Resentment on role of private companies in GSTN brewing. Swamy writes to PM to review Rs. 300cr funding

[dropcap color=”#008040″ boxed=”yes” boxed_radius=”8px” class=”” id=””]W[/dropcap]idespread objections are being raised against the private companies participating in the Goods and Services Taxes Network (GSTN). The GSTN was formed secretly during the United  Progressive Alliance (UPA)’s tenure in 2013 with the blessing of the former Finance Minister P Chidambaram with 51 percent share of private entities. GSTN is the IT backbone of Goods and Services Tax (GST), entrusted with the collection of taxes. Centre and State combined have only 49 percent in this company formed in a hush-hush manner. It was spectacular clairvoyance on part of Chidambaram (Jnana Dhristi?) to know in 2013, that the Bharatiya Janata Party (BJP) government is going to get the Constitutional Amendments done in order to pass the GST Bill.

After raking up the issue, Subramanian Swamy has found that GSTN is going to seek Rs.300 crores ($45 million) from the Centre. He has already objected to the IDFC loan to the company. Though Swamy said the loan is around Rs.550 crores ($82 million) and the Centre is going to give surety for this loan, it is learned that the actual loan amount is Rs.850 crores ($127 million)! But several officials in the Finance Ministry are now objecting to the private participation and non-control in GSTN, which is expected to deal with sensitive tax data.

Department of Expenditure (DoE) and Department of Revenue officials are now arguing that GSTN should be fully taken over by the government and made as a unit under Central Board of Excise and Customs (CBEC). They point out that the Income Tax Department is running a similar organisation very smoothly and tax related matters should be under the full control of Government.

[dropcap color=”#008040″ boxed=”yes” boxed_radius=”8px” class=”” id=””]T[/dropcap]he DoE has also objected to the recruitment and working style of GSTN, dictated by majority shareholding private bankers such as the ICICI Bank and HDFC. Bureaucrats have expressed concerns on the recruitment of private staffers with exorbitant salaries in GSTN.

In a recent letter Swamy urged Prime Minister Narendra Modi to intervene on the issue. The full letter is published at the end of the article. “Now I learn that without reference to any expenditure norm, there is a move to grant Rs.300 crores to GSTN by the Finance Ministry. This position of the Ministry of Finance to grant Rs.300 crores was taken without any analysis whether CBEC cannot perform the same work at much less expense”.

“The Cabinet may perhaps therefore have the matter fully examined before a final decision is taken in the matter,” said Swamy.

A  recent interview of GSTN Chairman Navin Kumar exposes the real intent of GSTN.

The interview reveals that Infosys has already got Rs.1380 cores from GSTN. “The contract we have given to Infosys is for Rs 1380 cr. ($206 million) Of which Rs. 500 crores ($75 million) is the capital expenditure before roll-out. We are borrowing for this part. We will be charging user fees once the network is operational. It will meet our operational expenses. User fees will be charged based on users (tax payers and officials). Government has said it will pay the charges on behalf of the users. The GST bill says charges could be levied on both tax payers and officials. The government felt it was not appropriate to charge the users. We will charge per tax payer per return,” says Navin Kumar.

This revelation by the Chairman of GSTN shows how private operators plan to milk money from tax collection, which is the sole responsibility of the government. Moreover, the government spends all the money for setting up the GSTN, tax payers pay huge money as tax and some private operators see huge amounts of money floating through their banks. This must stop. It appears as though some want to act as a Toll Gate in the tax collection process. As mentioned earlier by PGurus, the government should take full control of GSTN.

Letter of Dr. Swamy to the Prime Minister Narendra Modi:


Note:
1. The conversion rate used in this article is 1 USD = 66.91 Rupees.
2. Text in Blue points to additional data on the topic.

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