1.1 Introduction to GST
System The Goods and Services Tax (GST), which will replace the State VAT, Central Excise, Service Tax and a few other indirect taxes, will be a broad-based, single, comprehensive tax levied on goods and services. It will be levied at every stage of the production distribution chain by giving the benefit of Input Tax Credit (ITC) of the tax remitted at previous stages. GST is based on a destination-based taxation system, where tax is levied on final consumption. It is expected to broaden the tax base, foster a common market across the country, reduce compliance costs, and promote exports. The GST demands a well-designed and robust IT system for realizing its potential in reforming indirect taxation in India. The IT system for GST would be a unique system, which will integrate the Central and State tax administrations.
1.2 Introduction to GSTN
Goods and Services Tax Network (GSTN) is a Section 25 (not for profit), non-Government, private limited company set up primarily to provide IT infrastructure, systems and services to the Central and State Governments, tax payers and other stakeholders for supporting implementation and administration of the GST in India, hereinafter also referred as “GST System” or “GST System Project”.
Based on consensus amongst States/UT’s and Central government on a common GST System, GSTN has been made responsible to build and operationalize this system as the only national agency.
The project of setting and operations of IT infrastructure for enabling country wide GST rollout is a unique and complex IT initiative. It is unique as it seeks, for the first time, to establish a uniform interface for the taxpayer 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 silos.
GSTN has embarked on a journey to implement from ground up a modern, automated, fully digital tax infrastructure also called as “GST System”. The importance of this initiative and the resulting considerations are as follows:
a) It would have a Large social and economic impact
b) It has adequate potential to be a major driver for the local tech ecosystem if designed and architected carefully
c) While architectural scalability is enormous, the required technologies are available to build an open system
d) Powerful economic and convenience incentives to stay in the system rather than outside the tax system to reduce tax evasion and compliance
e) Convenience and user experience via ecosystem provided applications to overcome resistance from the taxpayers
f) Powerful economic incentives to evade tax compliance need to be tackled
g) Convenience and user experience are key to overcome resistance from the taxpayers
h) Seamless end-to-end interaction with the infrastructure is paramount
i) Fraud/evasion attempts need to be reliably identified