Analysis of GSTN: Does it have a smooth working?

A project report submitted in partial fulfilment of the requirements for

Project Management Project under Prof. Rajendra Sahu

By

Anni Gupta (2013IPG-022)

Deepak Kumar (2013IPG-037)

ABV INDIAN INSTITUTE OF INFORMATION

TECHNOLOGY AND MANAGEMENT

GWALIOR-474 015

2017

ABSTRACT

Implementation of GST to simplify prevailing tax structure in India on 1 July 2017 created chaos in the

whole economy. Integration with IT was thought one of the way to make tax structure working

smoother. Here is where GSTN comes into picture. GSTN, a non-profit organization which will manage

the entire IT GST system. We here would study its working and issues that it is facing after

implementation of GST.

Keywords: GSTN, GST, Infosys, India, GoM, IT.

TABLE OF CONTENTS

1. Introduction 6

2. Genesis and Structure of GSTN 7

3. Strategic Control of Government 10

4. Funding of GSTN 10

5. Expenses of GSTN 10

6. GST IT Strategy: Role assigned to GSTN 11

7. Monthly Compliance Cycle 12

8. Infosys & GSTN 14

9. Issues faced by GSTN 20

10. Criticism Faced by Infosys 21

11. Response of Infosys 22

12. Last date for July & August was extended 24

13. Statistics 25

14. GSTN Outreach & Capability Building Initiatives 26

15. Conclusion 28

Introduction

GST is backed by a robust Information Technology (IT) infrastructure for registration of taxpayers,

processing of GST returns, managing GST remittances, refunds, auditing and levy of penalty. The

Information Technology infrastructure behind GST, is controlled by the GSTN or GST Network, a

Section 8 Company (not-for-profit company) promoted by Central Government, State

Governments and other non-Government Institutions. The Government of India holds 24.5%

stake in the GSTN, while state Governments combined hold 24.5% state and the balance 51% is

held by Non-Government Institutions. Thus, GSTN will act like a clearing house that is self-

sustaining through levy of charges on taxpayers and tax authorities using the GST Network.

(http://www.gstn.org/)

Goods and Services Tax Network (GSTN) is a Section 8 (under new companies Act, not for profit

companies are governed under section 8), non-Government, private limited company. It was

incorporated on March 28, 2013. The Government of India holds 24.5% equity in GSTN and all

States of the Indian Union, including NCT of Delhi and Puducherry, and the Empowered

Committee of State Finance Ministers (EC), together hold another 24.5%. Balance 51% equity is

with non-Government financial institutions. The Company has been set up primarily to provide

IT infrastructure and services to the Central and State Governments, tax payers and other

stakeholders for implementation of the Goods and Services Tax (GST). The Authorized Capital of

the company is Rs. 10,00,00,000 (Rupees ten crore only).

Genesis and Structure of GSTN

The GST System Project is a unique and complex IT initiative. It is unique as it seeks, for the first

time to establish a uniform interface for the tax payer and a common and shared IT infrastructure

between the Centre and States. Currently, the Centre and State indirect tax administrations work

under different laws, regulations, procedures and formats and consequently the IT systems work

as independent sites. Integrating them for GST implementation would be complex since it would

involve integrating the entire indirect tax ecosystem so as to bring all the tax administrations

(Centre, State and Union Territories) to the same level of IT maturity with uniform formats and

interfaces for taxpayers and other external stakeholders. Besides, GST being a destination based

tax, the inter- state trade of goods and services (IGST) would need a robust settlement

mechanism amongst the States and the Centre. This is possible only when there is a strong IT

Infrastructure and Service back bone which enables capture, processing and exchange of

information amongst the stakeholders (including tax payers, States and Central Governments,

Accounting Offices, Banks and RBI).

This aspect was discussed in the 4th meeting of 2010 of the Empowered Committee of State

Finance Ministers (EC) held on 21/7/2010. In the said meeting the EC approved creation of an

Empowered Group on IT Infrastructure for GST(EG) under the chairmanship of Dr Nandan

Nilekani along with five state commissioners of Trade Taxes. Department of Revenue, Ministry of

Finance, Government of India vide OM no. S.34011/19/2010-SO(ST) dated 26th July 2010 notified

the Empowered Group on IT Infrastructure for GST with following members:

1. Member (B&C), CBEC

2. Additional Secretary (Revenue), DoR

3. DG (Systems), CBEC as Member-Secretary

4. FA, Ministry of Finance,

5. Member Secretary, Empowered Group of State Finance Ministers,

6. Member Technology Advisory Group for Unique Projects (TAGUP)

7. Commercial Tax Commissioners of Maharashtra, Assam, Karnataka, West Bengal and

Gujarat.

The Group was mandated to suggest, inter alia, the modalities for setting up a National

Information Utility (NIU/ SPV) for implementing the Common Portal to be called GST Network

(GSTN) and recommend the structure and terms of reference for the NIU/ SPV, detailed

implementation strategy and the road map for its creation in addition to other items like training,

outreach, etc.

Prior to this, the Union Ministry of Finance had set up the Technical Advisory Group for Unique

Projects (TAGUP) in March 2010 to make recommendations on the roadmap to roll out five major

financial projects including GST. TAGUP recommended setting up of National Information Utilities as

private companies with a public purpose for implementation of large and complex Government

IT projects including GST.

The EG held seven meetings between 2nd august 2010 and 8th August 2011 to discuss the

modalities. After due deliberations, the EG recommended creation of a Special Purpose Vehicle

for implementing the GST System Project. To enable efficient and reliable provision of services in

a demanding environment, the EG recommended a non- Government structure for the GSTN SPV

with Government equity of 49% (Centre – 24.5% and States – 24.5%) after considering key

parameters such as independence of management, strategic control of Government, flexibility in

organizational structure, agility in decision making and ability to hire and retain competent

human resources.

In view of the sensitivity of the role of GSTN and the information that would be available with it,

the EG also considered the issue of strategic control of Government over GSTN. The Group

recommended that strategic control of the Government over the SPV should be ensured through

measures such as composition of the Board, mechanisms of Special Resolution and Shareholders

Agreement, induction of Government officers on deputation, and agreements between GSTN

SPV and Governments. Also, the shareholding pattern would ensure that the Centre individually

and States collectively are the largest stakeholders at 24.5% each. In combination, the

Government shareholding at 49% would far exceed that of any single private institution. These

recommendations were presented before the Empowered Committee of State Finance Ministers

in its 3rd meeting of 2011 held on 19th August 2011 and in the 4th meeting of 2011 of the EC

held on 14th Oct 2011. The Empowered Committee of State Finance Ministers (EC) in its meeting

held on14.10.11, endorsed the recommendations of the EG.

The Government of India approved the proposal for setting up a Special Purpose Vehicle to be

called Goods and Services Tax Network on the lines mentioned above on 12th April 2012.

Following decisions were taken in this context:

1. Suitable and willing non-government institutions would be identified and firmed up by

the Ministry of Finance to invest in GSTN-SPV prior to its incorporation.

2. The strategic control of the Government over the SPV would be ensured through

measures such as composition of the Board, mechanisms of Special Resolution and

Shareholders Agreement, induction of Government officers on deputation, and

agreements between GSTN SPV and Governments.

3. The Board of Directors of GSTN SPV would comprise 14 Directors with 3 Directors from

the Centre, 3 from the States, a Chairman of the Board of Directors appointed through a

joint approval mechanism of Centre and States, 3 Directors from private equity stake

holders, 3 independent Directors who would be persons of eminence and a CEO of the

GSTN SPV selected through an open selection process.

4. Relaxation in relevant rules would be granted to enable deputation of Government

officers to the GSTN SPV for exercise of strategic control and for bringing in necessary

domain expertise.

5. GSTN SPV would have a self- sustaining revenue model, where it would be able to levy

user charges on the tax payers and the tax authorities availing services.

6. GSTN SPV would be the exclusive national agency responsible for delivering integrated

indirect Tax related services involving multiple tax authorities. Accordingly, any other

service provider seeking to deliver similar integrated services would be required to enter

into a formal arrangement with GSTN SPV for the services.

7. GSTN would be funded through a one- time non- recurring Grant- in aid of Rs. 315 crore

from the Central Government towards expenditure for the initial setting up and

functioning of the SPV for a three year period after incorporation.

In compliance of the above decision, GST Network was registered as a non-government, not-for-

profit, private limited company under section 8 (under new companies Act, not for profit

companies are governed under section 8) of the Companies Act 1956 with the following equity

structure:

In brief, the decision to structure GSTN in its current form was taken after approval of the

Empowered Committee of State Finance Ministers and the Union Government after due

deliberations over a long period of time.

Strategic Control of Government

Several measures of strategic control of Government over GSTN have been envisaged. These are

explained below:

1. Strategic control through Board of Directors (BOD):

The Articles of Association (AOA) of GSTN provide that matters of strategic importance

will be decided by the Board of Directors and that the Chairman of the Board will have

casting/ second vote where Directors are equally divided over any issue in Board meeting.

2. Strategic Control through Special Resolution:

The AOA of GSTN provides that certain matters of strategic importance shall be decided

only through Special Resolution (i.e. three fourth (3/4) of the shareholders voting must

vote in favour of such matters). Government’s 49% shareholding will ensure that it retains

effective control over such matters.

3. Strategic control through Shareholders Agreement:

An agreement amongst all shareholders of GSTN SPV may provide that till the time

Government holds certain threshold of shares in GSTN SPV, specific matters of strategic

importance shall not be decided upon without the affirmative vote of the Government.

4. Placement of personnel on deputation in the GSTN SPV:

Strategic Control is being ensured also through deputation of Government officials in the

GSTN, at both leadership as well as operational levels. Services Division of GSTN, which is

responsible for defining business processes, approving the modules and monitoring the

outcomes is managed primarily by Government officers drawn from Central and State Tax

Departments. GSTN has two officers of CBEC, eight officers from State Commercial Tax

Departments, one officer of Indian Audit and Accounts Service and one officer from

central government working on deputation. Some more officers are likely to join in future.

5. Agreements between Government and GSTN SPV:

Control over strategic matters could be exercised by Government by incorporating

suitable provisions in the Agreement governing service delivery to be executed between

Government and GSTN.

In order to reinforce these measures further, following provisions have been included in the AOA

of GSTN:

1. The Chairman of the Company will be nominated through a joint approval mechanism

of Central and State Governments.

2. Out of 14 Directors envisaged in the AOA, seven (including the Chairman) are

nominees of the Central and State Governments whereas private share-holders

having 51% equity can nominate only 3 Directors.

3. The quorum for a meeting of the Board is four (4) Directors, out of which one Director

must be the nominee of the Central Government, one Director the nominee of State

Governments and one Director should be other than nominees of Central and State

Governments. Further, the quorum for a meeting of the Board is not complete unless

fifty percent (50%) of the Directors present in any meeting of the Board are nominees

of Central and State Governments.

With above mentioned structuring, Government exercises an effective strategic control over

decision-making in the GSTN Board, in which all powers of the Company are vested.

Relationship of GSTN with Tax Administrations

The common GST Portal developed by GSTN will function as the front-end of the overall GST IT

eco-system. The IT systems of CBEC and State Tax Departments will function as back-ends that

would handle tax administration functions such as registration approval, assessment, audit,

adjudication etc. Nine States and CBEC are developing their backend systems themselves. GSTN

is doing the backend for 20 States and 5 UTs. GSTN has been interacting with CBEC and States for

ensuring mutual interaction between the front-end that would be operated by GSTN and the

back-ends of the tax administrations. Till September 2016, ten workshops have been conducted

with the States/CBEC. GSTN will undertake training of tax officials in GST IT system from

December 2016 onwards. During the operation phase as well GSTN will continue the interaction

with CBEC and states and extend help wherever necessary.

Funding of GSTN

As mentioned above, the Central Government while approving creation of GSTN also approved a

non-recurring grant of Rs 315 Crores. The table below shows the funds released by the Central

Government since inception of GSTN and the funds actually utilized by the Company:

Year Funds released by GoI Actual Expenditure by GSTN

2013-14 3,03,65,612 3,03,65,612

2014-15 20,00,00,000 13,80,31,415

2015-16 120,93,00,000 45,27,97,027

Total 143,96,65,612 62,11,94,054

The Empowered Committee of State Finance Ministers has, in its meeting held on 30th Aug 2016,

approved the Revenue Model of GSTN which is based on taking commercial loan from a

commercial bank for its pre-operative fund requirement of Rs 550 crores in FY 2016-17, which

includes payments to M/S Infosys, the Managed Service Provider developing the software and

providing required hardware and software licenses. The Central Government has agreed to

provide required guarantee for the same. Post GST rollout, GSTN will be charging user fees. The

GST System infrastructure managed by GSTN will be used by tax-payers, tax administrations,

banks, etc. but the user charges will be paid entirely by the Central Government and the State

Governments in equal proportion i.e. 50:50 on behalf of all users. The State share will be

apportioned to individual States in proportion to the number of taxpayers in the State.

The accounts of GSTN are approved by the Board and shared with all shareholders apart from

being tabled in the Parliament.

Internal Financial Control and Procurement

GSTN has developed its own Finance and Accounts Manual to define the roles and responsibilities

of the functionaries working in GSTN, establish sound internal controls and define the accounting

policies and procedures to be followed by GSTN. The Manual complies with Accounting Standards

issued by The Institute of Chartered Accountants of India and the Companies Act 2013 and is

largely based on GFR 2005.

Expenses of GSTN

The major chunk of expenses to be incurred by GSTN consists of payment to Managed Service

Provider M/S Infosys for design and development of GST Systems, supply of all underlying

infrastructure, software licenses, bandwidth and operation and maintenance of GST systems for

five years from the go-live date. M/S Infosys was selected by open tendering process. The second

chunk will be on ‘Fraud Analytics Tools’ and team to run the same during project operation period

along with cost of security audit and other program governance functions. The agency to do this

function will be selected through open tendering process. The third component is operating

expenses of GSTN which consists of salary, rent of office building, office expenses, internal IT

facilities, etc.

CAG’s Audit

Being substantially funded by the government during 2013-16 period, the C&AG has conducted

the expenditure audit of GSTN for FY 2013-14, 2014-15 and 2015-16.

Annual Report

The annual report of GSTN for FY 2013-14 1nd 2014-15 has been laid on the table of the

Parliament and circulated to all shareholders.

GST IT Strategy: Role assigned to GSTN

Creation of common and shared IT infrastructure for functions facing taxpayers has been

assigned to GSTN and these are filing of registration application, filing of return, creation of

challan for tax payment, settlement of IGST payment (like a clearing house), generation of

business intelligence and analytics. All statutory functions to be performed by tax officials under

GST like approval of registration, assessment, audit, appeal, enforcement etc. will remain with

the respective tax departments. The diagram below shows the work distribution.

• Role of GSTN in Payment of GST by Taxpayers

Under GST, all challans will have to be prepared by taxpayers on the GST portal only. This

has been done to ensure that bank tellers do not enter wrong TIN number from hand

written challans as happens sometimes today. Once Challan is created with GSTIN, name

of taxpayer, amount under various tax heads and sub-heads, the taxpayer has following

two options to pay the tax:

1. He can choose online option under which, he will have to choose one of the agency

banks (i.e. banks authorized by RBI to collect GST on their behalf) from the dropdown

menu and after that he will be taken to the website of chosen bank to make payment

by providing user ID and password of bank. After completion of payment, he will be

brought back to GST portal from where he can download the paid challan, which is

generated by GST System on confirmation from the Bank.

2. The other option of tax payment is to print the challan and present the same in the

relevant bank for ‘Over the Counter Payment’ (OTC). The bank after realizing the

payment will transfer the money to RBI and send confirmation of payment to GST

Portal for accounting.

At the end of the day, the GST portal will prepare a summary of all payment

confirmations received by it from Banks and share the same with RBI and accounting

authorities for reconciliation. No tax money will ever come to GSTN in any manner.

GSTN will only get conformation of payment from the Banks.

• Role of GSTN with respect to Filing of Returns

Under GST, there will be common return for CGST, SGST and IGST, eliminating the need

to file separate tax returns with Central and state GST authorities. Checking of claim of

Input Tax Credit (ITC) is one of the fundamental pillars of GST, for which data of Business

to Business (B2B) invoices have to be uploaded and matched. The Common GST Portal

created and managed by GSTN will do this matching on the basis of invoice level data filed

as part of return by all taxpayers. Similar exercise will be done for inter-state supplies

where goods or services will move from the state of origin to the state of consumption

and so will the taxes. The claim of IGST and its utilization will be settled based on returns

filed at the Common GST portal.

• Role of GSTN with respect to Registration Application

Under GST, the registration of taxpayers will be common under Central and State GST and

hence one place of filing application for the same i.e. the Common GST portal. The

application so received will be checked for its completeness by the GST portal, which will

also carry out validation of data like PAN from CBDT, CIN/DIN from MCA and Aadhaar of

promoters, if provided, from UIDAI. After completion of validation, the registration

application will be shared with respective central and state tax authorities. Query of tax

authorities, if any and their final decision will be communicated to GST portal which in

turn will communicate the same to the taxpayer.

The Common GST Portal, as explained in brief above, will be the single interface for all

taxpayers from any part of the country. Only in case where a taxpayer is picked up for

scrutiny or audit, and such cases are expected to be small in number, he will interface

with the respective tax authority issuing the notice under the Act. For all other cases,

which is expected to be around 95%, the Common GST Portal will be the only taxpayer

interface.

Access to Data

The design of GST systems is based on role based access. The taxpayer can access his own data

through identified applications like registration, return, view ledger etc. The tax official having

jurisdiction, as per GST law, can access the data. Data can be accessed by audit authorities as per

law. No other entity can have any access to data.

Monthly Compliance Cycle

One of the critical areas where the Goods and Services Tax (GST) has a ‘disruptive’ impact is the

Information Technology (IT) landscape. With the advent of the GST, using IT to be GST-compliant

has become inevitable. In a nation where most of the indirect tax compliances were thus far

being done using spreadsheets, this reform has ushered the need to adopt IT systems, as part of

the new tax regime. The GST ecosystem has been designed to ensure automation of the

compliance and filing processes covering inter alia maintenance of electronic records, issuance

of documents such as invoices, credit/debit notes, vouchers, uploading of transaction details,

payment of taxes, filing of returns, etc.

The monthly GST compliance cycle to be followed would be as follows:

i. On 10th of subsequent month—Details of outward supply would be filed in Form GSTR 1

ii. On 11th—Auto populated purchase details would need to be downloaded in Form GSTR 2A

iii. By 15th—GSTR 2A details would need to be validated and uploaded in Form GSTR 2

iv. By 17th—Validated details in Form GSTR 1A based on recipient’s filing in Form GSTR 2 would

need to be checked and uploaded

v. On 18th—Auto populated Part A of GSTR 3 with all supply and purchase details would be

generated and the same needs to be downloaded

vi. Between 18th and 20th—Tax payment needs to be made

vii. By 20th—Once the tax payment challan number is generated, post insertion of the said

number in Part B of GSTR 3, the final return needs to be submitted.

And the aforesaid process needs to be undertaken for each registration with no respite for any

Saturdays or Sundays in between. As it would be demanding and challenging to undertake the

aforesaid compliance cycle each month for each state (registration number), adopting IT to issue

GST compliant documents and undertaking the aforesaid compliances is the need of the hour.

Whether all 8 million registered dealers would be ready to adopt IT, (in the form of IT hardware,

software and connectivity) is the moot question. With over three weeks since GST

implementation, the majority of taxpayers are facing challenges in terms of adopting IT. Further,

the final set of GST rules released just before the implementation date did not help the cause.

While most taxpayers use third-party Enterprise Resource Planning (ERP) systems, others have

their own in-house ERP system. Due to lack of clarity on the procedures surrounding GST, most

of the taxpayers were not able to configure their ERP changes on time. Even large ERP vendors

were struggling to release their GST patch for their clients. As a result, on July 1, dealers faced

challenges in determining the tax type, mentioning the correct classification product and service

code, raising invoices, etc. Even today, some of the ERP companies face challenges in configuring

tax determination logic for the bill-to-ship-to arrangement, determining the place of supply for

different scenarios, building in tax determination logics, etc.

Not only are there challenges in the IT systems for taxpayers, even the online GST Network

(GSTN) portal maintained by the government has its own share of teething problems. Users

nationwide have been facing numerous concerns surrounding the website, with some of them

being non-validation of login credentials, non-acceptance of additional information for

amendments in registration details, non-issuance of new registrations numbers, temporary black

out of certain state GST sites, etc.

In order to help ensure smooth transition to GST, embracing the right technology at the right

time is not a ‘good to have’ but a ‘must have’ or a ‘prerequisite.’ Thankfully, there are many

companies or Application Service Providers (ASPs) that offer GST solutions that can extract the

data from the dealer’s ERP system, run data validation checks, upload the same to the GSTN

portal, compute the taxes, prepare and file the GST returns. Also, for micro, small and medium

enterprises (MSMEs), there are laptops available in the market which are pre-loaded with the

GST software which can assist in raising GST invoices and preparation and filing of GST returns.

All in all, to make GST a success, India needs a well-oiled robust IT ecosystem comprising the

government’s GSTN portal, ERP vendors and hardware suppliers all joining hands with the dealers

who are willing to embrace IT as part of the new tax regime.

Infosys & GSTN

Infosys was awarded a five-year contract worth Rs. 1,380 crore to develop GSTN in September

2015. Many technical glitches have been at the core of the GST rollout since July 1 due to which

several states had raised the issues being faced by taxpayers in the 21st GST Council meeting on

September 9. Subsequently, a five-member Group of Ministers (GoM) headed by Bihar’s deputy

chief minister Sushil Modi was constituted to monitor technology-related implementation issues

of GST. The GoM held its first meeting in Bengaluru on September 16 where it identified 27 issues

and asked Infosys to sort them.

After the first GoM meeting, Revenue Secretary Hasmukh Adhia had absolved Infosys, the vendor

for GSTN, of any blame for the numerous GSTN-related glitches, saying that they are delivering

“very well”. “I don’t think they (Infosys as a vendor of GSTN) have failed. We can’t conclude like

that…they are delivering very well. Only thing is that there are initial hiccups and issues which we

have to sort out with them. It’s not like there have been mass scale failures by them. Not at all,”

Adhia had said. Also, the panel’s head, Modi, at that time had said that 70-80 per cent of the

GSTN-related issues would get resolved by October-end.

After the GoM’s third meeting on October 28, Modi said that 18 of the 27 GSTN-related

functionalities with October 30 as deadline had been operationalized. “27 functionalities had to

be launched or issues had to be resolved by Infosys, out of which 18 of them have been

operationalised. This is about 66.7 per cent success. Infosys is doing their best, even though there

were many changes made by the GST Council,” PTI quoted him as saying.

The GoM had also raised the issues faced by businesses in different states and asked Infosys to

deploy their engineers there. “We had earlier asked Infosys to deploy engineers in major states

by October 30. They have done so in 9 states and sought time till November end to deploy in

other states,” Modi said.

He had further said “…Infosys has put their best manpower and they have assured that in the

coming days they will deploy more people. They have already deployed more than 100 people

from their team of IT professionals.” “We have also asked them to deploy best talent and

experienced people in the team.”

Issues faced by GSTN

A high-powered group of ministers will meet every fortnight to resolve over two dozen technical

glitches identified in the GST tax portal GSTN, the panels head and Bihar Deputy Chief Minister

Sushil Modi has said.

Over 25-odd glitches, which had led to the GST-Network portal crashing on at least two occasions

in the very first month of filing, relate largely to payments and registration. The grouping had

extensive interaction with executives of Infosys, which is providing the IT support for the portal,

and businesses will notice a "lot of difference" on the GSTN portal in the next 7-10 days.

The GSTN website had faced glitches last month as taxpayers flogged to the portal on the last day

of the deadline of filing returns for July. Over 25 issues have been identified which needs to be

resolved and timelines have been set for each of them.

The GSTN, the information technology (IT) backbone and portal for real-time taxpayer

registration, migration, and tax return filing under the GST, had developed a snag last month

when the first deadline for filing of returns approached, forcing the government to extend the

last date. A five-member GoM was constituted on September 12 after the GST Council decided

to sort out technical glitches. The first meeting of the GoM was held in Bengaluru on September

16.

Besides Modi, Kerala Finance Minister Thomas Isaac, Chhattisgarh Minister of Commercial Taxes

Amar Agrawal, Karnataka Agriculture Minister Krishna Byre Gowda and Telangana Finance

Minister Etela Rajender are part of the GoM.

Modi said the GoM noted that the tendency of taxpayers is to file returns on the last day, which

is evident from the fact that only 3.5 lakh taxpayers have so far filed GSTR-3B for the month of

August. The last date for filing is September 20.

Over 47 lakh returns in GSTR-3B was filed in July and the GST to the tune of Rs 95,000 crore was

collected in the maiden month of roll-out.

On September 15, GSTN officials and state commercial tax officers also held meetings with

bankers, large taxpayers and tax experts to decipher the procedural issues being faced by them

on the portal.

"The GoM will meet every 15 days to review the functioning of GSTN. The GSTN system is robust

and load is not an issue. We are looking into the procedural issues," Modi said. So far, over 22

crore invoices have been uploaded on the GSTN portal, which has a capacity of handling over 3

billion invoices. GSTR-3B is only a simple return which will ease compliance burden of businesses.

Businesses will have to upload invoices and file final returns in form GSTR-1, 2 and 3 on a

stipulated date.

The GST Council, chaired by Finance Minister Arun Jaitley and comprising state counterparts, had

last week decided to extend the last date for filing final returns for July by a month to October

10. GSTR-2 for July will have to be filed by October 31 and GSTR-3 by November 10.

1. Crashes

Good and service tax Network (GSTN), the only official website for GST enrollment crashes

for the second time.

The government allows tax payers to get fresh Registration under GST from 25th June.

But the website crashes as soon as the clock struck 12.

Earlier on 15th June too, the website was crashed due to heavy traffic as this was

supposed to be the last date for migrating into GST Regime. Later on, it was

communicated that the Enrollment procedure shall be open again from 25th June.

In an interview, GSTN chairman Navin Kumar talks about the preparedness of GST roll out

from July 1st “Nearly 90 lakh users; up to 1.2 lakh transactions per second; 320 crore

transactions per month and just 60,000 tax officers”

When asked about the Network Readiness, Kumar said “We have prepared for

concurrency (number of users the system can handle at the same time). We have

designed the system for 60,000 users per second. But we are keeping infrastructure on

standby and we’ll quickly expand the capacity if it exceeds. The redundancy is 2x. So far

as the states are concerned, our system has to connect to all states because the data that

we receive is passed on immediately to all the tax authorities at State and the Centre”

If the handling capacity is 60000/- users per second, there are obvious reasons that the

site will get crash due to heavy traffic.

Problem will arise while filling monthly Returns (GSTR-1 and GSTR-2) as the Professional

fills them at the eleventh hour. The same scenario was seen during Tax audit period at

income Tax portal too.

Out of 80 Lakhs taxpayers, 66.5 Lakhs have successfully migrated to the GST Regime and

have created their account at GST portal. The remaining 15 Lakh are still left out, this may

also be the case that they are not required to get themselves registered under GST

because they fall below the threshold limit of 20 Lakhs or 10 Lakhs in special category

state. Even if they are not required to get Registered new taxpayers will come under GST

from those sectors (textile, sugar and diamond) which were not taxable under GST

Regime.

Further problem will arise while uploading invoices post GST implementation.

Government should take necessary steps in order to remove such irregularities.

Moreover, as a complaint taxpayer, they also need to understand these irregularities.

They can do so by reading the Do’s and don’ts while migrating to GST Regime and

complying with the system requirements.

2. Erroneous Penalty:

More respite could be on the way small and medium enterprises (SMEs), with the goods

and services tax (GST) council set to ease a string of procedures, including partial relief on

penalties on late filing of GST returns. The tax department's proposal, if approved by the

GST Council in its next meeting on November 10 on Guwahati, will lessen the struggles of

small businesses still grappling to understand the nuances of the new indirect tax system

that was rolled out from July 1. The idea is that an entity should not end up paying penalty

higher than his tax liability, however, doesn't intend to waive off the entire late fee.

For instance, there have been cases, where businesses have not been able to file returns

due to slowdown in the information technology (IT) backbone of the tax system GST

Network (GSTN). A late fee was charged, which turned out to be higher than the

company's tax liability.

Similarly, a taxpayer might not have filed return as his tax liability is nil. However, such

assesses are also subjected to penalty of late fee. The government does not want to

penalize or pull up taxpayers who have missed filing returns, mainly due to technical snags

on GSTN, such as slowdown of the system. In fact, small taxpayers are still not used to

filing returns online and may have missed deadlines owing to lack of clarity pertaining to

processes and the system.

The move is aimed at soothing frayed nerves of millions of small enterprises and exporters

that have been battling with procedural irritants, delayed refunds and technical glitches

on returns filing. The easing on late fee penalties will follow the big changes that the

finance minister Arun Jaitley-headed council approved on October 6 to iron out rough

edges of the new tax system has been hit by multiple pain points since its rollout.

Currently, a late fee of Rs 100 each, under Central GST (CGST) and State GST (SGST) or Rs

200 per day is levied on an assessee. In addition to the late fee, an 18 percent interest per

annum also needs to be paid. The Council is looking at giving relief to taxpayers so that

they do not have to pay the entire Rs 200 per day late fee. Last month, the government

had waived off the late fee of Rs 200 per day for taxpayers who failed to adhere to the

deadline of the first set of GST returns for the month of July.

“Late fee for all taxpayers who could not file GSTR3B for month of July has been waived,

but not the interest on late payment of dues. Interest will be applicable to all taxpayers

who have not discharged their complete GST liability for July by August 25,” finance

ministry said in the microblogging portal Twitter in September.

While only 33.98 lakh July returns were filed by the due date, the number has now gone

up to 55.87 lakh. Similarly, for August, 28.46 lakh returns were filed till the last date, but

the figure went up to 51.37 lakh later. Also, for September, while 39.4 lakh returns were

filed by the due date, the number is rising and was over 42 lakhs till October 24. Also, the

Council earlier this month substantially lowered late return filing fees for businesses from

the Rs 200 at present. Businesses with nil tax liability will now have to pay only Rs 20 as

late fee for delayed filing of return while for the rest, the fee is Rs 50.

3. Offline Tool:

GST Network today said it has launched an offline tool for businesses to quarterly file a

form detailing inputs or capital goods sent to job workers and received back from them.

The excel-based offline tool has been made available for preparing and uploading the

statement in form GST ITC-04. The tool can be accessed at 'Download' section of GST

portal, GSTN said in a statement.

As per GST (Goods and Services Tax) Rule 45, details of inputs or capital goods sent to job

worker and received back from them need to be furnished on a quarterly basis in ITC-04.

"All the details can be added in offline mode and thereafter uploaded on GST portal to

furnish the form for the quarter July-September 2017," GSTN CEO Prakash Kumar said.

With the offline tool, internet connection is not required at the time of filling up details.

After the details are fed into the excel tool, it can be uploaded on the GST portal. Also

since most of the data entry and business validations are in-built in the offline tool, it

reduces chances of errors at the time of upload to the GST portal. Also, the data uploaded

will be available for editing or for making new additions.

After the file is uploaded, the system will show the summary of data uploaded, which

needs to be digitally signed or verified through EVC (electronic verification code) for

successful filing of the same.

A principal manufacturer sends semi-furnished goods to job workers to further process

the product.

Criticism Faced by Infosys

Infosys Technologies on Thursday took on criticism about the glitches that have affected the

performance of the fledgling Goods and Services Tax portal, and attributed implementation

problems to the large scale of the project as well as ‘rapid changes in policy and integration issues

with related IT ecosystems’.

A significant portion of the problems under the GST since its roll-out in July have been due to

issues taxpayers have faced in uploading tax returns on the GST portal. This prompted the GST

Council to set up a Group of Ministers last month to look into problems being faced.

The government on Monday postponed the deadlines for the filing of GSTR-2 and GSTR-3 for July

by a month each.

“Any large project of this scale, especially a transformative one like this, has to deal with changes

in both policy and stakeholder usability,” Infosys said in an official statement. “Some of these

modifications have resulted in rapid changes to the system particularly due to its integration with

heterogeneous IT ecosystems including GST Suvidha Providers, Aadhaar, Central Board of Excise

and Customs and Model 1 States.”

Response of Infosys

“Given the complex nature of the project and rapid change management, there have been

several stakeholder concerns that have also been raised,” Infosys added. “Some of our finest

engineers are supporting the GSTN (GST Network) team as they work towards resolving these

and serving all stakeholders.”

Infosys’ statement is in response to a letter from the Confederation of All India Traders (CAIT)

urging the government to initiate a CBI probe on Infosys and other companies for the “poor and

dismal performance” of the GST portal.

“Even after four months of GST implementation..., the GST portal, which was supposed to

function properly from July 1 itself, is still working like an experiment project causing much

harassment and mental concern to traders across country,” the CAIT said in a statement.

Infosys added, “The system has already demonstrated success across several parameters — till

date, 37 crore invoices have been uploaded on the system while the system is designed to handle

300-320 crore invoices every month.”

“Infosys is very proud to be associated with the prestigious GST project which is the largest tax

project of its kind in the world,” the company said. “The system has already demonstrated

success across several parameters — till date 37 crore invoices have been uploaded on the

system while the system is designed to handle 300 to 320 crore invoices every month. Seventy

lakh tax payers have successfully migrated to the new system and the country has recorded 25

lakh new registered taxpayers.”

Central and state-level tax regimes have been integrated with all 29 states and seven Union

Territories successfully migrating onto this system. In addition, the system is able to manage

100,000 active users and saw peak loads in the last two days of filing returns for July. Half the

filings were made in that timeframe and 70% of the collection achieved with just 25% of server

utilization, demonstrating the system’s ability to manage scale, Infosys said.

“Any large project of this scale, especially a transformative one like this has to deal with changes

in both policy and stakeholder usability,” the company said.

Since July 1, the GST Council and the Ministry of Finance have changed the tax rates on more

than 100 goods and services, and have issued more than 40 notifications, clarifications, and

corrections. Return filing deadlines have been extended more than four times since the roll-out,

mainly due to the problems being faced by taxpayers in logging onto the server, which often

couldn't cope with the load.

Last date for July & August was extended

Businesses will have more time to file the final goods and services tax (GST) returns as the

government extended the last date for filing of sales and purchase data as well as payment of

taxes for the months of July and August.

Now sales return or GSTR-1 for July will have to be filed by 10 September instead of 5 September

earlier and purchase returns or GSTR-2 would be filed by 25 September instead of 10 September

earlier. GSTR-3, which is the match of GSTR-1 and GSTR-2, will have to be filed by 30 September,

in place of 15 September.

“GIC (GST Implementation Committee) decides to extend date of GSTR 1, GSTR 2 and GSTR 3 for

the month of July to 10th, 25th and 30th September 2017, respectively,” the government said in

a tweet.

With regard to August, the date for filing GSTR-1, GSTR-2 and GSTR-3 has been extended to 5

October, 10 October and 15 October from earlier 20 September, 25 September and 30

September, respectively.

The industry has been demanding an extension of the date of filing final GST returns in view of

scores of invoices to be uploaded.

The government will shortly issue notification to extend the date of filing returns.

In the initial returns filed in form GSTR-3B, taxes worth Rs92,283 crore were collected for July

from just 64.42% of the total taxpayer base. Of the 59.57 lakh businesses, who should file return

for July, as many as 38.38 lakh taxpayers accounting for 64.42% of the total businesses who had

registered in July had filed their GST returns.

Through a notification last week, the central board of excise and customs (CBEC) had waived fee

for delayed filing of GSTR-3B and had allowed businesses to correct errors in the initial return

form while filing the final returns. It also said that entities who had not filed GSTR-3B can file the

final returns in GSTR-1, GSTR-2 and GSTR-3 and pay taxes.

Statistics

Nearly 37 lakh GST returns for September have been filed till 1900 hours and 75,000 sales data

is being uploaded on the GSTN portal on hourly basis, its Chairman Ajay Bhushan Pandey said.

The deadline for filing the initial returns in GSTR- 3B for September under the Goods and Services

Tax regime ends midnight yesterday. In an interview to PTI, Pandey said the GSTN system is stable

and has been handling data at just 30 per cent of its capacity with 20 lakh returns being uploaded

in last two days.

Pandey said 36.84 lakh returns have been filed till 1900 hours.

"The pace of filing is picking up with an average 75,000 returns being uploaded on an hourly basis.

GSTN system is stable. We hope more people are able to file return within the due date," he said.

Since the roll-out of GST on July 1, this is the third month for which businesses have to file GSTR-

3B returns listing out details of their sales. For July and August, 55.68 lakh and 50 lakh returns

had been filed, fetching Rs 95,000 crore and Rs 92,000 crore in revenue, respectively. Pandey

said that in the first two months, businesses have also uploaded returns after the end of due date

and the number for September returns would go up eventually.

"If we see the capacity of the network, GSTN is using only 30 per cent of its capacity. So, there is

a lot of headroom available for the server to upload more number of returns," Pandey said.

GSTN Outreach & Capability Building Initiatives

There has been a paradigm shift in the tax regime and for its wider acceptance, dissemination of

information and knowledge to all stakeholders is the first step for its success. Our effort is to

provide support and promote self- learning through various artefacts like videos, user manuals,

FAQs. Also, we are using WebEx and webinar as a means for dissemination of knowledge. All the

learning material is readily available in the Help section of GST portal (www.gst.gov.in). Apart

from the help section other material like step by step guide, videos, GST master class etc. is also

uploaded on social media channels YouTube, Facebook etc. Twitter handle (@AskGSTech) is used

to constantly update the stakeholders about new functionalities made available on GST Portal.

Constant efforts are made to resolve queries received through social media, and helpdesk.

AUGUST 2017

• WEBINARS CONDUCTED

Webinars are being conducted in regional languages for a wider reach among the

taxpayers so that it is easily understood and maximum benefit can be taken from this

initiative by all stakeholders. Viewership of more than four lakh taxpayers for 18

Webinars conducted so far by GSTN has made this initiative a success by all means. We

are very hopeful that it will lead to a better understanding of the GST portal by the

taxpayers and enable them in using the GST Portal effectively. The webinars conducted

so far are available at various platforms like • GSTN YouTube Channel: https://www.youtube.com/channel/UCFYpOk92qurlO5t-Zy-

bOQ/featured

• NEGD: www.kms.negd.in

• My Gov Portal: www.MyGov.in

• TRAINING FOR HELPDESK

The executives of helpdesk have been trained regularly so that they are well equipped to answer

the queries of the taxpayers. Major topics like GSTR 3B, TRAN 1, GSTR 1, Offline utility, payments

and ledgers were covered during the sessions in the month of August.

Training material available for the enhancement of knowledge like webinars, CBTs, User Manual,

FAQs, help section of GST

Portal were propagated among the executives so that they can guide taxpayers to use GST Portal.

In this month several visits were done by module owners to disseminate the finer nuances of

some important aspects of GST. On 22nd August 2017 Shri Shashi Bhushan Singh and Shri

Bhagwan Patil addressed pertinent issues received through helpdesk on TRAN1, TRAN 3 and

GSTR3B. On 28th August 2017 Shri Bhagwan Patil and Shri Pankaj Arora also visited the helpdesk

to address issues related to new releases like GSTR 1, GSTR2, Payment ledgers and they also

covered TRAN 1 and TRAN 3 processes. Migration related queries were also discussed during

session.

• TRAINING FOR TAX OFFICIALS

WebEx sessions for State Tax Officials were also conducted to address the queries regarding

GSTR3B, TRAN 1 & TRAN 3. On 21st August 2017, 8 States attended in the morning session and

12 states attended in the afternoon session. Some states are proactively conducting sessions for

the taxpayers in various districts in their States.

• TAXPAYER EDUCATION THROUGH SOCIAL MEDIA

In the month of August our focus has been to strengthen the content available on social

media channels like YouTube, Facebook and twitter. The video tutorials were made

available on almost all aspects of registration, payment and relevant parts of returns. The

information on social media channels of GSTN has been giving the required support to

taxpayers with respect to the functionalities and law related aspects. As of now 18

webinars and 28 video tutorials are uploaded for the benefit of taxpayers on GSTN

YouTube channel. Twitter handle is also being used to guide taxpayers. Apart from these

tools the training artefacts like User Manual and FAQs are available on the GST Portal

under help section. Self-learning always pays great returns, the Computer Based Tutorials

(CBTs) actually helps the taxpayers to learn about the various functionalities of GST Portal

by viewing it. We have introduced the following User Manual & FAQs in August.

• Application for TDS/TCS Registration

• Application for Amendment of Registration - Non-Core Fields

• Transition Form 1

• Provisional Return Filing for self-declaration of Taxes (GSTR 3B)

• Broadcast Message

• Directory of Officials

SEPTEMBER 2017

• WEBINARS CONDUCTED

Webinars have been giving the right kind of platform for GSTN to disseminate necessary

information for taxpayers. Since the GST regime is new, we wanted to guide our taxpayers

to follow the correct steps for using the GST Portal. Webinars have been giving the tips

and guidance, which helps our taxpayer to comply with the GST regime smoothly.

• TRAINING FOR STAKEHOLDERS

Training for CSC Executives

One-day training was conducted for executives of CSC to familiarize them with all functionalities

of GST portal. The executives trained through this session will further go for training taxpayers in

various parts of India. CSCSPV (Ministry of IT Company) officers Training was scheduled on

September 15, 2017 at their Okhla office.

Training conducted by NIELiT Master Trainers

Around 40 Master Trainers trained through NIELiT, Kolkata in the month May 2017, had further

conducted 13 workshops/trainings in neighboring North-Eastern states to train taxpayers in using

GST portal. Master Trainers trained total of 757 stakeholders as per the details given below:

Training for Taxpayers Help Desk Executives

Training was also conducted throughout the month of September, 2017 for helpdesk executives

who will be further training other executives in their team. Sessions were conducted to address

issues asked by the taxpayers frequently on the helpdesk. This month DSC related issues were

discussed at length so that effective solutions can be provided by the executives to the taxpayers.

• TRAINING FOR TAX OFFICIALS AND TAXPAYERS

Interactive session was conducted for Tax Officials from various States in Bangalore on 15th Sep

2017. Also, a meeting of Group of Ministers for IT implementation was conducted at Vidhan

Soudha, Bengaluru on September 16, 2017. The queries were answered and mechanism was

developed for handholding the states regarding the technical issues faced by taxpayers while

working on GST Portal so far. Apart from this, some states from Central & Eastern part have also

organized awareness sessions for taxpayers in a big way during the month of September, 2017.

Several Webex sessions were conducted for tax officials in the first week of the month. Officials

from 17 States and CBEC attended the sessions to address the issues while processing the

registration application.

Apart from other sources of information online, television has a wider reach to the section of

taxpayers. The GSTN team also took the initiative of conducting GST Ki Masterclass with help of

CBEC for addressing the common technical issues with their resolution for the tax payers. First

session was telecast on DD News on 29th September, 2017 which largely covered issues related

registration and migration on GST Portal. Subsequent sessions will address other issues faced

while filing returns and adding invoices.

OCTOBER 2017

• WEBINARS CONDUCTED

• TRAINING THROUGH WEBEX

Throughout the month, Training for State Tax Officials was done from time to time by conducting

training through WebEx. Whenever a new functionality was released sessions were conducted

to create awareness about new features and tips to navigate through GST Portal. WebEx sessions

were also conducted for Helpdesk Executives to reduce the time lag in disseminating information.

New functionalities released during the month like ITC04, PMT 07 etc. were discussed and

explained at length to relevant stakeholders.

• SOCIAL MEDIA

Digital media has a lot of buzz around GST as it is a new topic for taxpayers and other

stakeholders, hence need was felt to provide enough material on social media so that

taxpayers have an authentic source of accessing information/latest developments on GST

Portal.

1. YouTubeChannel

(www.Youtube.com/c/goodsandserv

icestaxnetwork).

The subscriber base of the official

channel has increased manifold in

the past one month, currently 19000

subscribers are regularly being

engaged through the following

artefacts:

i) Webinars: The recordings of

29 webinars is available

under the playlist for easy

access. Webinars alone have

viewership of more than

40,000 views.

ii) Videos: 28 short videos are

uploaded to guide taxpayers

to follow steps for navigating

through the GST Portal. In the

playlist videos have been

arranged in the order of

relevant functionalities like

registration, returns,

payment.

iii) GST ki Masterclass: Queries

and concerns of the

taxpayers were addressed

and telecast on Doordarshan,

as Television has a wider

reach among taxpayers. The

recording of these episodes is

made available so that users

of social media can also

benefit from it.

iv) Interviews: The leadership

team of GSTN addresses the

media from time to time

about latest developments

on GST which are also made

available through YouTube

channel to create awareness.

v) Workshops for Taxpayers:

GSTN also participates in

workshops being organized

by various trade bodies like

FICCI, ASSOCHAM etc. The

recordings of some of these

workshops are also available

so that the Q&A sessions can

benefit other taxpayers as

well.

2. Facebook:(www.facebook.com/gsts

ystemsindia)

The most popular social networking

site like Facebook is actively being

used to announce the latest

developments on GST Portal. The

dissemination of important dates

and introduction of new features on

GST portal is also done regularly.

c) Twitter: (@AskGSTech)

Twitter handle is used to announce the latest

developments on GST Portal. The effort is

also made to guide tax payers by sharing

brief step by step creatives about the new

functionalities on GST Portal. Dissemination

of notifications is faster through the twitter

handle.

Conclusion

Since India dealt with a very complex system of VAT and simplifying it is a very tedious task.

Every now and them, policies are formed based on people and businesses grievances. It would

take a while to develop a smooth working system by resolving loopholes time-to-time.

Currently, Government of India and GoM has decided not to extend any more deadlines as it did

for July and August due to the failure of the GSTN but in our view, it will totally depend on the

conditions that would be prevailing in the upcoming months.

References

1. Late Date Extended:

http://www.livemint.com/Industry/IP0OcCSuNOQE0XN4yqVY1J/Last-date-for-filing-of-

GST-returns-for-July-August-extende.html

2. GST Returns:

http://www.zeebiz.com/india/news-62-taxpayers-file-final-gst-returns-for-july-2017-

what-happens-to-those-who-missed-27501

3. Forms of GST Returns:

https://www.taxmann.com/blogpost/2000000043/gst-returns-types-forms-due-dates-

of-gst-returns-2017.aspx

4. Glitches in GSTN:

http://www.thehindu.com/business/Industry/gstn-glitches-policy-changes-to-

blame/article19969532.ece

5. Infosys Criticism:

https://economictimes.indiatimes.com/news/economy/policy/infosys-is-to-blame-for-

gst-network-glitches-say-government-officials/articleshow/61377204.cms

6. Technical Glitches:

http://www.thehindubusinessline.com/news/national/gstn-technical-glitches-will-be-

resolved-by-octend/article9862978.ece

7. GSTN Official Site:

http://www.gstn.org/

8. Chaos in filing returns:

https://www.pgurus.com/gst-network-gstn-collapses-chaos-all-over-in-filing-returns/