Nearly 90 lakh users; up to 1.2 lakh transactions per second; 320 crore transactions a month; and just 60,000 tax officers. These are some mind-boggling numbers that define the launch of goods and services tax (GST) on July 1. At the centre of all this is Chairman of GST Network Ltd, Navin Kumar, in charge of the technology that will make India's biggest tax reform work seamlessly.
In an interview with Rajeev Dubey and Dipak Mondal, Kumar explains how the network is readying to handle the transition of eight central and six state taxes into GST.
What is July 1 about, apart from the fact that GST will go live then?
From July 1, businesses can start issuing tax invoices using GSTIN. They can start uploading invoices from July 16.
But why are so many businesses panicking, liquidating stocks?
I don't know why. It's the fear of the unknown. If you have stock, then you have to file a claim for input tax credit on that. Somebody will look at it. What will happen, we don't know. How things will pan out, we don't know. So, why take risk? That is one. The other is, people generally want to avoid interacting with the tax department. This is because when you file a claim, they will say bring your books. But not everybody is liquidating their stocks.
Is GSTN ready in terms of load on the network?
There are two pre-requisites for GST rollout. One, the law mandates that existing payers of taxes that are getting subsumed in GST should have migrated to the new regime. Second, the facility for registering new taxpayers must be ready.
We collected data of all taxpayers from state tax departments and the Central Board of Excise and Customs or CBEC. The number was something like 90 lakh. We verified the PANs with the CBDT database. There were a lot of fake PANs. We sent all the mismatches to the tax authorities. We had to do 20 iterations between 2013 and 2016. Finally, we had PANs for 80 lakh verified taxpayers. The rest were either not active, not interested, or not found. We sent the password for each taxpayer to respective tax departments for passing it on to taxpayers and telling them that they can use the provisional ID (for GSTIN) to log on to the website, create their account and provide whatever information is required. Out of 80 lakh, 60.5 lakh created their account. Then, we received requests for extending the deadline. So, when we reopened between June 1 and June 15, six lakh more registered. We will open again on June 25 for three months. Some sectors that were not taxed (textile, sugar, diamond) under the existing regime are coming under GST. I anticipate about 10 lakh new taxpayers from these sectors. We have made arrangements for them.
What is the network's readiness? How prepared are the states?
We have prepared for concurrency (number of users the system can handle at the same time) of 60,000 users per second. But we are keeping additional infrastructure on standby and will quickly expand if it exceeds this number. The redundancy is 2x (1.2 lakh per second). So far as the states are concerned, our system has to connect to all states, as the data we receive will be passed on immediately to all tax authorities in states and the Centre. Of the 29 states, 20 states and all seven union territories have come to us (to create networks). Nine states and the CBEC are doing it themselves. The states and the CBEC are ready for transmission of data.
What happens to states like Kerala and J&K?
Kerala has passed the Act. Legally, J&K is not in. They have their system. We have connected our systems to their systems. The question is, when there is no law, what happens to people who apply from J&K? We are in a fix. Shall we block their application? But GST has two parts - CGST and SGST. The CGST law is already there. So, what we are thinking is that for those applications, we will generate a provisional registration. I have already referred the matter to the government to provide a solution.
Are you prepared for 300 crore transactions a month?
Yes. The new thing under GST is provision of invoice data for all B2B transactions. We wanted to know how many invoices would be generated and how much data put up on the network. We got data from nine states. Average invoices per month per dealer were 127, but the range was wide - from 10 invoices to 28 lakh invoices in a month. We had to devise a system that could handle this. Looking at an average of 127, we took three times that, 400, as the average. Multiplied by 80 lakh taxpayers, it's 320 crore invoices per month.
Since uploading of invoices will be the main activity, that may take a lot of effort on the part of taxpayers. We are opening the facility for uploading invoice data from July 16. To facilitate uploading, we have given an offline excel-based utility. The tool can handle 19,000 invoices in one go. It takes 17 seconds.
What happens to the e-way bill? All the laws will be subsumed under GST but states still need to collect taxes at borders as per old laws? they say GSTN was not ready.
The rules are not ready, so how can I be ready? Taxes are never captured at borders. The e-way bill system involves giving a permit or transit slip when the vehicle enters the area. They are supposed to be returned while exiting. The existing system will continue, and when the e-way bill comes, it will be replaced.
So, this is a black hole.
I don't know. One school of thought says that now that there is no tax arbitrage (earlier you had CST of 2 per cent and VAT of 14-15 per cent), why do you need an e-way bill system?
How will GSTN track profiteering? Eventually, the government will bank on you.
They will have a separate body to look at that. People will complain that the tax has been reduced but the benefit is not being passed on. It will be an adjudicatory system. They will look at it. We don't have anything to do with that.
What happens when the suppliers system is not ready but all others in the chain are ready?
People knew when GST would come. Small businesses should not have a problem. Businesses up to Rs 75 lakh can opt for the composition scheme and file a return only once in three months. And what do they have to write? Just that my total turnover in these three months is this, and they will have to pay a tax in the nature of turnover tax. Traders will pay 1 per cent, manufacturers will pay 2 per cent, and restaurants will pay 5 per cent. It's a one-line return.
There's another category of people above Rs 20 lakh but they have not opted for composition. They have to give invoice data if they make B2B supplies. But if they are selling to consumers, they don't have to do that, and their return will have just five-six lines. For each tax rate, they will have to mention just the turnover and the tax. Compliance is not difficult. Kirana stores will go for composition.
Are all 34 GSPs (GST Suvidha Providers) ready?
They had a problem as we had developed our software based on the rules of December 2016. We gave APIs to GSPs on that basis. The new rules required software changes. Half of them thought GST is not coming now and did not revamp their applications. Half of them have done it. We are giving the updated APIs time till June 28. They will take a week to make changes and be ready by July 16.
What if a GSP goes bust? How easy is it to migrate to another GSP?
Like buying one software, dumping it, and buying another. We brought in GSPs to help medium and large businesses which wanted their compliance activities to be automated. The offline utility will help taxpayers. But for large taxpayers to use that data for matching with their own purchase records will take some effort, and GSPs will do that.
What if somebody uploads a wrong invoice?
There's a provision for amendments. GST has no provision for revising the return but you can amend the data given.
How is the offline tool working in test runs?
We are testing that. We have not given it out yet. It's almost ready. We are planning to release the sheet by the end of this month, earlier than the tool, so that people can familiarise themselves. The tool will be needed from July 16.
What were the major issues during the trial run?
When we gave the offline tool for testing, it would not open on some computers. They had 32-bit computers and our software were meant to run on 64-bit computers. We revised our offline utility. Also, the excel sheet had the date format in the ddmmyyyy format. Some people were putting data into the ddmmmyy (02-APR-17) format.
What was the toughest thing in this journey?
The toughest thing was we were working against a moving target all the time.
Any last minute hitches? What could go wrong between now and July 1?
Nothing will go wrong. We have been testing and testing and testing every day. My only worry is these 10 lakh new taxpayers who will rush on the first day, June 25, to register. Wish us well.
By Rajeev Dubey and Dipak Mondal
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