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 Notification No. 39/2019 Central Board Of Direct Taxes

GST Network operating expenses to be funded by user fee
October, 07th 2016

Clearing the ambiguity over the funding of operating costs of the Goods and Services Tax Network (GSTN), the government has decided that an ‘assessee-based user fee’ would make up for the bill.

GSTN, a not-for-profit, non-government firm, would provide IT infrastructure and services to the central and state governments, taxpayers and other stakeholders for implementation of the Goods and Services Tax (GST).
“The Centre and states will pay user fees based on the number of assessees registered with each of them to meet the running expenses of the GSTN. It will work on a no-profit-no-loss basis,” a senior finance ministry official told FE.

Currently, the Centre has over 16 lakh indirect tax assessees, while states such as Gujarat, Karnataka, Maharashtra, Tamil Nadu, Uttar Pradesh and Delhi have more than one lakh assessees. With the implementation of GST, the government expects the number of taxpayers under indirect tax laws to increase from 36 lakh currently to about 65 lakh.

The Narendra Modi government’s plans to roll out GST from April 1, 2017. The GST Council, chaired by Union finance minister Arun Jaitley, is already working towards finalising the structure of the new tax law and two rounds of meetings are already concluded.

GSTN has hired Bengaluru-based Infosys on a project worth Rs 1,380 crore to buy and instal the IT infrastructure required for the network to function and to maintain it for five years. Of this, Rs 550 crore is towards capital cost. GSTN will reportedly subscribe to a loan to fund the expenses, and the repayment liability will be synced with the user charge. GSTN was incorporated on March 28, 2013. At present, the central government holds 24.5% equity in GSTN and all states hold another 24.5%. Balance 51% equity is with non-government financial institutions, including LIC Housing Finance, ICICI Bank, HDFC, HDFC Bank and NSE Strategic Investment Corporation.

GSTN has been initially funded through a one-time non-recurring grant in-aid of Rs 315 crore from the Centre towards expenditure for the initial setting up and functioning of the SPV for a three-year period after incorporation. After rolling out of GST, the revenue model of GSTN shall consist of user charge to be paid by stakeholders who will use the system and thus, it will be a self-sustaining organisation.

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