JULY 17, 2019

By Vijay Kumar

IS the GSTN a Private Company or a Government one? I asked this question to a GST consultant. He replied, "Going by their irresponsible and irresponsive behaviour, it looks like a Government Company."

The GSTN website states,  "Goods and Services Tax Network (GSTN) is a Section 8 (under new companies Act, not for profit companies are governed under section 8), non-Governmen t, private limited company. 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. 

In the 27th meeting of the GST Council on 4th May 2018, it was decided:

Acquisition of entire 51% of equity held by the Non-Governmental Institutions in GSTN amounting to Rs. 5.1 crore, equally by the Centre and the States governments and allow GSTN Board to initiate process for acquisition of equity held by the private Companies; and

GSTN Board shall be allowed to continue the existing staff at existing terms and conditions for a period upto five years, and shall have the flexibility of hiring people through contract on the terms and conditions similar to those used by GSTN till now while hiring regular employees.

The existing financial commitments given by Centre and States to GSTN to share the capital and O&M cost of the IT Systems shall continue.

The Union Cabinet on 26th September 2018, approved change in the existing structure of the GSTN with transitional plan as:

- Acquisition of entire 51% equity held by the Non-Government Institutions in GSTN equally by the Centre and the State Governments and allow GSTN Board to initiate the process for acquisition of equity held by the private companies.

- To restructure GSTN, with 100% government ownership - shall have equity structure between the Centre (50%) and the States (50%).

- To allow change in the existing composition of the Board of GSTN inducting three directors from the Centre and the States and three other independent directors to be nominated by the Board of Directors and one Chairman and the CEO.  

But has the GSTN become a fully Government owned Company? Has anything been done about the cabinet decision? The GSTN website says that it is still a non-government private limited company.

The Annual Report of the GSTN for 2017-18 in December 2018 states,

GST Council, chaired by Sh Arun Jaitley, Union Finance Minister and comprising state finance ministers, in its 27th Meeting held on 4th May, 2018 proposed to convert GSTN into a fully owned Government Company by acquisition of entire 51% of equity held by the Non-Governmental Institutions in GSTN amounting to Rs. 5.1 crore, equally by the Centre and the States Governments.

The Union Cabinet on 26th September, 2018 approved the proposal to convert GSTN into a government-owned company. The government will now own 100 per cent of GSTN, the IT backbone to the new indirect tax regime.

Does the Government now own 100 per cent of GSTN?

Strangely, the State of Telangana doesn't seem to be a shareholder. At least, it does not figure in the list of shareholders as given in the published documents of GSTN.

WHAT THE FM TOLD PARLIAMENT

The Finance Ministry gave some interesting clarifications this week in Parliament in response to questions from members;

WEAKENING THE NATIONAL ANTI-PROFITEERING AUTHORITY (NAA): None of the amendments carried out in the GST laws and rules aim to weaken the National Anti-profiteering Authority (NAA). To the contrary, Goods and Services Tax Council, in its 35th meeting held on 21.06.2019, made recommendations that would make NAA more effective in fulfilling its mandate to curb profiteering by businesses. It was recommended that a penalty equivalent to 10% of the profiteered amount shall be imposed on those businesses which do not pass on the benefit of reduction in rate of tax on any supply of goods or services or the benefit of input tax credit to the recipient by way of commensurate reduction in prices. GST Council has also recommended that the tenure of NAA be extended by two more years. Further, vide notification No. 31/2019 dated 28.06.2019, the Central Goods and Services Tax Rules, 2017 have been amended so as to provide:

(i) NAA may summon any person whose attendance it considers necessary either to give evidence or to produce a document and it shall have power in any inquiry in the same manner, as provided in the case of a civil court under the provisions of the Code of Civil Procedure, 1908;

(ii) NAA may now pass order within six months (earlier three months) from the date of receipt of the report from Director General of Anti- Profiteering;

(iii) NAA may order levy of interest at the rate of 18% from the date of collection of higher amount till the date of deposit of such amount;

(iv) NAA may direct the Director General of Anti- Profiteering to cause investigation or inquiry with regard to other goods or services or both which are not part of the report of Director General of Anti- Profiteering.

TAX COLLECTIONS: the average gross GST collection in the FY 2018-19 has been Rs. 98,114 crores which is higher than the previous year's average gross GST collection of Rs. 89,885 crores. The total GST collection of the States/UTs for the year 2018-19 is Rs. 518447 crores against GST collection Rs. 291100 crores in the FY 2017-18(only Aug '17 to Mar' 2018). The GST collection of the States/UTs has been showing steady improvement over the period of time. In addition, they are also assured a growth of 14% for a period of five years through payment of compensation by the Central Government. Concerted efforts have been made to improve tax compliance. Extensive automation of business processes, application of e-way bill mechanism, targeted action on compliance verification, enforcement based on risk assessment and proposed introduction of electronic invoice system are the steps taken for increasing the revenue collection.

GST INTEREST: Clause 99 of the Finance (No.2) Bill, 2019, seeks to amend section 50 of the Central Goods and Services Tax Act, 2017 so as to provide for charging interest only on the net cash tax liability, except in those cases where tax is paid subsequent to initiation of any proceedings under section 73 or 74 of the said Act.

The Central Goods and Services Tax (Amendment) Act, 2018, section 43A of the Central Goods and Services Tax Act, 2017 provides that a registered person, while furnishing returns under sub-section (1) of section 39 of the said Act, shall verify, validate, modify or delete the details of supplies furnished by the suppliers.

The Government does not propose to put in place a mechanism for single point sanctioning and processing of GST refunds. However, clause 102 of the Finance (No.2) Bill, 2019 seeks to amend section 54 of the Central Goods and Services Tax Act, 2017 so as to make Central Government the single point for disbursement of GST refunds.

HAS GST CAUSED AN ADVERSE EFFECT ON EASE OF DOING BUSINESS IN INDIA? No Sir. The implementation of GST has created a business-friendly environment in India by creating a common national market for goods and services. Simplification and automation of processes of registration, returns, refunds, tax payments under GST has led to ease of doing business for tax payers. 17 indirect taxes and 13 cesses have been subsumed into a single tax that has reduced the problem of cascading of taxes, thereby contributing positively to the ease of doing business in India.

AADHAAR FOR GST : The GST Council, in its 35th meeting held on 21.06.2019, recommended amendment to section 25 of the Central Goods and Services Tax Act, 2017, regarding the use of Aadhaar for registration under GST. It aims to curb fraudulent practices under GST such as availing input tax credit based on fake invoices, bogus registration etc.

Obviously, Government believes everything is fine with GST.

KEY OFFICIALS TRANSFERRED : Top troubleshooters of GST have been transferred. Is it because the Government believes that GST has settled down and these officers who carried the GST burden deserve a break or is it simply because of change of Finance Minister? The Commissioner, GST Policy Wing in CBIC has been transferred to Customs, Delhi; the OSD, ST in the Board has been transferred to Vigilance. The Joint Secretary in the GST Council is also changed. It was certainly not easy running the GST show for the Government in the initial years and these officers hardly get any credit, but will have to face the flak in abundance.

All the best for the new set of officers.

Until next week