 "We can create GSTN identity for 90% of tax payers anytime: Navin Kumar")
Take us through the GSTN journey so far.
We started from scratch in May 2013. At that time our target date was not clear. We were told for the first time in October 2014 that April 1, 2016, was our target date. It was then we started the recruitment process, as we had already built the organisation structure.
Our first challenge was to prepare for the RFP (request for proposals) in the absence of a GST framework. It was unclear what we should put in the RFP and what work we were supposed to do.
We took the permission from the state-empowered committee of finance ministers to work on the draft and had appointed PWC as our consultant. We floated the tender in April 2015 and selected the vendor, Infosys, in September 2015.
In November 2015, we gave the work order. According to the RFP, the vendor (Infosys) will provide us the support for five years from the date GST is rolled out. In between, we had interacted with the industry and went to Nasscom asking its members for suggestions and feedback about their needs and what could be the likely interface.
What was the industry feedback?
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We were stunned by their feedback. We had told them we wanted to work on a built-own-operate-transfer (BOOT) model. They said, thank you very much. The companies said they have burnt their fingers, and the BOOT model was dead and buried.
They cited instances where they have built the system, operated it but were still not getting the revenues because of various reasons. They said if you want to build the system, you have to pay the pre-operative cost, which is the capital cost.
There were instances when the central and the state governments had floated tenders and no one came to bid for them. The industry gave around 1,500 inputs and suggestions. We took most of them into account.
Did such meetings help?
We held a pre-bid meeting and incorporated their suggestions in the RFP through corrigendum. Finally, the big five — Microsoft, Tech Mahindra, Infosys, TCS and Wipro — sent their proposals. It was a challenge for us to select one because all the proposals were really good.
Where do we stand today on software development?
Prototyping of the user interface is almost over. Code writing is also half done. The software will be first tested by Infosys and then by us. The process will begin in October and last till January.
We gave Infosys a go-ahead to purchase hardware a day after the Rajya Sabha cleared the GST Bill. Once the software is loaded and tested, we will take a final approval from the Standardised Testing Quality Certification (STQC).
The approvals are expected by mid-February. And then, we will have dry runs till March.
When will the migration of existing tax payers take place?
Those who already pay VAT, service tax and central excise tax will be subsumed in the GSTN. Later other, small taxes, such as entertainment tax and luxury tax, will be migrated to GSTN. The current tax payers will not be asked to register again. They will be asked to provide their PAN and be given a unique identification number under the GST.
Currently 65 lakh people pay VAT, 25 lakh people pay service tax and another 3-4 lakh people central excise tax. We have already validated PAN of 90 per cent of these tax payers and we can generate their GSTN number any day.
The success of GSTN also depends on the readiness of the state governments. What is your assessment on their preparedness?
Some time back we did an assessment on the direction of the central government and found that many states will not be ready because they have to do lot of work.
So, we offered the states that we can design back-end processes for them as well. In November 2014, the revenue department called a meeting of the states and 12 of them said they would like to avail the offer of GSTN.
This included big states like Uttar Pradesh, Bihar and Odisha. The smaller states were from the Northeast. Now, are doing it for 21 states and Union territories. We are monitoring the rest of the states.
Do you need more funds?
We are borrowing from the banks for the capital investment. Once GSTN starts rolling out, we will be charging the central and the state governments a fee.
Recently there has been a lot of criticism regarding GSTN structure and some are raising privacy issues as well?
It is because they (critics) have not looked at our structure. GSTN is not a private company. It is a company structured as private company by the government. The central government and the state governments are the promoters.
The central government is the largest shareholder with 24.5 per cent. The private shareholders like the ICICI Bank, HDFC bank and LIC Housing finance nobody can have more than 11 per cent. It is technically a private company but the government has a strategic control over it.
We have 14 directors of which the Central government has three directors, the state governments send three directors, and chairman is selected by both the Central and the state governments. CEO is appointed by the board. Three directors are from the private companies, who hold 51 per cent but can send only three directors. And, then we have three professional directors. And no meeting can take place unless the 50 per cent of the directors present are from the government which means no decision can be taken against the wishes of the government. I know they are people who are not very happy think that the work should have gone to an outside body. In normal circumstances it should have not gone out and stayed with the government. The problem here was if it was a Central tax, the CBEC could have done it. If it was VAT, each state could have done it. But since it is a dual tax, where there is a central and state component, there is some sensitivity.
Problem is the state would not want the Centre to do it, the centre would not want any state to it. And if you give it to one state, the others would object.
This was discussed over and again in the state empowered committee of finance ministers about the structure of the organisation. It was finally decided that it should neither be states or the Centre but where both are presented with expertise from private sector.
The central government is the largest shareholder with 24.5 per cent. The private shareholders like the ICICI Bank, HDFC bank and LIC Housing finance nobody can have more than 11 per cent. It is technically a private company but the government has a strategic control over it.
We have 14 directors of which the Central government has three directors, the state governments send three directors, and chairman is selected by both the Central and the state governments. CEO is appointed by the board. Three directors are from the private companies, who hold 51 per cent but can send only three directors. And, then we have three professional directors. And no meeting can take place unless the 50 per cent of the directors present are from the government which means no decision can be taken against the wishes of the government. I know they are people who are not very happy think that the work should have gone to an outside body. In normal circumstances it should have not gone out and stayed with the government. The problem here was if it was a Central tax, the CBEC could have done it. If it was VAT, each state could have done it. But since it is a dual tax, where there is a central and state component, there is some sensitivity.
Problem is the state would not want the Centre to do it, the centre would not want any state to it. And if you give it to one state, the others would object.
This was discussed over and again in the state empowered committee of finance ministers about the structure of the organisation. It was finally decided that it should neither be states or the Centre but where both are presented with expertise from private sector.