Apart from the much-reported constitutional and political hurdles on a national Goods and Services Tax (GST), there is another basic one. Barely half of dealers in the country have a Permanent Account Number (PAN) from the tax department.
The proposed GST network (GST-N) needs a common information technology (IT) platform. In fact, an efficient IT infrastructure is essential for implementing a massive reform of the complex structure of indirect taxes at the central and state levels.
The aim here is to reduce the cascading effect of taxes, creating a seamless market across the country and improving productivity in the economy.
In a presentation before the Empowered Committee of State Finance Ministers on Tuesday, GST-N Chairman Navin Kumar said 6.5 million dealers are expected to be registered for GST. However, currently, of about 7.4 mn dealers registered for Value Added Tax (VAT) with the states, only 5.9 mn are active and only 3.2 mn or 54 per cent of active dealers have a PAN.
In the GST-N experiments conducted in 11 states, Maharashtra has fared well, in terms of number of active dealers with PAN registration. About 94 per cent of its active dealers have a matched PAN, compared with three per cent in Jammu & Kashmir, the lowest among all the states where the pilot was conducted.
Odisha, Assam and West Bengal have a little more than 80 per cent active dealers with a PAN card, followed by Gujarat (over 70 per cent), Andhra Pradesh and Punjab (over 60 per cent), Kerala, Karnataka and Tamil Nadu (over 30 per cent) and Delhi (19 per cent).
In places where such pilot projects have not been conducted, Uttarakhand, Chandigarh and Chhattisgarh are among the top performers. Nagaland, Mizoram and Sikkim are at the bottom. “We are spending Rs 30 crore for the early phase of GST-N,” said Abdul Rahim Rather, the committee's chairman.
The system will enable states to service their existing VAT dealers through the VAT module and simultaneously test the GST module. The integrated VAT-GST system would be so developed that the VAT reports are aligned to GST.
Implementation of GST-N would provide shared IT infrastructure and services to central and state governments, taxpayers and other stakeholders, even prior to GST’s implementation. GST-N will provide services such as common registration, return filing, settlement of interstate GST, matching of input tax credit and e-payment services. It will also help tax authorities to plug tax evasion.
In Budget 2012-13, Pranab Mukherjee, then finance minister, had said GST-N would be set up by August 2012. This did not happen. The special purpose vehicle (SPV) for this has been incorporated as a not-for-profit company, with equity capital of Rs 10 crore.
The Centre and the states have a stake of 24.5 per cent each in the SPV, while Natioanl Securities Depository Ltd has up to 21 per cent. It will have a self-sustaining revenue model, based on levy of user charges on taxpayers and tax authorities availing its services.