‘Through the use of technology, the GSTN will tip the balance in favour of compliance rather than tax evasion, lowering the barriers for entry into the tax payment system while making it much harder to cheat on payments,’ says Nandan Nilekani and Viral Shah.
The Goods and Services Tax Network is a new institution created specifically to act as the central technology platform that will implement the GST.
Given that the power to impose and collect taxes is spread across the central and state governments, any attempt to build a centralised technology platform could be seen as a ploy to alter the balance of this power, creating instant opposition.
One way to negate such potential dissent was as simple as choosing the appropriate name for the project. GSTN doesn’t exactly make for a catchy acronym, especially for a project that aims to completely transform India’s tax landscape.
However, there’s more to the name than meets the eye; a neutral term like ‘network’ doesn’t convey a threat, while terms like ‘authority’, ‘India’ or ‘national’ would imply a power shift towards the centre.
‘Network’ helped us convey our goal of the GSTN being only the plumbing that brought together all the stakeholders in the tax ecosystem, with no participation in any Centre-state power struggles.
From day one, one of the biggest implementation-level concerns with the GST centred around the actual process of revenue collection. It was not clear to the states whether the Centre would collect the revenue and if the Centre would share it with them promptly, or more likely late or never at all.
Fund flows from the Centre to the state have historically been delayed and intermittent, unable to provide much-needed support when state economies are struggling.
It is this history that has led to today’s complex taxation system and has left our states deeply suspicious of sharing revenue collection powers with the Centre.
The loss of control over their own revenues was an unattractive proposition and, given that many states have tight finances, any delay in collections could adversely affect their functioning.
To address these concerns, the GSTN has been designed as a non-profit company jointly owned by the central and state governments, with professional management.
By design, the government is not a majority stakeholder, allowing for the company to hire a professional team.
The structure of the GSTN does not disturb the balance of power, and provides much-needed support to both the government and the people; revenue collection departments will find their work simplified through professional technology services and people will avail of a customer-friendly set-up that transforms the adversarial relationship between the taxpayer and the authorities.
It also grants a great deal of flexibility, allowing the organisation to invest in choosing the right people for the task of building a complex, highly scalable technology platform.
The creation of an institution such as the GSTN also solves another thorny issue — that of the taxation of interstate commerce. A common and neutral body that is jointly controlled by all stakeholders can settle interstate tax claims in a well-defined, timely and taxpayer-friendly manner.
While these decisions gave a sound footing to the fledgling institution, it wouldn’t be government without its fair share of petty bureaucratic squabbles.
Nandan strongly recommended that the chairman be drawn from the government, while the CEO be a professional from the private sector; he wryly recalls, ‘One of the most heated discussions around implementing such a landmark reform was whether the heads of the organisation ought to be from the Indian Administrative Service or the Indian Revenue Service.’