GSTN – The extra constitutional network

Some of the concerns on the way the GSTN company has been structured and its performance thus far

Some of the concerns on the way the GSTN company has been structured and its performance thus far
Some of the concerns on the way the GSTN company has been structured and its performance thus far

The passage of four legislative GST bills created a lot of euphoria among the government, common public and the traders. As tweeted out by Honorable FM “It is a landmark tax reform since independence and passage of GST bill is history in the making.  All the government machinery led by “IRS” officers who had toiled hard for the last 10 years to make this day happen went gaga over the passage of the bill.

Roll out of Goods and Services Tax (GST) is hugely dependent on the readiness of IT infrastructure (GSTN).

But the mute question that arises “is everybody ready to face this great reform?” Traders and businessmen requesting the government for some more time for the GST preparation which was criticized by the revenue secretary does not bode well for the economy. But the revenue secretary himself knows that both the Central revenue officers and especially the state revenue officers are not ready for GST implementation. The officers received only superficial training – there is neither change in the mindset nor the behavior. This much is evident during the GST council meeting where state officers led by IAS insisted on the clause of road checking of vehicles which was thoroughly opposed by the IRS officers. Road checking of vehicles defeats the very purpose of the GST.  There is no movement of infrastructure mobilization, administrative setup or IT establishment. Only two things are happening at the ground level  one is spending money on the GST publicity and other is forcing the assessees to migrate to GST through GST Network (GSTN).

Roll out of Goods and Services Tax (GST) is hugely dependent on the readiness of IT infrastructure (GSTN). Any glitch in IT structure has the potential to delay GST roll out. So much of hype was created about the GSTN as it is the panacea for the smooth functioning and implementation of the GST.  But the criticism surrounded around the GST Network has questioned its ability, efficiency and effectiveness.

Criticism was mainly about the composition and structure of the GSTN.  Goods and Services Tax Network (GSTN) is a Section 8 (under new companies Act, not for profit companies are governed under section 8), non-Government, private limited company. The company has been set up to provide front end IT infrastructure for both central and state governments and Back end IT services to some states.  The Government of India holds 24.5% equity in GSTN and all States of the Indian Union, including NCT of Delhi and Puducherry, and the Empowered Committee of State Finance Ministers (EC), together hold another 24.5%. Balance 51% equity is with non-Government financial institutions namely ICICI Bank, HDFC Bank, HDFC Ltd, LIC Housing Finance and National Stock Exchange Strategic Investment Corporation Ltd. In this structure government is a minority stake holder and this was vehemently opposed by the Professor Subramanian Swamy and he argues for the restructuring of the GSTN with government owned financial institutions and handing over to finance ministry.

Not only Dr. Swamy but common public also raised their concerns about the majority share holding of Non- Government financial institutions in GSTN. And their concerns were justified and it is evident with the recent leakage of Dhoni’s Aadhar number by a private player which was later confirmed by the government. This shows how the private sector can abuse the sensitive data. And the GSTN with a majority share holding of private sector could be a bombshell which is going to handle huge financial data and company’s secrets.

…the private company where everyone assumed that it will produce an excellent product has failed to create a minimum standard product.

The motto of any private company is profit. What profit the private sector banks see in the investment of GSTN? Will the self sustaining revenue model as suggested bring the profit to these Non Government financial institutions or wealth of the sensitive data which they are going to hold?  The GSTN website mentions that GSTN SPV would have a self- sustaining revenue model, where it would be able to levy user charges on the tax payers and the tax authorities availing services. What an irony! The government is funding the project and the private entity is collecting the user charges from public and Tax authorities. This explains the reason for GSTN refusing the CAG audit and opposing Home Ministry security clearance and stalled the service tax department’s investigation.

The government has reduced itself to a minority stake holder and gave majority stakes to private company to enable efficient and reliable provision of services in a demanding environment after considering key parameters such as independence of management, strategic control of Government, flexibility in organizational structure, agility in decision making and ability to hire and retain competent human resources. But the private company where everyone assumed that it will produce an excellent product has failed to create a minimum standard product. As per the sources the front end training program of GSTN where in GSTN has unveiled a prototype has received criticism from all quarters given the bugs and connectivity issues. Doubts have been raised over competency and efficiency of the core team (It may be pertinent to mention that Ex babu the chairman of GSTN and CEO salary is in crores) especially regarding the design which is similar to CBEC back end program “Saksham” was costing around 200 crores  whereas the GSTN program was costing around 1500 crores. “Saksham” was developed by “IRS” with much deeper and profound data analytics.

The GSTN enrollment is fraught with issues and problems.  Taxation being a specialized subject that needs technical expertise and experience to collate and resolve the problems faced by taxpayers. GSTN without any representation from the “IRS”  has designed the logical processes for the flow and transfer of input tax credit (ITC) of CGST, SGST, and IGST. Not taking them on the board has hampered the effectiveness of the GSTN which is evident from the delay in reply to their queries and abstract and improper nature of the solution provided by GSTN.

The assessees have been asked to migrate to GSTN by filling up all financial details and uploading records in GSTN before 31st March 2017 later extended the date to 30th April 2017. However, there is no legal basis or directions for the taxpayer to do so nor is there any sanctity for setting up a deadline. When the law itself has not been passed by the Parliament it neither gave security clearance nor any authorization for the transfer of sensitive financial information to GSTN where the central government is a minority stake holder, forcing the assesses to migrate and enroll is beyond the jurisdiction of the executive and it ultra vires the constitution law and undermines the Parliament’s authority.

The country is hoping for a smooth transition to GST.

Further, the taxpayer is being threatened that failure to migrate before the deadline would result in ineligibility to transfer the credit in their accounts. This “ineligibility” clause was nowhere   mentioned in the Model GST Act. The act only allows smooth transfer of ITC already present in accounts of the tax payer to GST era. The executive can not hinder their transfer of credit in absence of any empowering source legislation or subordinate legislation when the law allows tax payer to carry forward the credit.

The country is hoping for a smooth transition to GST. The present government is having a clean image and to enhance, it should revamp the GSTN for the success of the GST. Increasing the government stake and reducing the private sector stake would not only put the public money to proper use but also instills the confidence among the common public.

Ravinder Kaushik is an Advocate, enrolled at Bar Council of Punjab & Haryana. His Social Media links are:
Ravinder Kaushik


  1. Very balanced view of GST. The Govt particularly Finance Ministry are not working with a flexible approach. Obstinacy should not be confused with firmness.

  2. My only question to finance ministry is —
    If all is right in gstn then why govt. And its private sharing companies are afraid from cag audit .

  3. I beg to disagree with the opinion expressed in this article. It carries an extreme view and represents a mindset entrapped in the deleterious straitjacket of our socialist past. The GSTN in its present avatar may not be perfect but is good as a beginning. No business structure is perfect to begin with. It improves and is modified with the passage of time. The presumption that the IRS prepared system is better is a fallacy. Firstly, after my over fifty years experience in dealing with them I cannot imagine that the IRS has the motivation, ability or perseverance to tackle a task of this magnitude and complexity. The Indirect Taxes establishment could not be any better. Secondly, there is something called ‘ living with the error’ factor which inhibits innovative thinking and change. Further there is a misconception that private entities have a majority stake in GSTN. They have only a collective 40% share. The remaining 60% is held by the govt and govt owned(LIC) entity. Thirdly, there is no national security. All data to be provided to GSTN is compulsorily published and openly available There are, however, some flaws in the system adopted. Firstly there should be no midway checking of transports. This will only lead to and delays corruption. Secondly tax collection should be done by by a single agency and the proceeds divided in set proportions according to set procedures. Multiplicity of collection agencies is detrimental to efficiency.Thirdly refunds should be automatic and time bound and not left to the discretion of tax authorities.

    rdly refunds should be automatic and time bound and not subject to scrutiny by low level officers.

  4. How will the Tax officials & Irs support Gst, They used to Suck blood out of Everyone, now it will become difficult.

    India is dominated by the bureaucracy, Modi has Changed the Political Administrator but The Bureaucratic Arrogance & Corruption has to be Nailed to Death.

  5. You are doing great contribution by projecting this thoughts,

    How can a Govt assign the duty of tax collection to Private Company, Tax is a Constitutional Obligation.

    If the Private Syndicate wants to evade taxes its all possible later without any much oversight as all powers rest in Private Body..we have seen this in BCCI

    More over Private GSTN company stake holders has a Market Insight with analytics of Tax Data from this project which gives them unfair uphand access on which products are selling at Fast phase and Which Products to Invest in, they can restrict those access for a gap and in meanwhile take advantage of I Market competition.

    Modi should take situation into hands and rubbish such Nephorious plots under FM camps longterm corruptive plans.

  6. We have niw wort FM in the history of india who doesn’t seems ti have brain when it comes to Finance.He doesn’t understand it and seems doing everything for his ego

  7. 1.Is this site and Swamy twitter handle soon becoming like a ‘gadfly’ ?
    2.Instead of showing something achieved and bringing optimism among people why do this site and swamy tweet handle always creating an air of pessimism,creatin suspicion on this,that etc ?
    3. why don’t you guys show some achievement as well i.e after you exposed this,that GOI or even ruling party watchdogs took action etc? It is upto you to take this as feedback as it can bring some air of optimism/+veness.

    • Asking questions like gadfly though is good at times but breedin excessive pessimism in the name of it doesn’t help anyone either.

      • It is not pessimism.It is reality.Look at this issue as a neutral not as a modi bhakt.Till DrSwamy exposed this hidden organisation called GSTN, no one in media wrote about it.Why?GSTN structure is skewed towards ICICI Bank,HDFC Bank and NSE.Why? All these 3 organisations have highly suspect “foreign” investors esp.ICICI Bank which is rumored to be pucca chor’s bank.Why modi continuing this arrangement?Since majority holding is with private entities, why is government alone is lending Rs1500 crores of public money to the organisation called GSTN?Since public money has been poured into GSTN, how can GSTN refuse to be audited by CAG?Why these 3 entities have not put in a single rupee for the organisation?Modi and jai italy are fully aware of this share holding and they are continuing the farce.Why?Who are their masters?It appears both GSTN and Aadhar are controlled by hidden masters and this duo is playing for them.Why?Am i pessimistic in asking these questions?Why are you cheesed off pGurus bringing this matter to public/my attention?

        • i am not a modi bhakt nor a swamy bhakt either 😉 Well it is precisely the line of your thinking/reply is what i am worried about.Swamy being a RS member,ruling party exec member must be bringing these issues within his party forums,parliament panel meetings,RS proceedings etc which i believe he may be doin as well. If that is the case what is the necessity to live and make people live in constant air of negative/pessimism.
          Anyway no one can stop anyone from writing/thinking ,so keep asking these questions and live in perennial suspicion/pessimism mode. No one can stop anyone.

        • Going by my observation of what goes on Tamilnadu politics where both khazhagams loot public money and where both khazhagams has never exposed each other’s corrupt acts,there is a nationwide unity of political parties to be silent on corruption so that each can indulge to heart’s content of swindling public funds.Now the time has come to expose this camaraderie between political parties.Modi is continuing status quo on fighting corruption.Demonitisation is a farce to fool the public.It will not expose corruption or corrupt acts.BJP and Modi if they are honest, they need to identify crooks who have swindled public funds,launch credible cases against them and see that many of them are put in tihar.They must also bring in transparency/honesty and especially when questions are raised on GSTN,they should have decency to explain what the government stand is.Instead government is silent .They cannot credibly argue why they are continuing with GSTN in its present form.Hence keeping quiet which is what governments do when they want to hide truth.

  8. Why was it thought fit to entrust majority of the shares to a private party. Does it mean that Govt. does not
    have people fit enough to do a good job or is it that the Modi Govt. is wary of Govt. people and more at home
    with private players like HDFC who are out to fleece the public.

  9. I think efforts of Drswamy is quietly being ignored totally by modi and his chelas.It is sad that DrSwamy will be forced to go to court in this important issue.BJP thro’ modi is becoming a draconian party.RSS should be wary that if BJP carries their draconian act which only puts common people more and more in trouble especially as it has happened in demonetization.There will be a reaction from public which will kick out modi and his bunch of slavish chelas into oblivion.What will take their place is the crooked bunch passing off as congis.RSS needs to act and drill some sense into modi.

  10. The government has NO rights to force anyone to conduct business a with a private entity. There must be multiple providers for GSTN service and people should be able to choose one. What prevents the foreign entities to buy 51% shares ans jack up the rates? And disrupt tax collection if GOI does not succumb to pressure?

  11. The government has rights to force anyone to conduct business a with a private entity. There must be multiple providers for GSTN service and people should be able to choose one. What prevents the foreign entities to buy 51% shares ans jack up the rates? And disrupt tax collection if GOI does not succumb to pressure?


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