“We hope that the (GST) System would be ready by February”

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Navin Kumar, Chairman of GST Network

The government is hoping to get the Goods and services Tax (GST) Bill passed in the monsoon session of Parliament. Business Today’s Dipak Mondal spoke to Navin Kumar, Chairman of GST Network, the company floated by the central and state governments to build the information and technology (IT) network for GST, on whether the system is ready for the timely roll-out of the new law.

What’s the status of the IT infrastructure need to build for GST?

We have taken Infosys as our IT partner. They will build the application and the infrastructure as per our specifications. In the RFP (request for proposal), we had given our requirement and specifications. We gave the contract to Infosys in October 2015, and we had hoped that the constitutional amendment would happen in the winter session. That did not happen,  but we decided was to go ahead with the  application development.

The entire system consists of hardware (servers storage, network, connectivity, etc) and software. We decided to hold back the procurement of hardware but decided to start the work on software and we have made very good progress on that. We are hoping that in July when the Rajya Sabha meets and passes the bill , we would give Infosys the go-ahead for the procurement of hardware. When that happens, installation and testing part would begin and by then parallely the software development would be completed, which would then be installed in the hardware and testing could be done.

So, we hope that our system would be ready by February.

Would you explain how the system would work?

The IT system that we are building, the entire system involves all the tax authorities (all the state, union territory governments along with the Centre). We would build a common GST portal. On this portal, three essential services would run-registration, filing of return and payment.

When a taxpayer comes on our portal and registers himself, then the information that he files at our portal is sent to the tax authorities. As you know GST is a dual tax–the state GST and the Central GST-so his application would be sent to both, the central government and the state government. They will approve the application and then we would generate his GSTIN (GST Identification Number) and he becomes the registered taxpayer.

Every month or every quarter, depending on the kind of taxpayer, he would file returns. So he comes to our portal to file returns and again we send this data to concerned tax authorities. He can also pay the taxes from our website. The money would not come to us but would go to the respective tax authorities. The consolidated funds of states or consolidated funds of the centre.

This is the front end, this is what we are doing. As I told you all the data would go to the respective tax authorities – the CBEC (Central Board for Excise and Customs) and the tax department of states. Therefore, they should have their own system also to receive this data, and do their functions–audit, assessment, refund and recovery, etc. We call that the back end. The responsibility of developing the back end is with the respective tax authorities.

Have you assessed the preparation of back-end required to be built by the states and the CBEC?

When we started out in 2014, we realised that doing the front-end alone was not sufficient and we started asking the states what their status was. The government had done a study of all the states in 2012 to see where did the computerisation of their tax system stood. We updated and studied that data, and found that half of the states were not prepared.

We reported this to finance minister and told that these states would not be able to do it on their own and that we are ready to help them in building their system if they want us to. The revenue secretary then convened a meeting of all the states and asked them if they would be able to do the back end on their own or they would want GST Network to help them out. As many as 12 states and union territories said that they would be happy to allow GSTN to do the back end for them.

When we made that offer we made it clear that we cannot develop separate (customised) back end for them, we create one application and they all have to use it. We basically wanted them to agree on a common processes.VAT was standalone tax for each state and every state has its own processes. So, to make them agree on a common set of processes was tough, but we made them do that.

The remaining states decided to build their own system, but we had this sense that not all of them would be able to do it on their own. So, we made an open offer whichever states – up to the end of 2015 – would realise that they could not develop the system on their own could ask us to build it for them. Later seven other states approached us to build the back-end for them.

So, we categorised the states as Model 1 states, which were building their own system and Model 2 states for which we were building the system.

The CBEC and the remaining states are doing it on their own. I am happy to note that most of them have made good progress and now if the GST Bill is passed (in the monsoon session), all of them would take the work in all seriousness and go full steam. I think they would be able do it on time.

We are interacting with the states on a regular basis. We have held eight workshops with them. We inform them what progress we have made, what they need to do and they apprise us of the progress they have made. We also keep reporting that to the central government so that if there is any problem they can intervene.

What are the major challenges that you faced?

When we started, we approached the IT companies. We wanted to sensitise the industry about the kind of system we wanted and we also wanted their advice on the issue. We had planned to keep the project in BOOT (Build-own-operate-transfer) model which means that the company which gets the project would invest their own money, and when the system starts working they would recover their money through user charges. We wanted the system to be built on BOOT model so that we do not have any financial liabilities.

But the IT companies were reluctant to work on BOOT model. They said they had worked on that model in the past and they have a lot of money stuck with the government. They said something like Rs 5,000 crore of their payments were stuck with various government departments.

So, we were very worried that if companies did not come forward for the project, we could not do it on our own.

So, we held three interactions with the industry in December 2014, and we asked them what their concerns were, how do they want the project to be modelled. All these interactions helped and we were relieved to see big companies like TCS, Infosys, Wipro, Tech Mahindra and Microsoft bid for the project and finally Infosys got the project. We had Infosys to do the work, but we have to tell them

How are you funding the IT infrastructure building since companies were not ready to do the project on BOOT model?

So, we agreed to fund it ourselves. The total cost of the contract to Infosys is Rs 1,380 crore. We have already made two payments to Infosys for two milestones delivered. When GSTN was incorporated in March 2013, the government sanctioned Rs 315 crore and we have been able to spend only Rs 150 crore. The two payments made to Infosys is from this Rs 150 crore only. We would borrow Rs 500 crore from financial institutions and the rest of the fund would be generated from user charges when the system starts working.

The key to success of the GST is trained personnel. What have you done for training of tax officials?

All states have people doing VAT and the central government has people doing excise and service tax. All these people are well-versed in VAT, and GST is also not very different from VAT. The law is similar, the logic is similar but the processes are different. Therefore, you have to train the officers. That work has already begun. For the law part, department of revenue has already started a training programme for state officers and CBEC officers. We are also collaborating with them.

For technology, that we will do. We have drawn up a training programme, we are waiting for the bill to pass. Hopefully, we would start that from August.

This is going to be very important because in most states the VAT system is not automated. While the front end is computerised, the back end in many states is still manually done. Therefore, the tax authorities have to be trained in IT system.  We also have a training programme for taxpayers.

There will be around one lakh tax officers in the states and centre. We can’t train all of them on our own. So, our strategy is to train some master trainers. We would be training a number of officers from states and CBEC, and they would then go back and train other officers.

But for that training, on our portal we will make arrangements. We will give these master trainers a schedule–on our website we will have a schedule for each of these master trainers – so when they put in request that on these particular days they want to train these many officers, we would give them access to the system.

Source: http://www.businesstoday.in/opinion/interviews/we-hope-that-the-gst-system-would-be-ready-by-february/story/234882.html

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