It would not be an exaggeration to say that the success of India’s landmark transition to a Goods and Services Tax (GST) relies on Navin Kumar, the chairman of GST Network and his 70-strong team. As the name suggests, the GST Network (GSTN) forms the technology backbone that will help this new tax stand up straight. The man in charge wears the responsibility lightly. The career bureaucrat was the former chief secretary of Bihar and chairman of Delhi Metro Rail. Before the interview starts, he points out that as the first information technology secretary of the Bihar state government, he handled projects amounting to Rs 90,000 crore. So far, the GSTN has spent approximately Rs 550 crore.
The bulk of it has been invested in building an information technology network that will for the first time establish “a uniform interface for the taxpayer and a common and shared IT infrastructure between the Centre and states”.
Almost everything about the GSTN is prefixed with “first time” or “unique”. The novelty and scale are daunting. Most of the 84-85 lakh taxpayers, those paying value added tax (VAT), service tax and central excise, must enrol with the GSTN. The process has been underway since October 2016 and so far 56 lakh or 66 percent have done so. And while a higher eligibility threshold will exempt some existing taxpayers, a wider net will force many into the tax system for the first time.
We have gathered data of new registrations in the states for VAT and service tax and our expectation is that over 5 percent growth will be there. So, if we are talking about 80 lakh taxpayers now, over 5 lakh new taxpayers will register themselves every year. Our system will be geared to accept that kind of registration numbers.
The Connectivity Challenge
So far, so good. The only major hurdle in this massive enrolment exercise has been connectivity, says Kumar. He cites instances of when poor connectivity has meant no access to the one-time password (OTP) generated at the time of enrolment. Given that an OTP is valid only for a few minutes, the loss of connectivity has meant that some taxpayers had to make several efforts to enrol.
At times people would complain that we’re not able to log in. Now, for that what happens is generally the tax consultants file the returns for half of the taxpayers, so enrolment is being done in many cases by them. So I (the tax consultant) have done it for one and then I go for the second one. Before you do that, you have to clear the browser and clear the cache, which they did not do because they did not know or did not read the instruction. Then they call up, they are told, then they do it. Things like that, nothing very major.
The connectivity problem will persist. Kumar agrees and points to certain areas such as North East India where it may be worse. But, he says, the government is working on it. Connectivity is critical to the success of GST. Besides registration or enrolment, taxpayers will have to file, online, at least three GST forms every month. This will determine conciliation of data between a buyer and seller and the availability of tax credits – the very bedrock of this ‘efficient’ tax system, which promises to eliminate double taxation.
Connectivity is very important. But you see the good thing that has happened in the country is we have very widespread mobile connectivity, even in the rural areas you find mobile connectivity. So we have also made a mobile application for the taxpayers which they can use on their mobile phones and they can use the SIM of their mobile to connect to our system. We are encouraging private information technology (IT) companies to come up with solutions, mobile solutions for such taxpayers.
The GST App Store
Because user-friendly filing interfaces will also be critical, the GSTN is banking on GSPs or GST Suvidha Providers.
The law says that every taxpayer must upload the invoice data every month which will go into their returns. Then they must also file returns on certain dates, they must make tax payments. So, (for) all these activities, the taxpayers come to our portal and do it. But coming to the portal and entering data is a very tedious task, particularly for the larger businesses it may not be very practicable to do that. So, they need automated applications for that. So, these GSPs can develop that at the backend and then use that application for them to connect to our portal.
34 such GSPs have been approved. Most of them established companies because GSTN wanted to play it safe in the first round. They include
- Deloitte Touche Tohmatsu India LLP
- Ernst & Young LLP
- NSDL e-governance Infrastructure Ltd.
- Central Depository Services (India) Ltd.
- Reliance Corporate IT Park Ltd. ( a subsidiary of Reliance Industries Ltd.)
- Tata Consultancy Services Ltd
In the second round, eligibility criteria have been relaxed to encourage startups to participate as well.
60,000 Tax Officers To Be Trained
The third critical responsibility GSTN shoulders is that of training tax officers, both central and state. 60,000 of them.
Where are you in the process?
Our training plan involves training certain number of master trainers first. So, we have trained around 2,000 master trainers, drawn from all the state tax departments as well as the central government excise and customs. Now these people have gone back and now the states are organising their state programmes. Two states have already done it. Others have started now and they will do it between this month and next month. So, a total 60,000 officers will be trained between both Centre and the states.
You have trained 2,000 master trainers by February. They have to train another 58,000 people by July 1. Will it be done?
It will be done because the training is of three-day duration and every group consists about 20-30 people. So, 60,000 people is 2,000 multiplied by 30.
Are States Ready?
Twenty states and seven Union Territories are relying on GSTN to provide them with technology backends to handle registration approval, assessment, audit and adjudication. Nine states and the Central Board of Excise and Customs are building their own.
They are quite advanced. All the nine states and the CBEC will be able to do it in time.
Kumar is referring to the deadline of July 1, 2017, the date on which the central government hopes to notify and implement GST. That’s just over 70 days to go but Kumar is confident GSTN will be ready. Beta testing starts in May, he says.
Unless our system is ready, we can’t test it even for one day. So, we will be ready. Why are we doing beta testing? Beta testing means we expose our system to selected number of users, to some taxpayers, to some tax officers, to some banks. So, they will all work on the system and see how it functions. If there are any problems, they will let us know. They will give us feedback and then we will improve the system accordingly. So, that is what we are going to do. We will be ready for July 1.