Analysis of the GSTN: Does it have a smooth working?

Anni Gupta (2013IPG-022)

Deepak Kumar (2013IPG-037)

What is GSTN (Goods and Service Tax Network)?

The and Service Tax Network (or GSTN) is a non-profit, non-government organization. It will manage the entireGoods IT system of the GST portal, which is the mother database for everything GST. This portal will be used bythe government to track every financial transaction, and will provide taxpayers with all services – fromregistration to filing taxes and maintaining all tax details.

Structure of GSTN

Private players own 51% share in the GSTN,and the rest is owned by the government.The authorized capital of the GSTN is ₹10crore (US$1.6 million), of which 49% of theshares are divided equally between theCentral and State governments, and theremaining is with private banks.

The GSTN has also been approved for anon-recurring grant of Rs. 315 crores. Thecontract for developing this vasttechnological backend was awarded toInfosys in September 2015.

The GSTN is chaired by Mr. Navin Kumar,an Indian Administrative Service servant(1975 batch), who has served in manysenior positions with the Govt. of Bihar,and the Central Govt.

Organization Structure

Salient Features of the GSTN

The GSTN is a complex IT initiative. It will establish a uniform interface for the taxpayer andalso create a common and shared IT infrastructure between the Centre and States.

• Trusted National Information UtilityThe GSTN is a trusted National Information Utility (NIU) providing reliable, efficient and robust IT backbone forthe smooth functioning of GST in India.

• Handles Complex TransactionsGST is a destination based tax. The adjustment of IGST (for inter-state trade) at the government level (Centre &various states) will be extremely complex, considering the sheer volume of transactions all over India. A rapidsettlement mechanism amongst the States and the Centre will be possible only when there is a strong ITinfrastructure and service backbone which captures, processes and exchanges information.

• All Information Will Be SecureThe government will have strategic control over the GSTN, as it is necessary to keep the information of all taxpayersconfidential and secure. The Central Government will have control over the composition of the Board, mechanismsof Special Resolution and Shareholders Agreement, and agreements between the GSTN and other stategovernments. Also, the shareholding pattern is such that the Government shareholding at 49% is far more than thatof any single private institution.

• Expenses Will Be SharedThe user charges will be paid entirely by the Central Government and the State Governments in equal proportion(i.e. 50:50) on behalf of all users. The state share will be then apportioned to individual states, in proportion to thenumber of taxpayers in the state.

Funding of GSTN

Year Funds released by GoI Actual Expenditure by GSTN

2013-14 3,03,65,612 3,03,65,612

2014-15 20,00,00,000 13,80,31,415

2015-16 120,93,00,000 45,27,97,027

Total 143,96,65,612 62,11,94,054

The Empowered Committee of State Finance Ministers has, in its meeting held on 30th Aug 2016, approvedthe Revenue Model of GSTN which is based on taking commercial loan from a commercial bank for its pre-operative fund requirement of Rs. 550 crores in FY 2016-17, which includes payments to M/S Infosys, theManaged Service Provider developing the software and providing required hardware and software licenses.

Internal Financial Control and ProcurementGSTN has developed its own Finance and Accounts Manual to define the roles and responsibilities of the

functionaries working in GSTN, establish sound internal controls and define the accounting policies and procedures

to be followed by GSTN. The Manual complies with Accounting Standards issued by The Institute of Chartered

Accountants of India and the Companies Act 2013 and is largely based on GFR 2005.

Expenses of GSTNThe major chunk of expenses to be incurred by GSTN consists of payment to Managed Service Provider M/S Infosys

for design and development of GST Systems, supply of all underlying infrastructure, software licenses, bandwidth

and operation and maintenance of GST systems for five years from the go-live date. M/S Infosys was selected by

open tendering process. The second chunk will be on ‘Fraud Analytics Tools’ and team to run the same during

project operation period along with cost of security audit and other program governance functions. The agency to

do this function will be selected through open tendering process. The third component is operating expenses of

GSTN which consists of salary, rent of office building, office expenses, internal IT facilities, etc.

GST IT Strategy: Role

assigned to GSTN

Creation of common and shared IT infrastructure

for functions facing taxpayers has been assigned

to GSTN and these are filing of registration

application, filing of return, creation of challan for

tax payment, settlement of IGST payment (like a

clearing house), generation of business

intelligence and analytics. All statutory functions

to be performed by tax officials under GST like

approval of registration, assessment, audit,

appeal, enforcement etc. will remain with the

respective tax departments. The diagram below

shows the work distribution.

Role of GSTN in Payment of GST by Taxpayers

Under GST, all challans will have to be prepared by taxpayers on the GST portal only. This has been done to ensure that

bank tellers do not enter wrong TIN number from hand written challans as happens sometimes today. Once Challan is

created with GSTIN, name of taxpayer, amount under various tax heads and sub-heads, the taxpayer has following two

options to pay the tax:

1. He can choose online option under which, he will have to choose one of the agency banks (i.e. banks authorized

by RBI to collect GST on their behalf) from the dropdown menu and after that he will be taken to the website of

chosen bank to make payment by providing user ID and password of bank. After completion of payment, he will be

brought back to GST portal from where he can download the paid challan, which is generated by GST System on

confirmation from the Bank.

2. The other option of tax payment is to print the challan and present the same in the relevant bank for ‘Over the

Counter Payment’ (OTC). The bank after realizing the payment will transfer the money to RBI and send

confirmation of payment to GST Portal for accounting.

“No tax money will ever come to GSTN in any manner. GSTN will only get conformation of payment from the Banks.”

Role of GSTN with respect to Filing of Returns

Under GST, there will be common return for CGST, SGST and IGST, eliminating the need to file

separate tax returns with Central and state GST authorities. Checking of claim of Input Tax

Credit (ITC) is one of the fundamental pillars of GST, for which data of Business to Business

(B2B) invoices have to be uploaded and matched. The Common GST Portal created and

managed by GSTN will do this matching on the basis of invoice level data filed as part of

return by all taxpayers. Similar exercise will be done for inter-state supplies where goods or

services will move from the state of origin to the state of consumption and so will the taxes.

The claim of IGST and its utilization will be settled based on returns filed at the Common GST

portal.

Role of GSTN with respect to Registration ApplicationUnder GST, the registration of taxpayers will be common under Central and State GST and hence one place of

filing application for the same i.e. the Common GST portal. The application so received will be checked for its

completeness by the GST portal, which will also carry out validation of data like PAN from CBDT, CIN/DIN from

MCA and Aadhaar of promoters, if provided, from UIDAI. After completion of validation, the registration

application will be shared with respective central and state tax authorities. Query of tax authorities, if any and

their final decision will be communicated to GST portal which in turn will communicate the same to the taxpayer.

Access to DataThe design of GST systems is based on role based access. The taxpayer can access his own data through identifiedapplications like registration, return, view ledger etc. The tax official having jurisdiction, as per GST law, can accessthe data. Data can be accessed by audit authorities as per law. No other entity can have any access to data

Monthly Compliance Cycle

The monthly GST compliance cycle to be followed would be as follows:

i. On 10th of subsequent month—Details of outward supply would be filed in Form GSTR 1

ii. On 11th—Auto populated purchase details would need to be downloaded in Form GSTR 2A

iii. By 15th—GSTR 2A details would need to be validated and uploaded in Form GSTR 2

iv. By 17th—Validated details in Form GSTR 1A based on recipient’s filing in Form GSTR 2 would need to be

checked and uploaded

v. On 18th—Auto populated Part A of GSTR 3 with all supply and purchase details would be generated and

the same needs to be downloaded

vi. Between 18th and 20th—Tax payment needs to be made

vii. By 20th—Once the tax payment challan number is generated, post insertion of the said number in Part B

of GSTR 3, the final return needs to be submitted.

Infosys & GSTN

Infosys was awarded a five-year contract worth Rs. 1,380 crore to develop GSTN in September 2015. Many

technical glitches have been at the core of the GST rollout since July 1 due to which several states had raised

the issues being faced by taxpayers in the 21st GST Council meeting on September 9. Subsequently, a five-

member Group of Ministers (GoM) headed by Bihar’s deputy chief minister Sushil Modi was constituted to

monitor technology-related implementation issues of GST. The GoM held its first meeting in Bengaluru on

September 16 where it identified 27 issues and asked Infosys to sort them.

Issues faced by GSTN

A high-powered group of ministers will meet every fortnight to resolve over two dozen technical

glitches identified in the GST tax portal GSTN, the panels head and Bihar Deputy Chief Minister Sushil

Modi has said.

Over 25-odd glitches, which had led to the GST-Network portal crashing on at least two occasions in

the very first month of filing, relate largely to payments and registration. The grouping had extensive

interaction with executives of Infosys, which is providing the IT support for the portal, and businesses

will notice a "lot of difference" on the GSTN portal in the next 7-10 days.

1. Crashes

2. Erroneous Penalty

3. Offline Tool

1. Crashes

Good and service tax Network (GSTN), the only official website for GST enrollment crashes for the

second time. The government allows tax payers to get fresh Registration under GST from 25th June.

But the website crashes as soon as the clock struck 12.

Earlier on 15th June too, the website was crashed due to heavy traffic as this was supposed to be the

last date for migrating into GST Regime. Later on, it was communicated that the Enrollment

procedure shall be open again from 25th June.

2. Erroneous Penalty

More respite could be on the way small and medium enterprises (SMEs), with the goods and services tax (GST)

council set to ease a string of procedures, including partial relief on penalties on late filing of GST returns. The

tax department's proposal, if approved by the GST Council in its next meeting on November 10 on Guwahati,

will lessen the struggles of small businesses still grappling to understand the nuances of the new indirect tax

system that was rolled out from July 1. The idea is that an entity should not end up paying penalty higher than

his tax liability, however, doesn't intend to waive off the entire late fee.

3. Offline Tool

GST Network today said it has launched an offline tool for businesses to quarterly file a form detailing

inputs or capital goods sent to job workers and received back from them. The excel-based offline tool

has been made available for preparing and uploading the statement in form GST ITC-04. The tool can

be accessed at 'Download' section of GST portal, GSTN said in a statement.

As per GST (Goods and Services Tax) Rule 45, details of inputs or capital goods sent to job worker and

received back from them need to be furnished on a quarterly basis in ITC-04.

Criticism Faced by Infosys

Infosys Technologies on Thursday took on criticism about the glitches that have affected the performance of

the fledgling Goods and Services Tax portal, and attributed implementation problems to the large scale of the

project as well as ‘rapid changes in policy and integration issues with related IT ecosystems’.

A significant portion of the problems under the GST since its roll-out in July have been due to issues taxpayers

have faced in uploading tax returns on the GST portal. This prompted the GST Council to set up a Group of

Ministers last month to look into problems being faced.

Response of Infosys

“Given the complex nature of the project and rapid change management, there have been several stakeholder

concerns that have also been raised,” Infosys added. “Some of our finest engineers are supporting the GSTN

(GST Network) team as they work towards resolving these and serving all stakeholders.”

Infosys’ statement is in response to a letter from the Confederation of All India Traders (CAIT) urging the

government to initiate a CBI probe on Infosys and other companies for the “poor and dismal performance” of

the GST portal.

“Infosys is very proud to be associated with the prestigious GST project which is the largest tax project of its

kind in the world,” the company said. “The system has already demonstrated success across several

parameters — till date 37 crore invoices have been uploaded on the system while the system is designed to

handle 300 to 320 crore invoices every month. Seventy lakh tax payers have successfully migrated to the new

system and the country has recorded 25 lakh new registered taxpayers.”

Last date for filing of GST returns for

July, August was extended

Businesses will have more time to file the final goods and services tax (GST) returns as the government on Monday extended the last date for filing of sales and purchase data as well as payment of taxes for the months of July and August.Now sales return or GSTR-1 for July will have to be filed by 10 September instead of 5 September earlier and purchase returns or GSTR-2 would be filed by 25 September instead of 10 September earlier. GSTR-3, which is the match of GSTR-1 and GSTR-2, will have to be filed by 30 September, in place of 15 September.

37,00,000GST Returns in September

Statistics

Nearly 37 lakhs GST returns for September have been filed till 1900 hours and 75,000 sales data is

being uploaded on the GSTN portal on hourly basis, its Chairman Ajay Bhushan Pandey said. The

deadline for filing the initial returns in GSTR- 3B for September under the Goods and Services Tax

regime ends midnight yesterday. In an interview to PTI, Pandey said the GSTN system is stable and

has been handling data at just 30 per cent of its capacity with 20 lakh returns being uploaded in

last two days.

GSTN Outreach & Capability Building Initiatives

There has been a paradigm shift in the tax regime and for its wider acceptance, dissemination ofinformation and knowledge to all stakeholders is the first step for its success. Our effort is to providesupport and promote self- learning through various artefacts like videos, user manuals, FAQs. Also, weare using WebEx and webinar as a means for dissemination of knowledge. All the learning material isreadily available in the Help section of GST portal (www.gst.gov.in).

SEPTEMBER 2017

1. WEBINARS CONDUCTED

2. TRAINING FOR STAKEHOLDERS

• Training for CSC Executives

• Training conducted by NIELiT Master Trainers

Master Trainers trained total of 757 stakeholders as per the details

given below:

• Training for Taxpayers Help Desk Executives

3. TRAINING FOR TAX OFFICIALS AND TAXPAYERS

Interactive session was conducted for Tax Officials from various States in Bangalore on 15th Sep 2017.Also, a meeting of Group of Ministers for IT implementation was conducted at Vidhan Soudha,Bengaluru on September 16, 2017. The queries were answered and mechanism was developed forhandholding the states regarding the technical issues faced by taxpayers while working on GST Portal sofar.

1. WEBINARS CONDUCTED

OCTOBER 2017

TRAINING THROUGH WEBEX

Throughout the month, Training for State Tax Officials was done from time to time by

conducting training through WebEx. Whenever a new functionality was released

sessions were conducted to create awareness about new features and tips to navigate

through GST Portal. WebEx sessions were also conducted for Helpdesk Executives to

reduce the time lag in disseminating information. New functionalities released during

the month like ITC04, PMT 07 etc. were discussed and explained at length to relevant

stakeholders.

SOCIAL MEDIA

Digital media has a lot of buzz around GST as it is a new topic for taxpayers and other stakeholders, hence need was

felt to provide enough material on social media so that taxpayers have an authentic source of accessing

information/latest developments on GST Portal.

a) YouTubeChannel (www.Youtube.com/c/goodsandservicestaxnetwork).

The subscriber base of the official channel has increased manifold in the past one month, currently 19000

subscribers are regularly being engaged through the following artefacts:

i) Webinars

ii) Videos

iii) GST ki Masterclass

iv) Interviews

v) Workshops for Taxpayers

b) Facebook: (www.facebook.com/gstsystemsindia) The most popular social networking site like Facebook is

actively being used to announce the latest developments on GST Portal. The dissemination of important dates

and introduction of new features on GST portal is also done regularly.

c) Twitter: (@AskGSTech)

Twitter handle is used to announce the latest developments on GST Portal. The effort is also made to guide tax

payers by sharing brief step by step creatives about the new functionalities on GST Portal. Dissemination of

notifications is faster through the twitter handle.

Since India dealt with a very complex system of VAT and simplifying it is a very tedious task. Every now and them, policies are formed based on people and businesses grievances. It would take a while to develop a smooth working system by resolving loopholes time-to-time. Currently, Government of India and GoM has decided not to extend any more deadlines as it did for July and August due to the failure of the GSTN but in our view, it will totally depend on the conditions that would be prevailing in the upcoming months.

CONCLUSION