GSTN: India's GST System

GSTN: India's GST System 

The Goods and Services Tax (GST) is India's indirect taxation system. But behind the scenes, an important player provides smooth operation: the Goods and Services Tax Network (GSTN). This article details the GSTN's difficulties, functionalities, and importance in the GST ecosystem.

Understanding the GSTN: A Public-Private Partnership

The GSTN is a non-profit, non-government organization founded in 2013. It functions as a shared Information Technology (IT) infrastructure, providing services to central and state governments, taxpayers, and other stakeholders involved in GST. 

• Private Players Hold the Majority: Private entities, including banks and financial institutions, hold a 51% stake in the GSTN.
• Government Maintains Significant Control: The remaining 49% of ownership is divided equally between the central and state governments, which confirms government control over sensitive taxpayer data.

Key Features of the GSTN

• National Information Utility (NIU): The GSTN is a trusted NIU that provides a safe IT infrastructure for data exchange within GST.
• Robust Infrastructure and Complex Operations: The GSTN facilitates taxpayer registration, tax payments, filing of GST returns, generation of business analytics, and calculation and settlement of Integrated GST (IGST) along with Input Tax Credit (ITC).
• Information Security: The government holds a significant share, prioritising information security and taxpayer data privacy. The government appoints board composition, special resolution mechanisms, shareholder agreements, and agreements with state governments.
• Multiple Payment Options: Taxpayers can make GST payments conveniently through both online and offline methods:

• Online: Payment gateways of authorized banks (Agency Banks) designated by the Reserve Bank of India (RBI) allow online payments. Taxpayers select the bank and log in to their online portal to pay and download the challan (payment receipt).
• Offline: Taxpayers can visit selected banks to make "over-the-counter" payments. The bank then informs the RBI and updates the GST portal.

Expenses and Funding

The user charges for the GSTN are held equally by the central and state governments (50:50). The state share is further distributed among individual states based on the number of taxpayers within each state.

GSTN's Core Functions: Simplifying Tax Administration

The GSTN acts as the front-end interface for taxpayers, simplifying communication with the government. 

• Registration: Businesses register for GST under the new taxation laws on the GSTN portal. Upon verification, the GSTN issues a unique GST Identification Number (GSTIN) to the taxpayer and forwards the information to the tax authorities.
• Invoice Matching: The GSTN plays an important role in preventing tax evasion by matching purchase and sale invoices. This process identifies and fixes any mismatches, making sure taxpayers can avail of the Tax Credit's benefits.
• Return Filing: The GSTN simplifies return filing by processing and forwarding agreeable expected returns for all types of GST (SGST, CGST, IGST) to both central and state tax authorities. This stops the need to file multiple returns.
• Taxpayer Profile Analysis: During taxpayer registration, the GSTN verifies all details and submits them to the central and state government tax authorities for approval.

Recent Developments: Integrating Bank Validation

In April 2023, the GST Network started compulsory bank account validation to confirm the accuracy of taxpayer bank details. Taxpayers can now check the verification status of their bank accounts on the official GST portal.

Beyond Tax Filing: Additional Duties of the GSTN

The GSTN's responsibilities extend beyond basic tax filing and return processing:

• Calculation and Settlement of IGST: The GSTN efficiently calculates and settles Integrated GST (levied on inter-state transactions).
• Integration with Banking Network: The GSTN connects with the banking network (Agency Banks) to ease tax payment processing.
• Managing Input Tax Credit Computation Engine: The GSTN manages the complex computation engine that determines taxpayers' Input Tax Credit entitlement.
• Submitting MIS Reports to the Government: The GSTN regularly submits Management Information System (MIS) reports to the government, which provides valuable data for tax policy formulation and administration.