The government today approved setting up of a special purpose vehicle (SPV) to provide IT infrastructure for roll out of the proposed new indirect tax regime Goods and Services Tax (GST).

The Cabinet, chaired by Prime Minister Manmohan Singh, approved the proposal to set up Goods and Services Tax Network SPV (GSTN SPV) to create enabling environment for smooth introduction of GST, HRD and Telecom Minister Kapil Sibal told reporters here.

"GSTN SPV will provide IT infrastructure and services to various stakeholders including the Centre and the States," he said, adding the SPV would have an equity capital of Rs 10 crore, with the Centre and States having equal stakes of 24.5 per cent each.

Non-government institutions would hold 51 per cent equity in the SPV.

Sibal said that no single institution would hold more that 10 per cent equity, with the possibility of one private institution holding a maximum of 21 per cent stake, Sibal said.

"GTSN SPV would have a self-sustaining revenue model, based on levy of user charges on tax payers and tax authorities availing its services," he added.

The GSTN SPV would be incorporated as a Section 25 (not-for-profit), non-government, private limited company in which the government will retain strategic control.

While the SPV's services would be critical to actual roll-out of GST at a future date, it is also expected to render valuable services to both the Centre and State tax administrations prior to implementation of the indirect tax regime.

GST would subsume levies like excise, service tax and states tax like value-added tax, entry tax and purchase tax.

While the GST Bill is currently being studied by a parliamentary standing committee, the structure of GSTN has been approved by the Empowered Committee of State Finance Ministers.

It will be set up as a National Information Utility and become operational by August 2012, Finance Minister Pranab Mukherjee had announced in the Union Budget.

The GSTN will implement common PAN-based registration, returns filing and payments processing for all States on a shared platform.