The Design of It Infrastructure for Gst

Based on the Paper 'The IT Strategy for GST' by the Empowered Group on IT Infrastructure on GST headed by Shri Nandan Nilekani

WHAT IS GST?

The GST OR GOODS AND SERVICES TAX is a value added tax which is to be implemented in India by April 2012. GST is a tax on goods and services with continuous chain of set-off benefits from the producer's point and service provider's point upto the retailer's level. It is essentially only a tax only on value addition at each stage, and a supplier is permitted to set-off at each stage, through a tax credit mechanism. The GST paid on the purchase of goods and services as available for the set-off on the GST to be paid on the supply of goods and services. The final consumer will thus bear only the GST charged by the last dealer in the supply chain, with set-off benefits at all previous stages.

The Goods and Services Tax will replace all indirect tax levied on goods and services by the Indian Central and State governments. GST is aimed at being comprehensive for most of the goods and services in India with little tax exemption.

STAKEHOLDERS OF GST

Following are the MAIN STAKEHOLDERS OF GST:

CBEC - Central Board of Excise and Customs is at central government level and will be responsible for collection of Central-GST (CGST) and Inter State-GST (IGST).

State Tax Authorities - The State tax authorities would be responsible for collecting State-GST (SGST).

Small and Medium Enterprise Taxpayer - Major economic activity in India is in SME sector. They are small taxpayers but important stakeholders.

Corporate Taxpayer- They are big player in economy and operate across various states and are big taxpayers.

Reserve Bank of India - RBI will play the role of a facilitator. It will facilitate the interface with various banks to facilitate movement of state's and centre's funds.

Banks - Banks will accept and collect duties from taxpayers and also process challans. Banks will route the tax collected to the concerned authorities through the RBI channel.

Apart from these main stakeholders other stakeholders will be CAG, TRPs and facilitation agencies.

ROLE OF IT IN GST

GST is one policy which is going to be implemented across India. IT has a big role to play in effective implementation of Goods and Services Tax. Without a well-designed and well functioning IT system full benefits of GST cannot be achieved. By digitizing and automating the whole chain, IT system will reduce delays, middlemen and number of channels for facilitating GST collection. IT system will provide a common platform so that there are no issues in reconciliation of accounts. Internet usage is already increasing in India, so by using IT system GST policy can reap benefits of internet user base to facilitate collection of taxes.

IT VALUE PROPOSITION

IT system will bring about many advantages or values to GST policy.

Enable Digitization and Automation of the Whole Chain: All the business processes surrounding GST would be automated to the extent possible, and all documents processed electronically. This will lead to faster processing and reconciliation of tax information and enable risk based scrutiny by tax authorities. For small taxpayers, facilitation centers can be set up to ease the migration to GST.

Uniformity of Policy Administration: The business processes surrounding GST need to be standardized. IT system will provide the tools for standardization. Uniformity of policy administration across states and centre will lead to a better taxpayer experience, and cut down costs of compliance as well as tax administration.

Simplicity for Taxpayers: The process of filing of tax returns and payment of tax should be simple and uniform and should be independent of taxpayer's location and size of business. By using IT, it will be possible for taxpayers to pay their taxes from anywhere, anytime. In addition, the compliance process should not place any undue burden on the taxpayer and should be an integral part of his business process. It system will facilitate the compliance process.

Respect Autonomy of States: The design of the IT system would respect the constitutional autonomy of the states. Several business processes will be re-engineered as a new IT system for GST is put into place. There would be no dilution of the autonomy of states as a result of the IT system, or the re-engineering. On the contrary, IT system would strengthen the autonomy of states.

Reduce Leakages: A fully electronic and IT based GST can dramatically increase tax collections by reducing leakages. Tools such as matching the input tax credit, data mining and pattern detection will deter tax evasion and thus increase collections.