GST won't be successful without its IT backbone GSTN
The Goods and Services Tax Network (GSTN) is a section 25 (not for profit), non-government, private limited company. It was incorporated on March 28, 2013.
The government of India holds 24.5 per cent equity in the GSTN, and all states of the Indian Union, including the National Capital Territory of Delhi and Puducherry, and the empowered committee of state finance ministers together hold another 24.5 per cent. The balance 51 per cent equity is with non-government financial institutions. However, strategic control of the GSTN is said to lie with the Centre even though it owns only 24.5 per cent of its equity.
The company has been set up primarily to provide IT infrastructure and services to the Central and state governments, taxpayers and other stakeholders for the implementation of the Goods and Services Tax (GST). It is going to be the IT backbone of the GST - the new tax regime much talked about as a major tax reform since Independence. But the success of this new tax regime seems to be dependent a lot on the GSTN.
The GSTN is a public utility like the Unique Identification Authority of India (UIDAI) in charge of Aadhaar. Its objective is to drive the basic business processes under the GST namely registration, payment of returns and refunds. These are called the front-end modules while there are back-end modules such as audit, adjudication, dispute resolution and an array of other applications which will be developed by the government.
The government had already transferred, hopefully under a MoU, the commercial database of existing taxpayers with strict assurance of data security and protection. This is understandably to operationalise the new tax regime early.
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| The GST is a new tax regime much talked about as a major tax reform since Independence. |
The GSTN has in turn awarded the contract to the second largest Indian tech major Infosys for Rs 1,380 crore to run the front-end operations of the GST, involving the four basic business processes mentioned above. These front-end transactions would eventually need ratification by departmental assessing officers at the back-end, according to government sources.
As everyone knows, the GST is the single largest unified indirect tax system to be rolled out by mid-2017. Strictly speaking, it is not a single tax system since the Centre and the states are going to tax the supply of goods and services on the same value base by exercising concurrent jurisdiction under Article 122 of the Indian Constitution.
The Constitution was recently amended to enable this act of the Centre and the states to swap each other's earlier rights to tax manufacture and sale of goods respectively. The Centre, in addition, concedes its exclusive right to tax services to the states as well under the new constitutional arrangement.
The GSTN was prepared to develop several of the back-end processes for the states since the Centre is supposedly equipped with its own back-end departmental IT support outsourced from another IT major WIPRO.
When the GSTN floated the offer there were only six takers. The number has jumped over threefold to 21 states in three years now. More and more states, both big and small, from Bihar to Arunachal Pradesh have realised it is worthwhile to fall in line with the GSTN for running their IT modules for the collection of their taxes and its administration. However, big states like Tamil Nadu, Karnataka and Maharashtra have their own IT systems since they have past experience in running the state value added tax (VAT) administration with their own IT architecture.
The GSTN is ready to do a beta launch in February and go critical from April 1. Many states feel that letting the GSTN build front- and back-end modules together will help drive synergies as there was no such common platform earlier. It could eventually help save time, energy and precious resources, many taxpayers think.
Some states have sought the help of the National Informatics Centre (NIC), the government's own IT outfit functioning under the ministry of electronics and information technology. In fact, the NIC has a large presence in every state, providing IT and communication support in carrying out various State-run education and other programmes. The first time the government took the help of the NIC was to run the customs tax collection module, ICEGATE, with resounding success.
However, the attempt of the government to outsource to Wipro the administration of its excise and service tax module, ACES, has reportedly not been very successful.
The long and short of it is that the Centre could come forward to have the states piggyback on its own official IT outfit which will ensure data security to taxpayers on the one hand and help train the government officials on the other. This arrangement may also ensure continuity and reliability of the IT facility for taxpayers and officers alike in the long-run.