Govt guarantee for GSTN's Rs 550-crore loan from IDFC

Centre gives long-awaited guarantee; will pay the interest till tax is operational

The GST Network (GSTN), a private body for the information technology (IT) backbone of the coming goods and services tax (GST), is to borrow Rs 550 crore from IDFC Bank, interest on which will be paid by the government till the new indirect tax system is rolled out.

After that, GSTN will bear the burden of interest from the revenues it will get through user charges of the network.

"We have received the government guarantee and now the Rs 550-crore loan from IDFC Bank will go through. This will be used mainly towards expenditure on salaries and payment to Infosys, our IT partner till GST is rolled out," said a GSTN official.

IDFC Bank won the bid from among 26 that had applied to offer the loan. GSTN had planned to take the loan in September till April 1 but the government approval to be a guarantor came only last week.

"With GST delayed a bit, repayment of the loan can only start after the rollout, when revenues start flowing in. The government will bear the interest cost for delayed repayment," said the official.

GSTN has estimated the project's cost at Rs 3,000 crore. That covers salaries, interest cost, security operations for five years of operation and the ongoing development period of two years. The loan is needed only till the rollout, to develop the service and hardware. "We will start getting money the day GST is rolled out as we start providing the service," said the official.

GSTN is a non-government and private limited company, incorporated on March 28, 2013. Union and state governments equally hold 49 per cent of the equity; the other 51 per cent is private shareholding. ICICI Bank, HDFC Bank, LIC Housing and NSE Strategic Investment Corporation hold 10 per cent each.

GSTN will provide a common platform for registration, filing returns and e-payment. It will also integrate the common GST portal with the tax administration systems of the Centre and states. It has awarded a contract worth Rs 1,320 crore to Infosys for building and maintaining the technology network to implement the proposed system across the country for five years.

About 6.5 million taxpayers will be moved to the GST IT portal. By the current contract with Infosys, the number could potentially go up to 13 mn.

"For now, till the loan is disbursed, we have been using the funds allocated by the government of India to GSTN," said the official.

The registration drive is on. Madhya Pradesh, Gujarat, Chhattisgarh and Rajasthan, all ruled by the Bharatiya Janata Party, as at the Centre, are leading in the migration of value added tax (VAT) payers to GSTN. These four states have over 70 per cent of dealers enrolled. GSTN had aimed to migrate all taxpayers of VAT, service tax and excise to the portal by end-January. It will be compulsory for dealers with annual turnover of more than Rs 20 lakh to register. They nay do so on the portal within three days, after applying for registration, sans any verification by the state government.