What is the structure of Goods and Services Tax Network?

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Bharatiya Janata Party (BJP) leader Subramanian Swamy’s attack on the Goods and Services Tax Network (GSTN), a company formed to manage and control the accounting and collection of GST, has put its ownership under the microscope. Mint takes a closer look at the ownership pattern of GSTN.

GSTN was registered as a section 25 not-for-profit company under the companies Act in 2013 with an authorised capital of Rs.10 crore to set up and operate the information technology backbone of the GST. While the Central and the state governments hold a combined stake of 49%, the remaining 51% stake is divided among five financial institutions—LIC Housing Finance with 11% stake and ICICI Bank, HDFC, HDFC Bank and NSE Strategic Investment Corporation Ltd with 10% stake each.

Even though the Central and state governments together hold less than a majority stake in GSTN, both are still the largest shareholders in GSTN, holding 24.5% stake each.

Also, the strategic control of the company lies with the government.

The Centre and the state governments together have seven members in a 14-member board, including the chairman. However, the private stakeholders only have three members, with the remaining three being independent members and a board-appointed chief executive officer.

“The strategic control over GSTN is with the government given the sensitivity of the role of GSTN and the information that would be available with it. The strategic control of the government over GSTN is ensured through measures such as composition of the board, mechanism of special resolution and shareholders agreement, induction of government officers on deputation and agreements between GSTN and governments,” said GSTN’s website.

The idea was to set up an entity that is equidistant from both the Central government and the state governments, as it will advice both the Centre and the states on the information technology network, said a person familiar with the development.

GSTN, last year, awarded Infosys Ltd the contract to develop the hardware and software for GST.

Swamy, in a letter to the Prime Minister’s Office, had said the data management for computation of tax under GST will be done by GSTN while questioning the 2013 decision of the finance ministry to outsource such confidential assessment and activity to the private sector.

“Adequate security has to be established to ensure that this data does not fall in the wrong hands,” he said, urging the government to take a closer second look and do a thorough scrutiny.

To be sure, tax departments themselves have been using external agencies for developing their IT systems for long. The Central Board of Excise and Customs had contracted Wipro Ltd to develop its ACES (automation of central excise and service tax). The Central Board of Direct Taxes also recently contracted L&T Infotech for its ‘Project Insight’ which seeks to nab tax evaders by sifting through the large amount of information at the tax department’s disposal.

Read more at: http://www.livemint.com/Politics/CLtIIQTxdvNgziZSbSCCaL/What-is-the-structure-of-Goods-and-Services-Tax-Network.html