DOE red flags large expenditure by GST-Network

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Large expenditure by Goods and Services Tax Network (GSTN), a special purpose vehicle set up to provide IT infrastructure for implementation of the GST, besides a proposed loan of Rs 515 crore, has been red-flagged by the Department of Expenditure.

It has favoured a “holistic examination” of the working of the GSTN and suggested that its work can be done internally by the government agencies, official sources said on Sunday.

The GSTN was set up as a not-for-profit private limited company in 2013 to provide Information Technology (IT) infrastructure and services to the central and state governments, tax payers and other stakeholders for implementation of the Goods and Services Tax-a single indirect tax which will be levied on goods and services across India.

The GST will replace most of the central and state indirect taxes such as Value Added Tax (VAT), excise duty, service tax, central sales tax, additional customs duty and special additional duty of customs.

The Department of Expenditure has raised the issue of substantial administrative cost in running of GSTN with around 45 employees all of whom have been hired at market rates and given additional facilities like house rent, car and other allowances besides productivity linked incentives, with the authorities concerned, they said. There is no central government employee working in the company.

It has suggested that the two bodies under the Department of Revenue-Central Board of Direct Taxes and Central Board of  Excise and Customs-are managing various tax related programmes and can manage GSTN effectively at lesser cost, the sources said.

About Rs 145 crore has been released by the government to the GSTN since its inception. Further, an amount of Rs 515 crore has been sought as a loan by the company for meeting its expenses. The Department of Expenditure has expressed its reservations over the expenses, the sources said.

The Department of Revenue under the Finance Ministry is also understood to have objected to the GSTN, which has 51 per cent equity of five private institutions-HDFC Bank Ltd, HDFC Ltd, LIC Housing Finance Limited, ICICI Bank Limited and NSE Strategic Investment Corporation Ltd.

The total equity paid by these private entities is Rs one crore each and, by virtue of they being the equity holders in GSTN, they would be joint owner of up to 51 per cent of the value of assets of the network which would be worth several hundred crore rupees, they said.

The central government holds 24.5 per cent equity in the company and all states, including Delhi, have another 24.5 per cent. The remaining 51 per cent is with non-government institutions.

Some senior officials in the Finance Ministry have expressed reservations about the future of the GSTN as some of these entities have up to 75 per cent investment from Foreign institutional Investors (FIIs) and believe giving such a valuable national asset to private companies may not be desirable.

The Ministry officials are also unhappy over the pace of work being done by the GSTN. “The GSTN officials are conducting off-site meetings at locations like Jim Corbett National Park and others and posting pictures on their website too,” a source said.

Bangalore-based IT major Infosys had in September last year bagged a Rs 1,320 crore contract to build GST network system.

A bill seeking to amend the Constitution and subsequent roll out of the GST is pending in Parliament for want of political consensus. The Centre has already missed the earlier deadline of April 1, 2016 to implement the new regime.

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