GSTN to take Rs 550-crore loan from IDFC Bank

Loan amount to be used towards expenditure on salaries and payment to IT partner, Infosys

Ahead of the goods and services tax (GST) rollout on April 1, 2017, the GST-Network (GSTN) – a private body for information technology (IT) infrastructure - will take a Rs 550-crore loan from IDFC Bank till the expected rollout date. 

This, after the initial proposal of government funding was resisted by the finance ministry. However, the government will be the guarantor for the loan it takes from the bank.

“We have decided to take a Rs 550 crore loan from IDFC Bank for the period till April 1, 2017. The government has given a guarantee for that. This will be used towards expenditure on salaries and payment to Infosys, our IT partner,” said a GSTN official. 

IDFC Bank won the bid from among 26 banks that applied to offer loans. 

The expenditure department, backed by the Central Board of Excise and Customs, had objected to government funding for a private body like the GSTN.

According to a finance ministry official, the initial proposal was of Rs 3,000 crore, which had to be funded by the government. However, the GSTN official clarified that the Rs 3,000 crore is the total cost of the project, which includes the salaries, interest cost, security operations for five years of operation and the ongoing development period of one-and-a-half years. 

Whereas, the private company for GST IT platform requires a loan only till the roll-out. 

"We need loan money only till the time we are developing the service and hardware. We will start getting money from April 1, once we start providing the service," he said.

The GSTN is a non-government, private limited company incorporated on March 28, 2013, with a government shareholding of 49 per cent and private shareholding of 51 per cent.

ICICI Bank, HDFC Bank, LIC Housing and NSE Strategic Investment Corporation hold at least 10 per cent stake each in the entity. The rest 49 per cent is held by the Centre and state governments, along with the empowered committee of state finance ministers, each holding 24.5 per cent. 

The 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.

The GSTN is pinning hopes on an April 1 roll-out. A delay could affect its functioning, given the loan raised will only suffice for expenditure till April 1. 

“If the April 1 deadline is missed, it may pose a problem for the GSTN functioning. Until the roll-out happens, we will not have revenue flow,” said another official. 

The GSTN awarded a contract worth Rs 1,320 crore to Infosys to build and maintain the technology network, crucial for implementing the proposed GST system across the country for five years. 

It  has so far paid Rs 28 crore to Infosys and will pay a large chunk, once the hardware are delivered by next month.

About 6.5 million taxpayers will be moved to the GST IT portal. According to the current contract with Infosys,  the taxpayers can potentially go up to 13 million, going ahead.

Since the launch in 2013, it has so far spent Rs 134 crore from the government allocation, against the claims by Bharatiya Janata Party Rajya Sabha MP Subramanian Swamy that the body has spent Rs 4,000 crore so far.  

 “We have spent much less than what was allocated by the government to us. These claims of Rs 4,000 crore have no basis,” argued the official.

The GSTN, though private, has itself offered to be audited by the Comptroller and Auditor General (CAG).  In fact, the GSTN has had three audits done by the CAG.

“The GSTN has been framed very effectively. While it is a private company, it also has effective government control. So, you could hire people from the market at competitive salaries. As far as private parties are concened, how can one not trust Life Insurance Corporation and National Stock Exchange? Besides, HDFC and ICICI are  one of the two most credible banks of India,” argued a senior government official.

It will be compulsory for dealers, with a turnover of more than Rs 10 lakh, to register with the GSTN. Dealers can register on the portal within three days, after applying for registration sans any verification by the state government.

FUTURE PLANS

• This move comes after the initial proposal of government funding was resisted by the finance ministry
   
• The government will be the guarantor for the loan it takes from the bank
   
• The GSTN will provide a common platform for registration, filing returns and e-payment