Even as the government is busy removing the hurdles before implementation of the proposed Goods and Services Tax(GST), the process for building a robust technology platform for it has started.
While the final GST roll-out is expected by 2015, both Centre and states have been running projects for two years to understand what is needed in a robust information technology (IT) system.
“All the preparatory works have been done and once the law is ready and they (the government) give the go-ahead, then the detailed planning can be done and all this can happen very fast,” said highly-placed sources involved in the development of the IT platform.
Earlier, the ministry of finance, with concurrence of the Empowered Committee of State Finance Ministers, had set up an Empowered Group on IT Infrastructure for GST, headed by Nandan Nilekani, chairman of the Unique Identification Authority of India. Based on its recommendation, the Mumbai-based National Securities Depository Ltd (NSDL) was mandated to incubate the prototype of a GST Network (GSTN) common portal, to work as a main interface at the central level.
A central GST portal operated by GSTN has been set up as part of the pilot run. The project, done by NSDL in 11 states to study the robustness of systems and processes, has found it to be quite successful. (Click for table)
The common GST portal is simply a pass-through device. The taxpayer files the return with GSTN, which keeps a copy of the return for analysis, and then sends it in near real-time to the respective state and to the Central Board of Excise and Customs. The taxpayer pays the actual duty in the bank, which uploads only the challan details into the GSTN. Actual funds never pass through the GSTN. One objective of the system would be to close the leakages and fraud in tax collection.
“The GST will provide some sense of commonality in the law. One way to look at is if you don’t do this, then the dealer will have to register himself with each state separately, will have to pay the taxes of each state separately and will also have to file his returns of each state separately,” said Neel Ratan, executive director at PricewaterhouseCoopers (PwC).
“IT can play a huge role in providing a unified common system, wherein while the jurisdiction of the states would remain, information can be collected centrally and distributed to all the states and the central government,” he added.
The main task before the government before actual GST roll-out will be to computerise the commercial tax departments in all states. “Unless this is done, you will find GST very difficult to implement,” said Raghu Cavale, vice-president and head of India business, Infosys.
Many states have already started the process of automating their commercial tax departments. Tata Consultancy Services (TCS), for example, is working with 11 states to automate their commercial tax collection. “Once GST is introduced, all the states would have to quickly gear-up to get into the GST regime by taking their IT infrastructure and applications up and running,” said Tanmoy Chakrabarty, VP & global head, government industry solutions unit, at TCS.
“It’s because there are intricate linkages between the central government and the state governments under a GST regime. If you are not able to correlate one level with the other, then there will be a break in linkage and data flow and that will affect GST computation,” he added.
According to the IT strategy for GST reporting, there has been a consensus on a common portal providing three core services — registration, returns and payments. GST will be a dual tax, with both the central and state component levied on the same base. The integrated GST framework will be used for goods and services exported across state boundaries. Thus, all goods and services, barring a few exceptions, would be brought into the GST base.