With Goods and Services Tax (GST) set to roll out on July 1. Experts says it could get messy because of GSTN. To clarify all the doubles CNBC-TV18 caught up with Navin Kumar, Chairman, GST Network (GSTN).
Kumar said all the criticism over messy rollout are unfounded and they are well prepared to roll out GST on time.
He further clarifies about the rationale behind giving a two-month extension to companies for filling tax returns and talks about how they plan to assist the industry. He also assures that the absence of E-Way system will not impede movement of goods.
He is very hopeful of getting good number of new tax payers.
Below is the verbatim transcript of the interview.
Q: Let me begin by asking all set for July 1, there is a complete clear structure from the Goods and Services Tax (GST) Council also. We will see a full rollout on the midnight of June 30. But let me begin. A lot of people have been highlighting that GST rollout all set for July 1, but it might be a little messy because of goods and services tax network (GSTN). If you can give your comments to it that is GSTN prepared or not? There are a lot of people talking about it. A messy rollout in the beginning?
A: Let me tell you. These criticisms are totally unfounded because we started preparing for GST rollout way back in November, 2015 and there are two essential precursors for rollout of GST. The first is migration of the existing tax payers and the second is to start the registration for new tax payers.
Now the first one, as you know, we exposed our GST portal in November last year and the enrolment process started. It has continued up to April and then we again reopened the window in June from June 1 to June 15. Now in these two phases, out of 80 lakh tax payers, we have already enrolled more than 65 lakh tax payers. That is about 80 percent. So, that part is already taken care of but we have been receiving requests that there may be some people still left out, so we are reopening that window from June 25. So that is one part.
The other part, as I said, is registration of new tax payers. Anybody who wants to do business now but is not registered under any of the previous existing taxes, then he can register afresh. That window also we are starting from June 25. Therefore, you see we are totally prepared and set to roll out GST not from July 1, but even from before that.
Q: As you said that you are going to open fresh windows and everything is all set, but yesterday at the GST Council, we saw that the return filing, the process has been delayed. In the meantime, there is an arrangement also. But a lot of critics say that this itself is an example that GSTN is not ready. How would you like to see the delay and how would you like to place it?
A: People are entitled to their opinions. I cannot change their views or opinions, but the fact is, media is the vehicle through which we get all the reactions and the requests of businesses and they have all been talking and they all been requesting the government that they need more time. They need more time to prepare themselves, they need to adapt their internal governance systems to the new compliance requirements under the GST Acts.
The second thing also is by allowing this deferment of the filing of the first tax return, what is going to happen is that all these businesses will be able to come to our website from July 1 and they will be able to see what is there. They will be able to familiarise themselves with various applications that we have. We have different applications for different activities. So they will be able to see that, work on them and that will be very useful for them to work on our system.
You must realise that there are two very important activities which the GST Acts enjoin upon the tax payers. First is, for business to business transactions, all the invoice data has to be put on the GST portal. That is one very important thing. So GST invoice data upload is a very important activity.
The other important activity is that once this data comes on our system, the system will auto-draft these invoice data into the purchase register of the buyers and they are supposed to look at that, download that, match with their own purchases and then say whether they agree with those or not.
The first one is important because if there is any mistake in that, it will impinge on the tax liability of the tax payer. And if there is any problem in the second part that is scrutinising the invoices with the purchase return, it will impinge on the input tax credit of the buyer.
Therefore these are very critical activities and the tax payers need to be acquainted with the applications that we have for this. This is providing this additional time to them to get familiar with this and work on the system.
Q: As you said, you are just trying to assist the industry by providing them additional time, let me ask you what are the steps that you are going to take to assist the industry in this additional time, the additional window that you are doing? Any specific steps that you are taking to help small and medium enterprises (SME) who have been crying a lot. A lot of big industries, aviation railways, they are also saying that we are not GST ready. Banking sector is a big one which has been saying that they are not GST ready, they need more time. What are the specific measures that GSTN is now going to take to make them GST ready?
A: There are two aspects to this. When a business says that I am not ready for GST, in fact they are talking about two things. One is their own systems, their own accounting systems, their own inventory systems, the manner in which they will compile the data and prepare the returns or put the invoice data. That is one part.
The other part is how they are going to put their information onto our system. To facilitate that, what we have done, particularly keeping in view the SMEs, because of smaller businesses, they can come on our portal and enter the invoice data over there. But for the SMEs who have, in a month, say 5,000-10,000 invoices or even more, 50,000 invoices, for them it is not possible to do that on our website directly. So for them, we are giving an offline tool which they can download from our websites and they will be able to input their invoice data in that excel sheet and this tool will import this data, upload on our website.
So this is one thing that we are going to do and during this period, the SMEs will be able to use this offline tool. They will be able to upload the data on our system and once that data comes on our system, it goes into the purchase register of the buyer, they will be able to look at this. If they find that something is missing, they can talk to the seller and then make those corrections. So they will have July and August, two months' time to do all this.
Q: Let me also ask you that this delay, is it going to hit the revenues of the government because a lot of matching will happen later on. Your goods and services tax returns (GSTR) 1 gets filed late, your GSTR 2 gets filed late and the GSTR 3 which actually synchronises both, the supplier and the receiver data will also get delayed. So will it have any impact on the taxes, on the revenue collections of the government?
A: There is a provision in the act which says that when the submission of GSTR 1 or 2 are delayed, in that case, the government can ask the tax payer to file a kind of summary return in form of GSTR 3b. There he will enter his tax liability and he will make tax payment on the basis of that.
So what will happen, since the July return which was supposed to be filed in August is getting postponed to September, on August 20, they will submit a return in GSTR 3b and they will deposit the tax together with that. Similarly, on September they will do that for the month of August. So the flow of revenue into the governments' accounts will not be impeded.
And what happens, finally when they submit their GSTR 1 and 2 for the two months, the system will prepare the GSTR 3 and it will be compared with the information given in 3b and if there is any shortfall, then the tax payer will have to pay that. If they have paid extra, then it will go and rest in his cash ledger.
Q: So it will be a computer automated thing which will then later on try and fill in for the initial delay and maybe later on a tax payer, if he has not declared enough, he will have to pay more or if there is a due to input tax credit then he will get it back as a reimbursement?
A: That is right.
Q: Let me also ask you something which was a big issue yesterday in the GST Council, that is the e-waybill. There was a clear understanding that there will be ruled laid out for the e-waybill which will actually try and see the smooth movement of goods from one state to the other, but there is no resolution that the council could achieve in the discussions yesterday and e-waybill is still under ambiguity, whether it will come, it will come in what shape, we do not know. And this is something, movement of goods is actually based on the e-waybill. If you can explain where we are currently and later on I agree, I believe that there will be some stage when e-waybill will be a reality and states will actually come on a common platform. What will be the infrastructure now in the meantime and what are you looking at in the e-waybill once there is a common platform that all the states reach to a common conclusion and they start acting on the e-waybill?
A: As you said, in the council meeting, a final decision could not be taken on the e-waybill, so the interim arrangement that has been made, as announced by the minister yesterday is that the present arrangements for regulating the traffic, the goods traffic which is existing in the states, that will continue. Many states have this transit permit system, it is known by different names, that will continue.
But let me also tell you that I know that many states, in anticipation of rollout of GST have already taken a decision to remove their check posts. In yesterday's meeting also, the hope was expressed that states will go ahead and remove the check posts so that the movement of goods is not impeded even when the e-waybill system is not there.
Now, how e-waybill will play out, I cannot predict that, but sometime back, we had been asked to work on that, so we had prepared a proposal and we had prepared the scope of work for that. So once the rules are finalised, once the council takes a decision that e-waybill system has to be brought in then we will see how that process is to be taken forward and implemented. So at this time, we can only say that e-waybill thing is a work in progress.
Q: As you said, you had prepared a proposal, if you can share a brief highlight of the proposal, what was it because GSTN must be preparing at the back on the basis of that proposal only. And sooner or later, we will see one e-waybill coming through the GST Council with a formal nod.
A: The whole idea was that the law requires that when goods are moved on a carrier, it must be accompanied with certain documents which will indicate what is being carried and what is the tax paid, etc. So the idea was that the consigner that is the seller or the transporter should be enabled to generate electronically an e-waybill on our website, not necessarily on the GSTN website, but some website which is linked to GSTN. And that information, the driver of the vehicle can carry on his mobile in a soft form. And wherever any tax officer wants to check whether the goods being carried are authorised, whether the tax is paid or not, etc. then he will be able to look at this number and then verify from our website. So this was basically the kind of system we were thinking of. But all this can be finalised. I mean what shape it will come, it will depend on what kind of rules are made.
Q: If I may ask, what is the way forward in these last few days of GST coming to a reality because July 1 is very close and I am sure GSTN must be now working day and night to get the GST rolling exactly on day one of July. What is now, the way ahead in these last few days of GST rollout?
A: As I mentioned in the beginning, June 25, we are starting the registration for new tax payers. Enrolment will also come. Now, in enrolment what we have found that 65 lakh tax payers have already activated their accounts, but only about half of them have submitted it with DHC or e-sign or e-receipt. So the remaining people, we are going to tell them through e-mail. We will convey what is known as acknowledgment reference number (ARN) to them
Q: This is a verification of the person who has registered?
A: Yes, it is an acknowledgement that he has filed all the information on the website. This number is required before he gets the provisional certificate of registration. So that we are going to send by e-mail and then on June 27, everybody who has submitted his application for enrolment, they will get provisional certificate of registration in their account on our website. This is one thing that is going to be done.
Then the people who have not activated their accounts at all, their number is also about 15 lakh, I would like to urge all of them to come to the portal and activate their accounts and fill their application for migration. Now I understand that many of these people, who are actually below Rs 20 lakh and the threshold now is Rs 20 lakh, earlier it used to be Rs 5-10 lakh in value added tax (VAT), so some of these may not want to register, so it is fine. But anybody who wishes to continue his business during the GST and he is above Rs 20 lakh, he should come and enrol himself. That is one.
The second is, according to the tariff, etc. which has been announced, there are some new sectors coming under taxation, so these people would like to come and register themselves. So they can come to the portal from June 25, but I want to tell them that there is no rush for them because they will have one month time during which they must obtain registration. So it is not necessary to rush on June 25 only, they can easily, at their convenience register themselves.
Q: Which are these industries to whom you are referring to?
A: For example, there are some sectors like textiles, I believe sugar and like that.
Q: E-commerce also part of it if I am not wrong? A lot of e-commerce players were saying that they are unable to register and they will now be registering in the new assessees window?
A: Yes, their registration will also take place, but their numbers are small. That is not very difficult to do it. Their numbers are small. But new tax payers may be in good numbers. So we are prepared for all of them and they should come and register themselves.
Q: Recently, on the last day if I am not wrong, June 15, there were technical glitches that the GST portal saw and it was pulled down for a few hours. If you can just elaborate that, how are you going to deal with such technical glitches?
A: What happened was 15 days the site was open, but on those days the total number people coming was 30,000-50,000, but on the last day, there was a great rush. And there was a problem because one of the hardware components failed. So we replaced that. When you run a big system like this, glitches come. Our success will lie in the fact that how quickly we handle that and we fix that. So we fixed it and on the last day also, more than 50,000 people actually enrolled themselves.
Q: Even after the technical glitch?
A: Even after the glitch. Not only that, more than two lakh people were able to submit their applications with DHC or electronic verification code (EVC) or e-sign. So that is how we handle that.
And I also want to tell the existing tax payers and would be tax payers that when they come on our website, if they have a problem, we have a helpdesk. They should get in touch with the helpdesk. Now from June 25 onwards, this helpdesk we are equipping them with special facility that if any particular tax payer has a problem and he on the instructions or the advice given by helpdesk, he is not able to resolve it, then if the tax payer permits, the helpdesk can takeover his screen and they can resolve the problem themselves.
Q: Maybe I can give me user id and password to that person and he can enrol?
A: No, it is not necessary. There is a software which can takeover your screen and then tell you how to go about it. So it will be very easy to do that.
Q: So, quite user friendly?
A: It is very user friendly. We are there to help all the tax payers, comply with all the provisions of the act and any problems that we have on our portal, we will be able to take care of it.
Q: One quick last question. As you said, security, cyber security is still a concern. How secure is the data on the GSTN portal because technical glitches we saw, they can be corrected, but what about the data hacking? Data hacking is something which even the government is grappling with right now and people are quite sensitive about their data. It is about their marketing schemes, their client base, it is about business and their business data getting hacked or something is what people would not like to be in such a situation and they are not happy.
A: This particular aspect has engaged our attention right from day one. And in fact when we floated the request for proposal (RFP) for selecting the IT partner, we put a specific section on security and indicated all our requirements. So the IT system that has been developed, we have built in a lot of security into it. In fact we call it a layered security structure and our system will be ISO 27001 certified which is known to be the best information security management system in the world today.
So at every level, at the physical security level, at the network level, at the data level, at the application level, security tools and measures have been built in. even while writing the code, the secure coding practices have been used and we will running a security operation centre 24/7/365 which will keep an eye on all the traffic that is coming and going and if there is any indication of any problem, they would raise alarms and then will take action. So we are taking all care to ensure that the data that we see from the tax payers is secure.
Q: I am sure to run such a system and that too, at this stage, you must be meeting a lot of service providers such as Infosys, Wipro, Tata Consultancy Services (TCS) who are in one way or the other associated with GSTN. How have these meetings been and recently, we saw Infosys Chief, Vishal Sikka meeting Finance Minister, Arun Jaitley. He did talk about the preparedness of GSTN. I am sure you are aware about it. If you can just give us a brief highlight of such meetings and what happened in that meeting if you are aware of it.
A: We are not meeting companies one to one, but myself, the CEO and our officers have been interacting with various trade associations and through them we have been talking to all the tax payers which include IT companies also. And we have been trying to take feedback from them and also to understand their requirements and then we tell them what we are doing about it.
So these interactions have been very useful. In fact, based on many of these interactions, we have incorporated many changes in our system. So that is how we are going about it.