From the day it was launched on July 1 , the implementation of the Goods and Services Tax has faced two sets of challenges. The first set of problems emerged from the fundamental flaw of having multiple tax slabs instead of a simple two-or three-tier tax system.
The other set of difficulties emerged from the need to file multiple tax returns and the cumbersome accounting most people engaging in the sales of services or goods are required to undertake. These troubles were accentuated by the online system through which all users have to file their returns. The software and IT system for GST is run and maintained by the Goods and Services Tax Network, a non-profit company in which the Union and state governments hold a 49% share.
Formed in 2013, the company and its operations have faced a series of controversies, including misgivings about the fact that the country’s indirect tax database has been handed over to a non-government entity.
The company contracted Infosys to build the IT backbone on its behalf for GST. But as the tax regime was launched, many people filing returns complained of glitches with the network. A body of traders accused Infosys of failing to deliver on its contract, and the GST Council set up a five-member team headed by Bihar Deputy Chief Minister Sushil Kumar Modi to look into technical problems being faced by the GST registration and tax filing portal.
Alongside, a debate raged about whether the Comptroller and Auditor General of India could audit the Goods and Services Tax Network company.
Ajay Bhushan Pandey, chairman of the Goods and Services Tax Network, spoke to Scroll.in to answer some queries on these counts.
What problems that people faced with filing returns through the Goods and Services Tax Network have been resolved, and what issues issues remain pending for resolution?
Let me clarify, many of the the issues which cropped up at the beginning have been addressed. We are also seeing the results now. As of December 2, the number of tax returns filed for the month of October are 5.25 million. For the month of September, in comparison, 4.8 million returns were filed. There is a marked increase of 450,000 returns on a month-to-month basis. This shows that more and more people are finding it convenient to file their returns. The people who filed monthly returns for October and the previous months in November went up to eight million. From the day the Goods and Services Tax was launched, the total number of returns filed has gone up to 31 million. This clearly shows people are able to file returns.
There could be some cases still, where, because of individual circumstances, people may be facing some difficulties. For example, some people want to do internet banking and it is not working [because], say, someone has got locked out by putting in the wrong password three times – that can happen in any IT-based system. People may be facing some similar problems and we shall address those too. The last day to file the returns for October was November 20. On that day alone 1.8 million people filed returns.
But, the total potential people assessed to file monthly returns was pegged at 7.5 million?
So far as October returns are concerned, the total number of people who are supposed to file it and are not under the composition scheme [which allows simpler taxation and compliance for small businesses] is pegged at 7.7 million. Out of this 5.25 million have filed their returns. Now, there is also the statistics that approximately 40% of these returns are zero-tax returns. One has to find out why the remaining 2.5 million people have not filed their returns and whether they had any business activity or not. If you see the pattern from the time the Value Added Tax was imposed, usually 60% of those supposed to file returns used to actually do so. Now, out of 7.7 million, 68% have filed and the returns are still coming in. We want to make the online filing system more friendly so even smaller dealers file their returns by pressing a few buttons. That work is undergoing.
How many of the problems in the GST network have arisen because the rules have been constantly tweaked and the software has had to be altered to incorporate them? How long will it be before it really stabilises?
No large software system has been designed to become fully operational on Day One. Nowhere in the world has it happened. Over the next few months, or few years, it has to go through adjustment. The system has to be flexible for changes to be made. In the case of GSTN, the software system was launched on July 1. It is a very large system. If you remember, at that time we had to [bring] on board 6.5 million to 7 million people. Systems of all states, the Central Board of Excise Taxes and the Service Tax system had to be integrated. In such a large and complex system lots of changes were bound to happen. Over the last three to four months, whatever changes we have suggested by way of operational requirement, or for the convenience of people, or because of changes in rules – all those had to be accommodated.
By when do you think the GSTN system will be stabilised and work efficiently?
We are moving up along the improvement curve. There are some issues that we need to further respond to. The software systems for filing 3B returns [monthly returns detailing sales and purchase of inputs] is stabilised. But then there are certain issues regarding the refunds for exporters – here some work needs to be done and we are at it. We are also trying to ensure that people should not suffer while we work behind the scenes to fix things. For that we have given workaround methods. There cannot be a situation where we say ‘we are working on the system’ and people face difficulty. So we have provided methods to work-around, particularly for the refunds.
And what about the issues that many people are facing about matching invoice inputs against the goods sold?
Invoice matching is a very important element of the GST system. The question is how do you match it and at what frequency. The council has set up a committee to look at the simplification. When it comes out with a suitable recommendation, the changes will be incorporated into the system for further improvement.
You have now asked for a black box review to identify how vulnerable the system is to an attack from outside or inside the system that could violate the confidentiality, integrity and availability of GST systems. What is this for?
As is true for any large system, what we need is to ensure that the system should be safe from attacks from the outside and inside as well. The security process required for that is being followed, and a system for detecting vulnerabilities is being deployed.
This has not been done before?
The system has been in place for a while. But the fact is that the vulnerabilities change dynamically and we have to constantly adapt and build a firewall against changing threat perceptions. It is for that purpose that this exercise is being undertaken. This has to be done continuously to remain ahead of the threats.
We understand that the Comptroller and Auditor General of India is now going to audit the GSTN. What is their exact mandate for the audit?
We have said the entire working of GSTN can be audited by any independent agency, and the Comptroller and Auditor General is that agency. It is independent as well as a statutory authority.
What are the terms of reference of the CAG audit? Are they checking the resilience of the network and software or the financial accounts of the GSTN company, or both?
The CAG audits to find out whether public money – after all GSTN is run out of public money – has been spent in the manner it had to be spent, and spent efficiently. CAG will look into this. It has a very well-defined process. Their audit will help us improve as well if there is scope for it. We will get audited by an auditor empanelled by the CAG. If they wish to do more after that they can always do so.
Infosys is your main contractor to set up the Goods and Services tax Network. The Confederation of All India Traders has threatened to take Infosys to court and has demanded a CBI inquiry into the contract with GSTN, alleging failure to deliver. Did Infosys fail to deliver against its contracted obligations?
Infosys is our important partner. When you develop any large project you have to work closely with the agency that is going to implement it. There will always be some mismatch between the timelines that we set and their delivery. There are professional ways of managing such mismatches and differences through discussions and meetings. All those things are being done. That is how, through the past three months, there has been a lot of improvement.
Was it just a delay in the deadlines that was of concern, or the capabilities of the agency to deliver?
It would not be right on my part to arrive at any such conclusion. Right now our focus is to get the work done and make the system more robust and convenient for the people.