FinMin Mulls Making GSTN 100% State-run Entity; GST Council to Take Final Call

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The government is looking at the possibility of converting GST Network, the company that handles IT infrastructure for the Goods and Services Tax regime, into a state-owned company with a majority or 100 percent stake, an official source said.

Finance Minister Arun Jaitley has asked Finance Secretary Hasmukh Adhia to “examine the possibility” of converting GSTN into a majority government company or a 100 percent government company. Currently, five private financial institutions — HDFC, HDFC Bank, ICICI Bank, NSE Strategic Investment Co and LIC Housing Finance Ltd — hold 51 percent stake in GSTN, which was incorporated on March 28, 2013, in the erstwhile UPA regime.

The remaining 49 percent stake is with the Centre and states. The government is in favour of making GSTN a wholly-owned company with 100 percent shareholding, but a final call would be taken by the GST Council, headed by Jaitley and comprising state counterparts, in its next meeting, the source said.

After GST Council’s clearance, the proposal would go to the Union Cabinet since GSTN will become a public company. According to the source, the government believes it should be a majority owner considering GSTN is a repository of such huge data. The company from providing IT platform, is now getting into data analytics to help catch tax evaders.

“GSTN is working like a state-owned company with grants and capital from the government. It is also subjected to audit by the CAG. So why not make it a wholly-owned public sector undertaking?” the source said. With the portal fully stabilising for collecting taxes and e-way bill being rolled out, the Finance Ministry feels the time is right for converting it to a government company.

The government stake in GSTN was initially kept at 49 percent and incorporated as a private company to “allow adequate flexibility and freedom” to “ensure timely implementation of the IT infrastructure” prior to the GST roll out.

Goods and Services Tax (GST), which subsumed over a dozen local taxes, was rolled out on July 1, 2017. Over one crore businesses are registered on the GSTN portal. “The government would buy back the shares in the same proportion as the private shareholders had put in,” another source said.

Currently, the authorised share capital of GSTN stands at Rs 10 crore, with equal contribution from the Centre and states. “GSTN is a Section 8 company under the new Companies Act and hence is a not-for-profit entity. So private shareholders would be more than happy to sell their shareholding because there is no ploughing back of profit,” the source added.

BJP MP Subramanian Swamy on multiple occasions has raised concerns over GSTN’s shareholding pattern, terming it “a shady organisation” and saying it was a “grave security” issue. Swamy had even written to Prime Minister Narendra Modi in August 2016 asking him to give a “close second look” into GSTN’s shareholding pattern and questioned how a private entity can be allowed access to “sensitive” information without security.

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