The GST trajectory is one of a shared political history dating back to 2000 when the NDA government under Atal Behari Vajpayee set up an empowered committee headed by West Bengal Finance Minister, Asim Dasgupta, to begin work on introducing GST in India.
It was under the UPA Government in March, 2012 that a milestone decision was taken. Infosys Chairman Nandan Nilekani, who was heading the Technology Advisory Group for Unique Projects submitted to the empowered GST committee the proposal to begin the national dealer registration process, as well as designing the operation and administrative systems for GST implementation.
Nilekani said that this process should run parallel to the legislation being discussed in Parliament to avoid another 3-5 year push-back that would inevitably occur if they waited for the GST Bill to be passed.
In a rare and admirable display of cooperation the idea was unanimously accepted by the GST empowered committee, and as a result in 2013 the GSTN – GST Network – was incorporated under Section 25 (not-for-profit) as a non-government, private limited company in 2013 with an authorised capital of Rs 10 crore.
From its first office in Janpath Hotel in New Delhi, it is now housed in the swanky World Mark building in Aerocity near Delhi airport. The organisation is headed by Naveen Kumar, a 1975 batch IAS officer and an IT (Information Technology) buff of sorts, who has served as the former Chief Secretary of Bihar, as well as worked closely with Yashwant Sinha when he was Finance Minister and Montek Singh Ahluwalia who was heading economic reforms planning under the Manmohan Singh Government.
Harsh Goenka of Tally Solutions has been quoted as saying that his company spent an “obscene amount of money” on just educating various stakeholders on the VAT (Value Added Tax), a tax that is now going to be subsumed under the GST. Isn’t all that expense and effort a staggering amount to just waive away?
The VAT was a much-needed improvement on the sales tax, which was seen as an important step ahead at that time. It is a natural process of evolution to move from one tax to another. Since the VAT included only goods, there was a need to include services too. In addition, the Constitution accords the subject of taxation to be divided between the centre and state, so the GST is a natural progression.
Anyway, it would be wrong to say that the money was wasted, in a way it prepared states to move towards GST so it is not entirely a new experience for them to adopt the GST. Much of the investment was also on computerisation. The states know how the VAT system works, the GST is a new tax but they will learn fast because states have operated VAT for almost 10 years now.
But ministers and bureaucrats keep changing so is that continuity really there?
Yes, I think there is a logic of activity that continues, people change but policies continue. Capacity building is a very major mandate of GSTN and we have laid a lot of emphasis on that, and it doesn’t just involve the ministers and top bureaucrats. There are the top tier officers in the departments of revenue, who then train others under them. We help governments to conduct programmes with broader target groups – tax officials first and foremost; then tax payers themselves, then shopkeepers, traders, dealers, who take the help of chartered accountants and lawyers – they are very important intermediaries whose training is also very much on the cards.
As you mentioned capacity building becomes even more important because GST cannot be implemented by different states at different times as with the VAT…
Yes, the states had the luxury to adopt VAT at their own pace, some taking almost a decade. However, unlike VAT for GST implementation all the states have to come on board at the same time, and this is a huge challenge because all states do not have the same type of system, some are advanced, and some are rudimentary.
For this reason, we offered all state revenue departments help to rebuild their systems. First, 12 state departments accepted, then another 4 asked for help, so for them we are doing the front-end of the system as well. Once we have collected the data it will be passed on to the state revenue departments so they have to be ready with their systems too. So we are extending front and back-end support for these 16 states so that each State in India is ready at the same time. Some of these 16 states include UP, Bihar, Orissa, Delhi, North East states, and union territories. Some of the states that are ready include Maharashtra, Karnataka, Tamil Nadu, Gujarat, Kerala, and Rajasthan.
What do you see as one of the biggest strengths of the system?
There will be no manual filing required which will minimise physical interface between taxmen and people by almost 95 percent. This will dramatically reduce corruption. It’ll be like when IT was introduced for rail ticketing: technology brought in vast improvements, processes were efficient, transparent and brought down corruption… hoping that will happen in GST too.
With your experience where do you see work is left to be done?
Lots of work still remains to be done. We, at GSTN, are only working on the IT system, but a lot of legislative work on IGST (Integrated GST) and SGST (State GST) still needs to be done. It’s a challenging thing because there are many governments involved – Centre and State, and many political parties too.
In addition, there needs to be a comprehensive progress in other policy areas – land, education, training, etc.
How important is it for an IAS or IRS officer to be heading a technology company like the GSTN?
I think for this kind of a position there is a requirement for knowledge of taxation, administrative, IT, so whoever fits that bill is suitable. If one has not worked in administration and finance with the Government, it becomes difficult to understand how to move around the system, which is very important.
How will you respond to the parliament log-jam on the GST Bill?
We are working to the April 01 deadline, 2016. That’s what the Government told us, that’s what we are doing. All our systems will be ready to roll by that date.
Shareholders of the GSTN
Central Government 24.5%
State Governments & 2 UTs & EC Collectively 24.5%
LIC Housing Finance Ltd 11%
ICICI Bank Ltd 10%
HDFC Ltd 10%
HDFC Bank Ltd 10%
NSE Strategic Investment Corporation Ltd 10%