Some of the concerns on the way the GSTN company has been structured and its performance thus far

[dropcap color=”#008040″ boxed=”yes” boxed_radius=”8px” class=”” id=””]T[/dropcap]he passage of four legislative GST bills created a lot of euphoria among the government, common public and the traders. As tweeted out by Honorable FM “It is a landmark tax reform since independence and passage of GST bill is history in the making. All the government machinery led by “IRS” officers who had toiled hard for the last 10 years to make this day happen went gaga over the passage of the bill.

Roll out of Goods and Services Tax (GST) is hugely dependent on the readiness of IT infrastructure (GSTN).

But the mute question that arises “is everybody ready to face this great reform?” Traders and businessmen requesting government for some more time for the GST preparation which was criticized by the revenue secretary does not bode well for the economy. But the revenue secretary himself knows that both the Central revenue officers and especially the state revenue officers are not ready for GST implementation. The officers received only superficial training – there is neither change in the mind set nor the behavior. This much is evident during the GST council meeting where state officers led by IAS insisted on the clause of road checking of vehicles which was thoroughly opposed by the IRS officers. Road checking of vehicles defeats the very purpose of the GST. There is no movement of infrastructure mobilization, administrative setup or IT establishment. Only two things are happening at the ground level one is spending money on the GST publicity and other is forcing the assessees to migrate to GST through GST Network (GSTN).

Roll out of Goods and Services Tax (GST) is hugely dependent on the readiness of IT infrastructure (GSTN). Any glitch in IT structure has the potential to delay GST roll out. So much of hype was created about the GSTN as it is the panacea for the smooth functioning and implementation of the GST. But the criticism surrounded around the GST Network has questioned its ability, efficiency and effectiveness.

Criticism was mainly about the composition and structure of the GSTN. Goods and Services Tax Network (GSTN) is a Section 8 (under new companies Act, not for profit companies are governed under section 8), non-Government, private limited company. The company has been set up to provide front end IT infrastructure for both central and state governments and Back end IT services to some states. The Government of India holds 24.5% equity in GSTN and all States of the Indian Union, including NCT of Delhi and Puducherry, and the Empowered Committee of State Finance Ministers (EC), together hold another 24.5%. Balance 51% equity is with non-Government financial institutions namely ICICI Bank, HDFC Bank, HDFC Ltd, LIC Housing Finance and National Stock Exchange Strategic Investment Corporation Ltd. In this structure government is a minority stake holder and this was vehemently opposed by the Professor Subramanian Swamy and he argues for the restructuring of the GSTN with government owned financial institutions and handing over to finance ministry.

[dropcap color=”#008040″ boxed=”yes” boxed_radius=”8px” class=”” id=””]N[/dropcap]ot only Dr. Swamy but common public also raised their concerns about the majority share holding of Non- Government financial institutions in GSTN. And their concerns were justified and it is evident with the recent leakage of Dhoni’s Aadhar number by a private player which was later confirmed by the government. This shows how the private sector can abuse the sensitive data. And the GSTN with a majority share holding of private sector could be a bombshell which is going to handle huge financial data and company’s secrets.

…the private company where everyone assumed that it will produce an excellent product has failed to create a minimum standard product.

The motto of any private company is profit. What profit the private sector banks see in the investment of GSTN? Will the self sustaining revenue model as suggested bring the profit to these Non Government financial institutions or wealth of the sensitive data which they are going to hold? The GSTN website mentions that GSTN SPV would have a self- sustaining revenue model, where it would be able to levy user charges on the tax payers and the tax authorities availing services. What an irony! The government is funding the project and the private entity is collecting the user charges from public and Tax authorities. This explains the reason for GSTN refusing the CAG audit and opposing Home Ministry security clearance and stalled the service tax department’s investigation.

The government has reduced itself to a minority stake holder and gave majority stakes to private company to enable efficient and reliable provision of services in a demanding environment after considering key parameters such as independence of management, strategic control of Government, flexibility in organizational structure, agility in decision making and ability to hire and retain competent human resources. But the private company where everyone assumed that it will produce an excellent product has failed to create a minimum standard product. As per the sources the front end training program of GSTN where in GSTN has unveiled a prototype has received criticism from all quarters given the bugs and connectivity issues. Doubts have been raised over competency and efficiency of the core team (It may be pertinent to mention that Ex babu the chairman of GSTN and CEO salary is in crores) especially regarding the design which is similar to CBEC back end program “Saksham” was costing around 200 crores whereas the GSTN program was costing around 1500 crores. “Saksham” was developed by “IRS” with much deeper and profound data analytics.

The GSTN enrollment is fraught with issues and problems. Taxation being a specialized subject that needs technical expertise and experience to collate and resolve the problems faced by taxpayers. GSTN without any representation from the “IRS” has designed the logical processes for flow and transfer of input tax credit (ITC) of CGST, SGST and IGST. Not taking them on the board has hampered the effectiveness of the GSTN which is evident from the delay in reply to their queries and abstract and improper nature of the solution provided by GSTN.

[dropcap color=”#008040″ boxed=”yes” boxed_radius=”8px” class=”” id=””]T[/dropcap]he assessees have been asked to migrate to GSTN by filling up all financial details and uploading records in GSTN before 31st March 2017 later extended the date to 30th April 2017. However, there is no legal basis or directions for the tax payer to do so nor is there any sanctity for setting up a deadline. When the law itself has not been passed by the Parliament it neither gave security clearance nor any authorization for the transfer of sensitive financial information to GSTN where the central government is a minority stake holder, forcing the assesses to migrate and enroll is beyond the jurisdiction of the executive and it ultra vires the constitution law and undermines the Parliament’s authority.

The country is hoping for a smooth transition to GST.

Further, the taxpayer is being threatened that failure to migrate before the deadline would result in ineligibility to transfer the credit in their accounts. This “ineligibility” clause was nowhere mentioned in the Model GST Act. The act only allows smooth transfer of ITC already present in accounts of the tax payer to GST era. The executive can not hinder their transfer of credit in absence of any empowering source legislation or subordinate legislation when the law allows tax payer to carry forward the credit.

The country is hoping for a smooth transition to GST. The present government is having a clean image and to enhance, it should revamp the GSTN for the success of the GST. Increasing the government stake and reducing the private sector stake would not only put the public money to proper use but also instills the confidence among the common public.