FinMin proposal to convert GSTN into govt company raises eyebrows

There seems to be rising disquiet over a proposal to convert the Goods and Services Tax Network (GSTN) into a government company with many stakeholders wondering why it is required when the move is now towards privatisation of government firms.

While the proposal is still at a nascent stage, sources said the move has been necessitated due to rising concerns over security of data and control over the company.

“The GSTN is an important element of the country’s new indirect tax architecture — the Goods and Services Tax. Many in the States as well as the Union Finance Ministry believe it should be a government-controlled firm,” said a person familiar with the development, adding that even if it happens, it will be a time-taking process. “It will require atleast three to six months. It cannot be done immediately,” he said.

However, a former State Finance Minister, who was part of the process of setting up the GSTN, said it was not envisaged to be a public sector firm.

“It was a conscious decision at the time to go in for this kind of a structure. And there are enough checks and balances, be it in the composition of the Board or shareholding to ensure that the GSTN remains controlled by the Centre and States,” he said, asking not to be named.

The issue is already being discussed informally amongst States and is also likely to be a part of the next meeting of the GST Council.

GSTN is a National Information Utility and is registered as a non-government, not-for-profit, private limited company. The Centre and States together have 49 per cent equity in it. Financial institutions, including HDFC, HDFC Bank, ICICI Bank and NSE Strategic Investment Company — all hold 10 per cent stake each, apart from LIC Housing Finance, which has 11 per cent equity.

Finance Minister Arun Jaitley is understood to have asked Finance Secretary Hasmukh Adhia to “examine the possibility” of converting GSTN into a majority owned or 100 per cent government company. GSTN provides the IT infrastructure for GST, and runs the portal on which businesses register themselves as taxpayers and file returns and pay taxes.

Attracting right talent

However, even officials in the Centre have been pointing out that for the kind of work it does, GSTN requires to rope in private sector professionals at market determined rates. “As a government company, it is unlikely that it will be able to attract the right talent as the pay structure will not be as competitive,” noted an official.

A State official also pointed out that when the Centre is looking at privatisation of its public sector units, the proposal to convert GSTN into a government company bucks the trend.

“There are genuine concerns over the GSTN control in many quarters. But whether turning it into a 100 per cent government entity is the solution, will have to be looked into. Per se, there is nothing wrong with how the GSTN is working,” he pointed out.

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