Technology

The Blockchain opportunity for GST

A suggestion for using Blockchain technology such as Hyperledger for GSTN implementation.

September 15, 2016

The GST or Goods and Services Tax is a broad-based, comprehensive, single indirect tax which will be levied concurrently on goods and services across India.

[dropcap color=”#008040″ boxed=”yes” boxed_radius=”8px” class=”” id=””]A[/dropcap]fter ratification of the Constitution 122nd Amendment Bill popularly referred to as GST Bill by the Parliament of India and a majority of States and UTs with legislature, the President of India has also given his assent to the said Bill.

The Government of India has also approved by way of a cabinet note the formation of the GST Council and a GST Secretariat for the implementation of the said GST Law.

GST Network, an already functional, not for profit, non governmental, private company (which is now the subject matter of an intense public outcry with Dr Swamy leading the charge) set up primarily to provide IT infrastructure and services to the Central and State Governments, taxpayers and other stakeholders for implementation of the GST.

Whilst minor and basic information is available on the Technology aspect of the GST Network on the GSTN portal, it is silent about the principal technology that will be used to build a critical national IT Infrastructure that needs to sustain an open architecture in the long run on a scale which has never been attempted before.

In this regard, I suggest the use of Blockchain based Hyperledger.

What is a Blockchain?

[dropcap color=”#008040″ boxed=”yes” boxed_radius=”8px” class=”” id=””]Y[/dropcap]ou may have heard about it many times in dailies but are still curious to know what it is. Well in laymen’s language, Blockchain is a distributed database that maintains a continuously growing list of transaction records secured from tampering and revision.

Blockchain is also the main technical innovation behind the widely popular and world’s first online cryptocurrency ‘Bitcoin‘ and serves as the public ledger for bitcoin transaction.

A blockchain consists of blocks that hold batches of valid transactions. Each block includes the hash of the prior block in blockchain thus linking the two.

The blockchain technology coupled with an e-Invoicing standard discussed in my previous post can be put to use by GST Network to securely host the public transactions – transfer of title in goods and services contracts evidenced by Invoices and Debit / Credit Notes – electronically.

Reference is also drawn to the Hyperledger project in the USA, a cross-industry collaborative effort to develop Blockchain based distributed ledgers designed to support global business transactions with the goal of improving many aspects of performance and reliability.

The project needs to be developed on an open architecture, protocols and standards and provide a modular framework that supports different components for different uses.

It may also be noted that the principles stated in Technology papers – GST System Architecture are principally met by a Hyperledger Project using the blockchain technology.