicle be stopped multiple times for inspection?
Generally, once a physical inspection has been conducted and recorded, the vehicle should not be stopped again unless specific information is received.

Can e-way bills be extended?
Yes, under certain conditions such as natural calamities or unforeseen delays, the validity of e-way bills can be extended.

Are there exemptions to e-way bill requirements?
Yes, certain categories like exempted goods, hand-carried goods, and movements within notified distance limits may not require an e-way bill.

Who is considered the ‘person in charge’ of a conveyance?
It can be the driver, owner, or any individual in control of the vehicle carrying goods during transit.

Can detained goods be released before penalty payment?
No, goods and the vehicle will typically be released only after the payment of applicable tax and penalty.

Is Section 68 applicable to intra-state movement of goods?
Yes, but applicability depends on the value of goods and state-specific notifications for intra-state movements.

How can businesses ensure compliance with Section 68?
By timely generating e-way bills, ensuring documents are in order, and training transporters to handle inspections professionally.