Tag Archives: GSTN

Subramanian Swamy asks PM to restructure GSTN

Newsroom24x7 Staff

gstnRuling Bharatiya Janata party MP and former Union Minister for Commerce, Law and Justice Subramanian Swamy has written to Prime Minister Narendra Modi urging him to direct the complete stay of all operations of the present constituted Goods and Services Tax Network (GSTN) till it is restructured according to India’s national interest and after security certification by the Home Ministry.

Swamy has said in his letter that he is happy to learn from the media that the Prime Minister had taken a review meeting of Finance Ministry officials on the question of GST/GSTN implementation.

Significantly Newsroom24x7.com took the lead and was the first to bring in focus the irregularities in the implementation of Goods and Services Tax (GST). Newsroom24x7 also underscored constitutional points to emphasise the illegality of entrusting the implementation to GST to GSTN – a Private Limited Company.

Swamy has pointed out in his latter that GSTN is a data processing and tax revenue collecting private company that was never security cleared by the Home Ministry. This is a mandatory requirement, he has emphashised.

Bringing to the notice of the Prime Minister that “some Finance Ministry civil servants as well as the illegally appointed person-designated as the chairman of GSTN are telling the press that the GSTN, as presently constituted, will continue without any hindrance”, Swamy has urged the Prime Minister to order the stay of all operations of the present GSTN as “it is illegal because it never obtained security clearance from the Home Ministry; and it is dominated by not only private institutions that are together holding majority shares in the GSTN Private Limited Company but these private institutions are controlled by foreign shareholders. For example, 65% to 80% of ICICI and HDFC share holdings are owned by foreigners, Swamy has pointed out and asserted that GSTN needs to be restructured as it is foreign controlled.

Another important point Swamy has raised is that the Comptroller and Auditor General of India (CAG) has not been allowed to audit the financial transactions of GSTN that would run into lakhs of crores of rupees once GST is implemented. Hence, he has pointed out that there is a “reckless disregard” to the use of public funds to the benefit of private shareholders and employees. Elaborating further, he has said in his letter that “the CEO of GSTN gets an annual salary of over Rs 10 million, House rent allowance of Rs. 100,000, free car and travel, telephone, wifi network at home, club membership, medical reimbursement, ITA and so onbeside performance linked incentive bonus up to 50% of the basic salary plus DA. Never in the history of any Government has any officer got this level of remuneration.”

Furthermore, it has been pointed out that the Indian Revenue Service Association has unimously resolved that the GSTN is a facility which can be duplicated by the experience of the Finance Ministry’s data processing of Income Tax receipts with much greater experience and efficiency by the CBEC.

Drawing attention to the computer programming supposed to be done by GSTN which has been outsourced to Infosys at a huge payment of Rs. 6000 million of which Rs. 4000 million has already been paid to the company, Swamy has revealed that Minister of State for Finance Jayant Sinha’s wife was made a Director of Infosys just after the contract was signed.

According to Swamy, the data obtained by private parties and foreign shareholders of the indirect tax dues and payment of Indian tax payers as well as the details of travel from the point of manufacturing to the point of sale will help private parties to rig National Stock Exchange outcomes. He has also made the allegation that this is why the decision was taken to create a subsidiary of NSE headed by a crony of the former Finance Minister P. Chidambaram and this subsidiary holds 10% shares of GSTN. This amounts to legitimising the offence of inside trading, he has observed.

Swamy has urged the PM to restructure GSTN with Government owned financial institutions in place of private banks and private companies. The data processing can be handed over to the Central Board of Excise and Customs (CBEC). The continuation of the present system with marginal amendments will be set aside by the Supreme Court on a PIL as unconstitutional and not being in public interest, he has said in his letter.

Click here for more news on GST and GSTN by newsroom24x7.com:

Implementation of GST: Why involve a Private Limited Company in a Sovereign Function?

Implementation of GST by generalists and private players: Discontent brewing among IRS officers

Implementation of GST: Why involve a Private Limited Company in a Sovereign Function?

Lalit Shastri

gstn-gstThe directive by Union Finance Ministry to the Central Board of Excise and Customs (CBEC) and Central Board of Direct Taxes (CBDT) to share data with Goods and Services Tax Network (GSTN) – a Section 25 non-Government, not-for-profit Pvt Ltd Company – has run into rough weather as serious objections are being raised about the new arrangement on constitutional grounds and also because it involves the risk of critical data slipping into foreign hands.

It is being pointed out by those in knowledgeable circles that since GSTN will be having access to the entire tax data of the country – both of direct and indirect taxes – with the PAN providing the cross-link between the two databases, there is always going to be the danger of critical data getting into private and also foreign hands as FIIs own a sizeable equity in some of the banks involved.

From the point of view of the Constitution of India, it must be underscored that Article 283, which relates to Custody of Consolidated Funds, Contingency Funds and moneys credited to the public accounts, provides for the custody of the Consolidated Fund of India and the Contingency Fund of India, the payment of moneys into such Funds, the withdrawal of moneys therefrom, the custody of public moneys other than those credited to such Funds received by or on behalf of the Government of India, their payment into the public account of India and the withdrawal of moneys from such account and all other matters connected with or ancillary to matters aforesaid shall be regulated by law made by Parliament, and, until provision in that behalf is so made, shall be regulated by rules made by the President. Under this Article, there is an identical provision for tate Governments and the linked matters are to be regulated by the State Legislature and by the Governor.

Courtesy GSTN website
Courtesy GSTN website

Since the Constitution (One hundred and First Amendment) Act is silent vis-a-vis Article 283, serious objections are being raised in concerned official circles because the stage has been prepared to hand over the task of fund transfer to Consolidated Fund of India and the States to NGTN, a Pvt Ltd Company in gross violation of the letter and spirit of Article 283.

Tax administration, it is being pointed out by Indian Revenue Service (IRS) officers, is a sovereign function. It deals with sensitive, confidential and private information about tax payments by millions of tax payers. With GSTN implementing the GST, it will be difficult to rule out the possibility of the leakage of sensitive information as 51% of the equity of GSTN will be in private hands.

 

A note doing the rounds in official circles, which can be described as a critique of the system being put in place by the Union Finance Ministry for implementing the GST says: “GST also envisages inter-departmental sharing of return data and PAN data which will generate substantial additional revenue because of cross matching of data and 360 degree profiling of taxpayers. Under the GST regime, such an important function will be highly dependent on the system itself which warehouses all the data. Such system/data in the hands of a Pvt Ltd Company is uncalled for.”

The note also quotes the select committee of Parliament (Rajya Sabha) that has noted serious concern in this matter by putting on record that the “Non-Government shareholding in GSTN is dominated by private banks, and this is not desirable”. It further said, “The committee strongly recommends that the government may take immediate steps to ensure non-government financial institution shareholding be limited to public sector banks or public sector financial institutions.”

Since GSTN is a Section 25 non-Government Pvt Ltd Company, it also does not come within the purview of the Comptroller and Auditor General of India (CAG).

Also read:

GST: Finance Ministry commits blunder; now centre can levy and collect Excise duties only on petroleum and tobacco products

Implementation of GST by generalists and private players: Discontent brewing among IRS officers

Implementation of GST by generalists and private players: Discontent brewing among IRS officers

Lalit Shastri

The idea of forming a private limited company with private players to implement the GST goes against the whole concept of sovereign responsibility of administering tax administration. It is to be underscored that India is a Union of States and the Union should not become weak by giving the States excessive leverage when it comes to implementing GST. It was weak institutional framework and tax administration that was responsible for the fiscal developments that eventually flared up the Greek crisis..

GstThere is stiff opposition and no dearth of anger among a section of officers belonging to the Indian Revenue Service as the Government of India has put a system in place whereby the GST secretariat will be headed by generalists and not by those who have the experience of collecting Central Excise and Service Tax, which accounts for 56% of GDP.

There is also stiff opposition to the whole idea of setting up a private limited company (GSTN), which is headed by a retired IAS officer, to implement GST.

While stating that they already have a successful track-record of assessment, collection, duty drawback and refunds, backed by one of the most efficient manpower and the best system in the world, the IRS officers are  pointing out that the Central Excise and Service Tax website handles the important job of Registration, Return filing and Duty Payment. They are particularly drawing attention towards their professional competency and asserting that the GST Secretariat should not be allowed to be run by generalists.

On the Customs side, it is being pointed out by the IRS officers that besides their duty to assess, their Single Window, ICEGATE (Indian Customs EDI Gateway) or the e-Commerce Portal of Central Board of Excise & Customs, and the Risk Management System (RMS), which is an IT driven system with the primary objective to strike an optimal balance between facilitation and enforcement, can be compared with the best systems anywhere in the world.

An IRS officer stated that the Directorate General of Central Excise Intelligence (DGCEI), Directorate of Revenue Intelligence (DRI) and their Audit are professionally managed and touch global standards. He further said that they ensure minimum interface, absolute transparency, and follow strict deadlines when it comes to taking decisions. Taking a jibe at the Government of India for entrusting the administration of GST Council and GST Network to IAS officers, he said this is highly demoralising for the Indian Revenue Service officers.

An IRS officer wrote on a social networking platform that “with weak and demoralised work-force, the Centre neither can be strong nor can it fulfill its responsibilities in a judicious manner vis-a-vis the Directive Principles of State Policy An economically weak Centre is a death knell for Democracy and Cooperative Federalism, he said adding the need of the hour is a professionally driven Tax Administration System.”

Another IRS officer reacted in sharp terms he said: “The idea of forming a private limited company with private players to implement the GST goes against the whole concept of sovereign responsibility of administering tax administration. It is to be underscored that India is a Union of States and the Union should not become weak by giving the States unnecessary leverage in administering the GST. It was weak institutional framework and tax administration that was responsible for the fiscal developments that eventually flared up the Greek crisis.”

The Union Cabinet in its meeting held on 12 September, 2016 approved setting-up of GST Council and its Secretariat. Simultaneously, it was announced that the first Meeting of the GST Council will be held on 22 and 23 September 2016 in the national Capital.

The Cabinet took decisions for the following:

  • Creation of the GST Council as per Article 279A of the amended Constitution;
  • Creation of the GST Council Secretariat, with its office at New Delhi;
  • Appointment of the Secretary (Revenue) as the Ex-officio Secretary to the GST Council;
  • Inclusion of the Chairperson, Central Board of Excise and Customs (CBEC), as a permanent invitee (non-voting) to all proceedings of the GST Council;
  • Create one post of Additional Secretary to the GST Council in the GST Council Secretariat (at the level of Additional Secretary to the Government of India), and four posts of Commissioner in the GST Council Secretariat (at the level of Joint Secretary to the Government of India).

The Cabinet also decided to provide for funds for meeting the recurring and non recurring expenses of the GST Council Secretariat, the entire cost for which shall be borne by the Central Government. The GST Council Secretariat shall be manned by officers taken on deputation from both the Central and State Governments.

The Constitution (122 Amendment) Bill, 2016, for introduction of Goods and Services Tax (GST) in the country was accorded assent by the President on 8 September, 2016, and the same has been notified as the Constitution (101) Act, 2016.

As per Article 279A (1) of the amended Constitution, the GST Council was to be constituted by the President within 60 days of the commencement of Article 279A. The notification for bringing into force Article 279A with effect from 12 September, 2016 was issued on 10 September, 2016.

As per Article 279A of the amended Constitution, the GST Council will be a joint forum of the Centre and the States. This Council shall consist of the following members:

  • Union Finance Minister – Chairperson
  • The Union Minister of State, in-charge of Revenue of finance -Member
  • The Minister In-charge of finance or taxation or any other Minister nominated by each State Government – Members

As per Article 279A (4), the Council will make recommendations to the Union and the States on important issues related to GST, like the goods and services that may be subjected or exempted from GST, model GST Laws, principles that govern Place of Supply, threshold limits, GST rates including the floor rates with bands, special rates for raising additional resources during natural calamities/disasters, and special provisions for certain States.


Goods and Services Tax Network (GSTN)†

It is a not-for-profit, non-Government Company set up by the Centre and States for implementation of the Goods and Services Tax (GST) by providing shared IT infrastructure and services to Central and State Governments, tax payers and other stakeholders.

GSTN is a National Information Utility (NIU) set up to provide an IT Backbone for the “smooth functioning of the Goods & Services Tax regimen”. It is being projected as an entity to “leverage the entire nation as One Market with minimal Indirect Tax compliance cost”.

GSTN was incorporated on March 28, 2013. 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.

GSTN is a private limited company registered under the Companies Act, 1956. The Authorised Share Capital of the company is INR 10,00,00,000 (Rupees 100 million) with 49% equity of the company held by the Government (24.5% Central Government and 24.5% all State Governments/UTs put together) and 51% equity is held by private financial institutions namely ICICI Bank, HDFC Bank, HDFC Ltd, LIC Housing Finance and National Stock Exchange Strategic Investment Corporation Ltd.

Organisation Structure

Today GSTN has a team of 46 full time employees including 37 from the Private Sector and 9 deputationists from the Government. The Organisation Structure of the Company broadly consists of 3 verticals, viz. Technology, Services and Support, each headed by an Executive Vice President (EVP) reporting to the CEO. The Technology team is to be entirely sourced from the Private Sector, Services Team from deputationists consisting of Tax Officials from the Central and State Governments and the Support team is a mix from both Private Sector as well deputationists.

Indian IT services Company Infosys, through a competitive bidding process, in which other big IT companies like TCS, Wipro, Tech Mahindra and Microsoft also participated, bagged the contract of Rs 1,380 crore to be the Managed Service Provider (MSP) for GSTN.

The MSP shall build the technology infrastructure for Goods and Services Tax known as the GST System Project (GSTSP), a common Portal for the use of different Tax Payers, Tax Administrators and other stakeholders which includes common Registration, Return and Payment services. The MSP will build the system and once it is ready they will operate it for five years. The Contract with Infosys was signed on 6 November 2015.

Navin Kumar, a retired 1975 batch IAS officer, is the Chairman of the Goods and Services Tax Network.

GSTN Mandate

  • Provide common and shared IT infrastructure and services to the Central and State Governments, Tax Payers and other stakeholders for implementation of the Goods & Services Tax (GST).
  • Provide common Registration, Return and Payment services to the Tax payers.
  • Partner with other agencies for creating an efficient and user-friendly GST Eco-system.
  • Encourage and collaborate with GST Suvidha Providers (GSPs) to roll out GST Applications for providing simplified services to the stakeholders.
  • Carry out research, study best practises and provide Training and Consultancy to the Tax authorities and other stakeholders.
    Provide efficient Backend Services to the Tax Departments of the Central and State Governments on request.
  • Develop Tax Payer Profiling Utility (TPU) for Central and State Tax Administration.
  • Assist Tax authorities in improving Tax compliance and transparency of Tax Administration system.
  • Deliver any other services of relevance to the Central and State Governments and other stakeholders on request.

† authorised websites