An IT platform that supports all center-state and interstate transactions is a must before GST regime is kicked in
By Siddharth Mehta
With the government working hard to expedite the Goods and Service Tax (GST) implementation, one wonders as to whether we have the necessary IT infrastructure in place to support the new system.
Under the current system too, there is some degree of automation, both at central and state levels. For instance, most of the tax compliances around central taxes such as excise duty and service tax can now be discharged by taxpayers online through ‘ACES’ and e-payment facility. At the state level, an IT platform called ‘TINXSYS’ is used to track details of dealer registrations and issuance of declaration forms such as Form C for inter-state transactions of sale of goods. Additionally, some states like Kerala, Maharashtra and Andhra Pradesh provide facility of e-payment and or e-filing to the taxpayers.
However, most of the other states are currently trailing behind, and still rely on manual registrations, tax payments and filings. Also, in view of the variations in compliance requirements between the central and individual state-specific tax laws, there is currently no national IT platform that can handle all indirect tax related compliances for the taxpayer.
The uniformity in tax provisions and compliances, likely to be offered by GST, clearly offers an opportunity to automate these compliances. Thus, with common registration and return formats, and similar tax-payment obligations, the government can create a unified IT platform for GST.
A pan-India IT platform is anyways inevitable under GST, in order to implement the proposed ‘IGST’ model for inter-state transactions. By design, GST would be a destination-based tax i.e., in case of inter-state supplies of goods or services, the state’s share of GST would accrue to the destination state where such goods or services are getting consumed. However, for the convenience of taxpayers, they would be required to deposit IGST in the state from where they supply such goods or services.
IGST would be deposited with the central government or a nominated agency, which would then act as a clearing house and transfer the state component of IGST to the respective states on a periodic basis. Hence the need for a robust IT network that would capture details of such inter-state supplies, and facilitate reconciliations and fund-transfers between various governments.
Recently, an empowered group has been constituted under the chairmanship of Nandan Nilekani, to take appropriate measures for timely implementation of the IT platform required for GST. National Securities Depository Ltd (NSDL) has been selected for implementing this network.
As far as creating the platform for implementing IGST is concerned, TINXSYS may perhaps serve as a good base or prototype, to begin with. However, the system would need to have the ability to process, verify and reconcile dealers’ invoice wise details uploaded by inter-state suppliers. This is likely to be an onerous task with minimal room for error, as it would have a direct bearing on the funds to be transferred to each state for the IGST supplies attributable to them.
The other big challenge would be to expand the IT coverage to the not-so-tech-savvy states and remote parts of the country, to facilitate online registrations, filings and payments for all taxpayers. While we do have a similar online system for income tax, the geographical spread and challenges of GST are somewhat different from income tax. As regards the quantum of data to be handled by such system, while it would be huge, we already have precedents in terms of the IT systems used at the NSE and NSDL.
Once implemented, a common GST portal would not only help the taxpayers, but also help the government with better audit trail, and a facility for pattern-analysis.