India is considering a major reform in mineral transportation by phasing out the decades-old transit pass system and replacing it with mandatory GST invoicing for every truckload of ore. The move, currently under discussion in high-level stakeholder meetings, is aimed at curbing revenue leakages and improving transparency in the mining sector.
Officials say the existing transit pass mechanism has often been criticised for being opaque, vulnerable to forgery, and a hotbed for under-reporting. According to a Comptroller and Auditor General (CAG) analysis, Odisha alone is estimated to have lost nearly Rs 1,400 crore in iron ore royalty in 2022 due to such inconsistencies.
"Moving to GST means greater central control over the items being moved out of mines," a senior government functionary said, adding that changes in the GST invoicing system may be introduced to capture all details currently recorded in transit passes.
A government document suggests that an advisory may soon be issued to phase out transit passes and recognise GST invoices as valid transport documents. Discussions are expected to involve the Ministry of Mines, the Department of Revenue under the Finance Ministry and mineral-bearing states.
Present System vs GST Invoicing
Currently, trucks transporting ore must obtain a transit pass from the state mining department as proof that the ore is legally mined and royalty is paid. Under the proposed system, a single GST invoice would replace multiple documents, thereby automating the dispatch process and enabling digital tracking.
"Making GST invoices mandatory for all dispatches can act as both a mining permit and proof of royalty payment, reducing duplication and curbing corruption," another note highlighted.
Why the Shift?
The paper trail under the transit pass system is susceptible to manipulation. For instance, a truck carrying 40 tonnes of ore may be issued a pass for only 20 tonnes, with the excess being sold illegally. The CAG report on Odisha exposed how unchecked e-passes created large gaps in tracking ore movement.
The 2022 audit revealed that out of 37,958 e-passes generated, at least 16% were issued against vehicles registered as three-wheelers-clearly not capable of transporting minerals. Further, over 14% of e-passes had no valid records at exit gates, raising questions on monitoring.
The audit estimated that 1.48 crore tonnes of iron ore, worth nearly Rs 1,473 crore, may have escaped proper tracking due to unchecked e-passes.
The Road Ahead
If implemented, the GST invoicing system would tighten central oversight, simplify compliance and plug revenue leakages that have plagued the mining sector for years. However, the transition would require coordination across multiple ministries and states, as well as modifications in the GST framework to capture the finer details of mineral dispatch.
Industry insiders suggest the reform could be a game-changer for India's mining economy, ensuring greater accountability, transparency, and higher royalty collection for mineral-bearing states.
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