The GSTN CEO, Prakash Kumar discusses the challenges and learnings in building the world’s largest tax platform
Although, it hasn’t been even an year since the GSTN was launched, the journey seems to be long and tortuous. The continuous changes in law, design changes, uncertainty over state-centre dialogue, it was an arduous task to come up with a stable IT platform. Except for the first few days, the glitches in the IT platform continued, post the launch of GSTN in July. Now, the e-way bill has also been launched, which widens the scope of the system. In this backdrop, it’s interesting to know the GSTN was over designed and it did prove to serve a purpose. The anticipation made by the team on designing the network for more number of users than it was initially estimated for proved right because the actual number of users have overshot the number of users estimated.
The GSTN rollout was divided into three phases with the first, second and the third phase logically divided into external, internal and analytics components respectively. Even though GSTN had provided the rollout plan to the government, the challenge on the way was to submit the final form with the required changes in, for eample, August, which was provided to the GSTN in July.
GSTN – Challenges for the taxpayer
The biggest challenge and change in management came in the form of the reconciliatory nature of Goods and Services Tax Returns (GSTR) 1,2,3 invoice filing and finalising; until the transaction is tallied by the parties on both sides of the transaction – the receiver and the supplier.
The sales data is uploaded by the seller, whose purchase data is automatically taken by the system based on the data uploaded by the suppliers. In case there are any changes, the seller edits the data, which is relayed back again to the buyer for reconciliation. This has to be done in a short time window due to which the industry (taxpayer and tax consultants etc) could not cope and it’s kept on hold. The committee has been set up to do a rethink on this process, to make it more acceptable.
“Hitherto the data had to be submitted and the system did the matching. However, the process has been changed to invoice based matching wherein acceptance / rejection is done at a very large scale between the buyer and the seller,” says Prakash Kumar, CEO, GSTN.
Moreover, GSTN brought a paradigm shift in the working of the taxpayers. Earlier, when only a few states followed the business to business (B2B) tax invoices, GSTN mandated all the taxpayers do a B2B tax invoicing. All on the electronic mode and completely paperless, which was in the past, paper + electronic.
GSTN- Internal challenges
The biggest task for GSTN was to rally support and team up with the multiple stakeholders like tax authorities, accounting authorities, banks and RBI, business, industry and also negotiate with the 29 states including the union territories for various provisions in the GST.
The second biggest challenge was the uncertainty about the GST rollout date because of the lengthy evolution of the process. Until October 2016, there was no clarity on the GST rollout date. “The development team was always curious about the final date for them to decide on how should they approach the work to be done,” says Kumar.
Training was a mammoth task and so was change management. More than 60,000 tax officers and the related staff had to be apprised of the working of the GST.
Given the requirements to keep the GSTN flexible, scalable, it was like building a ship, while the ship has started sailing. “On the scalability side, we noticed that businesses tend to file the returns on the last few days. No system is designed to handle crores of requests on the same day,” says Kumar. The government has agreed to follow a system where the return filing will be staggered following which different businesses will have different final dates to file returns. The same applies to indirect taxes. The deadline for filing different kinds of taxes will be separate.
Learnings
The biggest learning is to always overdesign and over deliver. According to an internal estimate, the total number of taxpayers were expected to be 65 lakhs, at an annual growth of eight per cent. Yet the system was designed for 1.5 crore users. The assumption was more and more users will come onboard as people are mandated to report their invoices. “This stand of ours has turned out to be true. The number of users currently has crossed one crore already,” says Kumar.
A big learning from the GSTN rollout is the implementation of the scale and size of such a big law and reform should be gradual. A big bang approach is not recommended. Recently, in an interaction with the Indian Express, Prakash Kumar said that they will need time to prepare the software network to support the revisions. “We would need time. How much time will be required depends on how much change is there. Software is like building a house, if you need only small things changed, then it needs less time. But if you want to remove doors and windows and increase the area of balcony, then it will take time. So, it all depends on what the new structure is going to be. How different it’s going to be from GSTR-3B and GSTR-1,” informs Kumar.
It’s important to anticipate how the users will take the newly introduced features. A big takeaway has been to have a dialogue with the users, take their advice and accordingly make changes. Based on the previous suggestions, again anticipate the demands of the users.
GSTN in stats – So far
One crore two lakh taxpayers have been registered since July 1, 2017. A total of 7.25 crore has been filed on the platform with 219 crore B2B invoices. Close to 4.65 lakh crore has been paid through the portal excluding IGST on imports with over 2.55 crore payment transactions.
On 20 November, on a single day, 17.8 lakh returns were filed, with a server utilisation of just 27 per cent. On the payment side, on a single day, the highest number of payment transactions have been over eight lakhs.
In June, 2016, almost an year before the Go-Live, the first draft of the model GST law was finalised and made available before the publication of the rules for registration, returns, payment invoice and refund was released in September 2016. Two months later, in November 2016, the revised draft GST was released. This constant change in the rules and forms on the GSTN led to the team having to do a complete rework of the software designed earlier with little time to prepare for the next set of changes.
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