GSTN is a company formed to provide the IT infrastructure for the roll-out of GST and will connect the databases of states and the centre.
Thiruvananthapuram: The central government and the states on Friday gave the go-ahead to the Goods and Services Tax Network (GSTN) to finalize a uniform registration, return and refund system to be followed across India under the single tax regime.
A strong technology backbone is considered crucial for the successful roll-out of GST, a tax reform that seeks to economically unify the country by subsuming a slew of indirect taxes levied by the central and state governments. The government plans to implement GST from 1 April 2016.
GSTN is a company formed to provide the information technology (IT) infrastructure for the roll-out of GST and will connect the databases of states and the centre. The system it puts in place will be used to implement PAN-based (Permanent Account Number-based) registration, filing of tax returns and a payment processing system. It is expected to check tax evasion and help broaden the tax base.
The empowered committee of state finance ministers accepted a sub-committee’s report on registration of dealers in the new indirect tax regime. They also held talks on the processes to be followed on refunds, returns and payments, but did not reach a consensus.
However, GSTN has been asked to go ahead with its task of setting up a seamless IT platform.
“Considering the importance of GSTN’s work on preparation of an IT platform and its time-bound nature, we have authorized GSTN to go ahead with their work based on the reports,” said K.M. Mani, chairman of the empowered committee of state finance ministers, adding that small changes can be made at a later date once the committee revises its reports.
“We are confident that the IT platform will be ready by the time GST is introduced,” he said.
The empowered committee has recommended that it be optional for traders having sales of less than `10 lakh to register with the GST network. A final decision on the threshold level will be taken by the yet-to-be-set-up GST Council at a later date.
Also, the registration of dealers will be automatically done within three days and there will be no pre-verification by the state government.
Mani, who is also Kerala’s finance minister, hoped that laggard states in terms of computerization will be ready to move to GSTN by 1 April 2016, the roll-out date for GST set by the central government.
“It is crucial for tax administration to have a robust information technology network, especially when it comes to indirect taxes, given that they are collected every month,” said Amit Kumar Sarkar, a partner at Grant Thornton India Llp, a consulting firm. “GSTN will play a crucial role in GST’s successful roll-out, but how effective it is will only be known over time.”
The central government and the states have also agreed to equally share the costs incurred by GSTN. The modalities of distribution of these costs between the states will be decided by a sub-committee.
GSTN is looking at a self-sustaining revenue model where it will charge `500 as one-time service fee at the time of registration from each dealer. It is also looking at levying a user fee—either based on each transaction or as a one-time fee—from taxpayers and tax authorities availing its services.
GST is expected to broaden the tax base, sharpen the competitive edge of Indian exports by removing several tax distortions and create a unified national market by removing inter-state barriers to trade. Supporters of the tax have described it as the most important tax reform contemplated in independent India.
The tax will replace a multitude of central levies like excise duty and service tax, and state levies such as octroi, sales, value-added, entertainment and purchase taxes.