With 16 states having ratified the GST Bill, which introduces a concurrent tax on goods as well as services by the Centre and states, it is looking increasingly likely to be implemented early in fiscal 2017. A core platform that will enable taxpayers to comply with the GST process is the Goods and Services Tax Network (GSTN). GSTN, set up as a Section 8, not-for-profit company, has been chartered with providing a system (the GST System) to enable taxpayers to register, file returns and pay taxes. The system will also enable central and states’ tax authorities to approve registrations, assess returns, conduct audit and vigilance activities, etc. It will integrate with the CBDT, UIDAI, banks and RBI, and CBEC to provide a fully digital, end-to-end compliance process.
GSTN was set up in the model of a National Information Utility—a model pioneered by Nandan Nilekani, and realised successfully at the UIDAI. GSTN also builds on many key ideological and architectural concepts pioneered by Aadhaar and UIDAI, which have proven powerful in enabling add-on solutions (such as the Unified Payment Interface) over time.
At its core, the GSTN is creating an IT platform that encodes the GST processes of registration, returns, payments and refunds, and implements the provisions of GST Acts and Rules. The GSTN system will also maintain centralised ledgers (such as cash, and ITC and Liability Ledgers for IGST, CGST and SGST) of each individual taxpayer, thereby evolving to become the single source of truth for all taxpayer credits and liabilities, across all the states and the Centre.
The base transaction unit on which the compliance process for GST is built is an invoice. Invoices raised and received form the basis of the monthly GSTR1 and GSTR2 returns. It is expected that over 75 lakh taxpayers will create the GSTR1 and GSTR2 returns comprising over 250 crore invoices, every month.
To cater to these volumes of taxpayers, returns and invoices every month, the GST system will provide multiple options, following a segmented strategy for different categories of taxpayers.
The simplest way to get digitally ready for GST compliance is to use an offline application to be provided by GSTN. This will be used by taxpayers with slow or limited internet connectivity, and few monthly transactions. This offline application can be used to manually generate the GSTR1, GSTR2 (and other returns) in the format required by GSTN as a data file. This file can, subsequently, be uploaded to GSTN Common Portal either by the taxpayer himself, or by his tax return preparer (as authorised by the taxpayer through the GSTN portal).
The next category of taxpayers are those with good internet connectivity and with larger volumes of invoices. It is likely that such taxpayers already use desktop accounting software and applications for their current business operations and for indirect tax compliance. They could expect to directly generate these GSTR1/GSTR2 and other returns from their accounting applications (which would require GST upgrades/patches). The files output by these applications could then be uploaded into the GSTN portal, either by the taxpayer or by their authorised tax return preparer.
For taxpayers with a large number of transactions to handle, such a manual upload process may become cumbersome and error-prone, especially since it needs to be repeated every month with tight timelines and short durations. For such taxpayers, GSTN is creating an Application Programming Interface (API) that will enable such applications electronically upload the GSTR1, download the GSTR2, approve and reject invoices, etc. In short, the same functionality that would be available to taxpayers with lower volumes through the GSTN common portal would be available to such taxpayers through APIs.
Further, GSTN proposes to empanel and license agencies labelled as GST Suvidha Providers (GSPs), who, in turn, would provide taxpayers with value-added services using these GSTN APIs. Such services could range from the basic service of being able to electronically upload and file returns from the taxpayers IT systems without having to use the GSTN portal (by using the GSTN APIs), to value-added dashboards and analytics, to industry specific returns validations, etc.
Thus, the GSTN approach to service delivery will cater to the needs of each category of taxpayer. Through the offline application and the GSTN portal, a vast majority of the taxpayer and tax return preparer population could be handled initially. Through the GSP model, GSTN provides further extensibility to its platform, in a manner similar to what Aadhaar and UIDAI have demonstrated. GSPs could also offer their own value-added portals or applications for easing taxpayers’ compliance effort. While getting ready for GST and reconfiguring their systems, master data and processes, taxpayers should also assess which approach they will use to interact with the GSTN system.
The author is partner, Advisory Services at EY India. Views are personal