The GST Network (GSTN), a non-profit, non-government organisation which manages the entire IT system of the GST portal has been at the receiving end for all the issues that cropped up in the course of the implementation of the Goods and Services Tax (GST) in India. Yet, in the past five months the organisation has steered India towards a new indirect regime, albeit on a bumpy road.

Here ETCFO caught up with Prakash Kumar , CEO, GSTN to get a sense of the key outstanding issues and the priorities for the coming months. Prior to this assignment, Kumar, an officer of the Indian Administrative Services (IAS) from 1985 to 2008, held positions at the strategic consulting arm of Cisco and then worked as the National Technology Officer at Microsoft India.

Kumar believes that the organisation got more flak than it deserved given the crunched deadlines it worked on for such a complex project. There simply wasn’t enough time to build and test the system and then educate the tax payers on the change. Excerpts from the conversation:

Q: What are the current challenges that are taking up your time?

Prakash Kumar : The main job at present is to complete the pending functionality and to develop the back-end for 27 states. Roughly 27,000 tax officers of these states work on our system. Earlier, we were planning to do this in phase two, but this item has been advanced forward. Functionality has to be made available for these states. Other nine states are doing their own backend with independent vendors.

Other than that there are some pending functionalities in the existing system. So, for example, we are working on the ‘appeal’ functionality. We never thought that it will be required so soon. But then, when registration is cancelled, people will go to appeal. So there are lot of such functionalities that we are focussing on.
Achieve marketing goals & improve ROI with Colombia NetworkCOLOMBIA Download now a free MProfit Portfolio Management SoftwareMPROFIT SOFTWARE PRIVATE LIMITED Recommended By Colombia

Another example is the refund process which we want to automate end-to-end. We have the next three months have to deliver on this. Today it is half automated and half manual – you apply and then the officer will go through each bill and approve. Next two to three months, the refunds would be done on the computers. The tax payers will not need to go to the tax officials.

Q: What are the other priorities?

Prakash Kumar : Based on this experience of the past five months for returns and the feedback from tax payers on GSTR1 and GSTR2, we are redesigning the whole system. For that a committee of 10 members has been constituted chaired by GSTN chairman and members from across the states. I am also a member.

What that committee is working on are ways to simplify how people will be interfacing with the system. ..

We have to redesign the software. Migrating the data from the existing system yet again will be a challenge. That is why I am here, to ensure that it is designed in such a way that data porting doesn’t become difficult.

We realised this when we were doing migration initially. We had do some minor changes, when we started porting that data into new format. We had massive challenges in July. Suddenly, the screens went blank and the user could see nothing. This was because a new field had been introduced and the system was not used to it. It took us a few days to find out what had happened. And, people get impatient. Our call centre had a meltdown, it has a capacity for 20,000 calls but that day we had 50,000 calls.

We will try and finish the redesign by December, so that we can develop and test it properly.

Also read: Five states ready to roll out E-way bill from Dec’ 17, says GSTN’s Prakash Kumar

Q: It has been a rocky journey so far…

Prakash Kumar : In IT, we say, one can walk on water provided it is frozen. Similarly, all functionalities are possible, provided the specifications are frozen. However, that almost never happens.

Since everything had to be redesigned from June onwards, we decided to do it in phased manner – first GSTR1, then GSTR2 and finally GSTR3.
In a short period of time we couldn’t have given everything, provided every functionality. For example, in a house, you construct the house floor-by-floor and then you do the furnishing.

In a short period of time we couldn’t have given everything, provided every functionality. For example, in a house, you construct the house floor-by-floor and then you do the furnishing.

By now, we have provided majority of the functions on the portal. The remaining we will do so in the next couple of months.

For instance, earlier this week, we implemented another feature. Earlier, tax payers were depositing tax under wrong heads. For example, if they had to submit the tax under SGST and they deposited it under cess by mistake then you had to seek refund for that. The money goes to the respective government.
It could not be corrected here.

Now, you deposit tax and it goes into your cash ledger, which works as wallet from which you make payments. So this is the mechanism through which you will get refunded. Now, if I have no liability it is only for 13 months that the money will go unutilised. I can't even use it.

Q: The small tax payers have been the ones who really suffered the most. The big companies managed…

In IT, we say, one can walk on water provided it is frozen. Similarly, all functionalities are possible, provided the specifications are frozen. However, that almost never happens.

Prakash Kumar: There is a data analysis on GSTR1 that has been filed so far. Around 95% of our tax payers had less than 50 invoices in their account. We had provided an offline tool you can transfer it into an excel sheet and sort it supplier wise. This could be eye-balled. Most of them managed to file GSTR1.

Our analysis showed majority of the returns filed were by small businesses. It was the big companies who had problems with thousands and lakhs of invoices, which had to be automated. We got back to the large businesses for problems.

So there was a unique problem that usually happens when the entire ecosystem is not prepared for such change. Many of them had not thought about how the matching will be done.

When the GSTR2, which has now been suspended, was to be filed they had to match it to their existing systems. GSTR2 is auto-drafted.

Big companies when they get material in batches, instead of filling one invoice they divide it into three parts--invoice 1/2/3. So instead of one entry, they had three entries while the GST returns had single line entries for such batches. No computer can match such information, unless you massage that data and bring it into alignment. The large ones, except one big conglomerate which was ready, ran into problems.

Q: How is the system working between centre & state? How is interstate GST (IGST) splitting between the two on your system?

Prakash Kumar : Currently, the buyer pays IGST to the seller. The seller reports it. The buyer can report this IGST for paying his tax liability too.

So there is a rule, that if he further exports to another state (export is used here to mean crossing the boundary into another state), makes use of IGST to pay and if selling locally then utilises SGST or CGST. This settlement is reported in their account – how much IGST/SGST/CGST has been paid. How much has been used to settle and so on.

Then towards the end of the month, we run a programme that looks into each return for the settlement between state and centre. That is called settlement report. We generate it for all returns filed. It is 40 lakh returns this month. Usually, the government requires it on 26th of every month or so. It is a huge document that says how much will go from centre to state and state to centre. It is mostly from IGST to states. Based on that settlement, the money passes hands.

Q: One of the major glitches in the GST system came from a return filed inappropriately. And the system thought it was a cyber attack. What measures have you taken to ensure that GSTN is secure?

Prakash Kumar : We can assure you that we have taken precautions, without going too much into details. As you know, 37 VAT and CBEC systems have merged into one. We are cognizant of that fact, apart from being rich in data, if the whole system goes down it will be a big issue.

So, from Day One, when we started last year, we have taken care in deploying these measures. Who accesses? How access is provided? How data travels? We also employ the technique of sharding. One taxpayer’s data is divided and kept in different places, so that the employees too cannot access that data.

Here in GSTN, what rate the person has paid GST is also sensitive commercial information. We have used best-in-class security systems from across the world.