While the country is waiting to shift gear and move on to the new uniform tax regime, a team of private and government sector experts are busy putting in place the crucial ICT backbone for the paperless system
Pratap Vikram Singh | October 20, 2015
The legislation on goods and services tax (GST), when ratified by the upper house of parliament, will make lives of 65 lakh traders, manufacturers and service providers easier. The new indirect taxation system aims to replace all taxes levied by the central and state governments with just one tax, GST. This will require a one-stop shop portal wherein traders across India can register, file returns, pay taxes and claim refund. Even though the legislation will take some time, the good news is that the exercise to create a hassle-free, internet-based system to execute GST is already underway.
“This will be one of the largest information systems in the country. Tax related transactions for 35 states and UTs will happen from one single portal,” said Prakash Kumar, CEO, GST Network (GSTN), the SPV formed for providing IT support for tax rollout. Every month, 5.2 terabit of data would flow to GSTN.
According to a World Bank report, India ranks 158 (out of 189) for ease of tax payment. GST is a solution to the existing complex system of indirect taxation. Broadly, there are two categories of taxes: central and state. While the central government levies duty on services, the state government charges taxes on goods. Some major taxes falling in the central government’s jurisdiction include central excise duties, service tax, countervailing duty (meant for importers), special additional duty, surcharge and cess. Value addition tax, entertainment tax, luxury tax, purchase tax and entry tax are those that get directly in the state’s kitty. Besides, the centre also levies the central sales tax that is collected by the states.
In the new GST regime, while both the centre and states will be able to levy tax on goods and services, the dealers will have to pay only one uniform tax, having two components: central GST and state GST. In case of inter-state trade, an integrated GST will be charged which will be distributed among states by the centre. This new regime will have a strong pan-India IT-enabled infrastructure to facilitate collection and distribution of this tax.
The GST system, according to the request for proposals (RFP) floated by GSTN seeks to establish an IT infrastructure with a standard interface for the taxpayer to facilitate the core services of taxpayer registration, filing of return and payment of tax. The system is envisaged to be a common and shared IT infrastructure between the centre and the state governments, as well as that between other organisations like the Reserve Bank of India and the central government tax authorities (see The GST backbone). The '1,380-crore project was awarded to Infosys in September amidst tough competition from other IT majors like TCS, Wipro, Tech Mahindra and Microsoft.
Hooking on to GST network system
“Under GST, the entire process from registration to returns to payments for all states and UTs will be done from a single portal. The project will involve setting up portal, database, application, security and data centre. We will be connecting all state headquarters (SHQs) through leased line,” Kumar said adding that once the system is up and running, the applicants won’t have to fill any physical form for registration, refund and payment. “All the services would be provided in a time bound manner through the new GST infrastructure,” he stressed. Overall, the GST system will facilitate interconnection of tax systems in states and centre for efficient tax administration.
To register, the applicants will have to provide their PAN number. Once all required details are filled, the GSTN will check its veracity in the backend with the state and central tax authorities. Kumar said that GSTN has already integrated its database with PAN, Aadhaar and income tax databases.
If authorities don’t respond in three working days, the system would automatically generate a 15-digit GST identification number (GSTIN), said Shashank Priya, additional director general, GST division, central board of excise and customs (CBEC). Priya further explained that the 15 digits will follow a pattern: first two digits will represent the state code, next 10 digits will be the PAN number, 13th number will be a separate entity related to PAN, 14th will be a 'free' number and 15th will be a check sum digit.
In case authorities need additional information or documents, the same will be communicated through email and SMS. Once the applicant has provided the information, the authorities have to respond in less than seven days. This will put pressure on tax authorities to timely respond to the applications, Priya said. Even the refund has to be done within a time limit (it has not been made public yet). The authorities will pay interest to the applicant if they fail to refund in a time-bound manner, he said.
The GSTN, with the help of Infosys, would also help 12 states including the northeastern states to develop applications related to return, refund, audit, assessment, appeal, recovery and investigation.
The scope of work for the project also includes tax credit matching module, setting up of taxpayer ledger, integrated GST settlement, MIS report for tax authorities, developing online training modules in different languages, a help desk for tax authorities and information security and fraud protection.
Tab on tax evasion
A major advantage of the automated GST system is that since all returns have to be filed online, the invoice level details provided by the buyer will help in checking the invoice details of the supplier, therefore keeping a tab on tax evasion. According to PwC, the consultant for the project, based on the sales details uploaded by the supplier, GSTN common portal would auto draft the purchase statement of counter party purchaser on a near real-time basis.
The organisation will have a separate division for business intelligence and analysis. “Here we will analyse data on certain parameters. In case we find some discrepancy, the authorities can do the verification. This will be set up by April 2017,” Kumar said.
Since data will be available at both central and state levels, the government can analyse several trends including duty payment and quantum of supply. The analytics, for example, would help in ascertaining the evasion prone commodities. Priya said that this would help in generating audit leads for tax authorities.
The GSTN would also support external software companies and developers in developing online services and mobile apps for providing these services. Kumar referred them as eco system partners. “Accounting solutions provider including Tally, SAP and Oracle can develop mobile apps or web services which can offer same services in a more user friendly manner,” he said.
The organisation will also set up a security operating centre. A tender for vendor selection will soon be brought out by the GSTN. Since tax transactions of all states and UTs will be done through a single portal, it will become a prime target for hackers from China and Pakistan, an official associated with the project said.
The GSTN also plans to intimate users at every step of transaction through SMS. When return has to be filed, an alert message will be delivered to the users. “The documents uploaded by chartered accountants on the GST portal will be accepted only after the approval of the applicants, who will be informed about the process through an SMS,” Kumar said.
While the portal and other major works will be taken care by Infosys, GSTN will have a full-fledged team of techies who would oversee the implementation and monitor the network’s security. With total sanctioned posts of 110, the GSTN has separate teams for audit, security, services (tax officials recruited from central and state governments), human resource and finance. To make sure it has the right talents, GSTN is hiring techies who have already worked with IT majors including IBM and Oracle. “We have already recruited 16 people from the IT companies,” Kumar said. The organisation will soon have a team of 80 officials.
Though the GST bill has been facing hurdles in the Rajya Sabha, Kumar said he expected that the IT infrastructure would be ready by March 2016.
This piece is based on a previous article by the authors published in Geoforum [Elsevier] in May 2019: available online: https://www.sciencedirect.com/science/article/pii/ S0016718519300764?via%3Dihub
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