The Goods and Service Tax Network (GSTN) is a non-profit, non-government organization, which manages the entire IT system of the GST portal. The system has been architected in such a way that processing of applications like registration or refund and assessment of a taxpayer can be done by different tax officers, if required.
Prakash Kumar, CEO, Goods and Services Tax Network (GSTN), Government of India, tells us more. Excerpts from an interview:
DQ: GSTN has been quite a pathbreaker. Elaborate.
Prakash Kumar: The GST System Project is a unique and complex IT initiative. It is unique as it has established a uniform interface for the taxpayer and a common and shared IT infrastructure between the Centre and 36 States/UTs, integrating 37 disparate systems, which were at different levels of maturity when the project was started.
Besides GST being a destination-based tax, inter- state trade of goods and services (IGST) required a robust settlement mechanism amongst the States and the Centre.
This was possible only when there was a strong IT infrastructure and service backbone, which enables capture, processing and exchange of information amongst the stakeholders, including taxpayers, States and Central Governments, Accounting Offices, Banks and RBI.
The common GST Portal developed by GSTN, functions as the front-end of the overall GST IT eco-system where taxpayers are registering themselves, preparing challans for payment through banks, filing returns, filing refund applications and getting the same paid in their bank accounts.
Apart from integrating disparate IT systems of tax departments, it has eliminated all physical contact between tax department and the taxpayer.
The system has been architected in such a way that processing of applications like registration or refund and assessment of a taxpayer can be done by different tax officers, if required. This is something which was not possible under manual, paper-based system.
The other big change which has been made possible on account of centralisation of data is use of Business Intelligence (BI) and Analytics to identify risky taxpayers/transactions and use software to pick up taxpayers for scrutiny. GSTN has developed multiple models using Artificial Intelligence/Machine Learning (AI/ML) algorithms to identify outliers.
The GST System has been designed on Open Stack, and that is something unique for a tax department’s IT System. The Platform approach adopted by GSTN has helped us integrate other departments/agencies quickly using openAPIs and develop an eco-system of Fintech companies (called GST Suvidha Providers or GSPs), which enables lakhs of taxpayers to comply with tax requirements without coming to GST portal.
Thus, the IT System of GST designed and developed by GSTN has been a pathbreaker. The volume of data filed on this portal in the first 3 years of its operation itself tells the story
DQ: How are you doing the implementation of E-invoicing and QR code?
Prakash Kumar: The e-invoicing is not a tax compliance mechanism, but an enabler for improving invoice exchange amongst businesses to cut down the processing time and remove errors. Electronic invoices are generated by a large number of businesses today.
However, they all use the format as provided by the ERP or billing software they use.
Lack of a standard leads to a scenario where e-invoice generated on one billing software can’t be read by another, requiring manual data entry from an electronically generated invoice.
All this means lots of engagement in the maintenance of invoices, manual feeding in the system, a pile of paperwork and a lot of transcription errors.
The e-invoice is a system, which does away much of paperwork, human error, transcription error, saves time and gives you a format that is compatible to all, no matter what software you are using to key in your financial data.
Just like how the traditional billing was done between two entities, the same way the e-invoicing method will be by trading partners, i.e., customers and their suppliers, but all digitally and will get assimilated in the accounting/billing software of the buyer on a click of a button.
Standard-based electronic invoice generation will also mean no data entry of purchase invoice by the buyer as that will be shared electronically and read by the accounting/billing system of the buyer.
Reporting of e-invoice to the GST portal, generated using prescribed standard, will lead to pre-filled sales and purchase annexures and the Return.
The adoption of the standard will be akin to what happened after Unicode was adopted, especially by the vernacular press. Just 20 years back, one had to download the font of specific vernacular newspaper to read the same on the Internet.
Development and adoption of Unicode have done away with that requirement and one can read in any Indian language on any device today.
The e-invoice standard was drafted in consultation with trade/industry bodies and ICAI using PEPPOL/UBL schema as the base. The schema was later approved by the GST Council. As far as businesses are concerned, no changes are required as they will continue to use the same software with the same user interface to generate the e-invoices such as ERP, accounting and billing software, excel based billing system etc.
The companies which have developed the ERP or billing the software are making changes in their software codes to make them conform to the approved standards. The Council decided to implement the e-invoice in a phased manner starting first with large taxpayers.
The Invoice Registration Portal (IRP) has been made functional since 6th January 2020 for large businesses, ERP companies, GSPs and other accounting software companies to integrate and test their software. The e-invoice will be rolled out from 1st of Oct 2020 for taxpayers having annual aggregate turnover of Rs 500 crore and above at PAN level. You can know more about this initiative in this video:https://youtu.be/QxxAspTigHU.
The QR code will be shared back by the Invoice Registration Portal as part of the e-invoice payload on successful generation of Invoice Reference Number (IRN). The QR code can be printed by the seller, if desires to do so. The QR code will contain the unique IRN along with below key particulars.
a) GSTIN of supplier
b) GSTIN of Recipient
c) Invoice number as given by Supplier
d) Date of generation of invoice
e) Invoice value (taxable value and gross tax)
f) Number of line items.
g) HSN Code of main item (the line item having highest taxable value)
h) Unique Invoice Reference Number (hash)
The QR code will enable offline verification of invoices using mobile app.
DQ: When do you plan to include the e-wallet scheme?
Prakash Kumar: This scheme is to be implemented by Director General of Foreign Trade. GST System will get integrated with the e-Wallet System.
DQ: How are you now doing the Aadhaar verification?
Prakash Kumar: In the 37th GST Council meeting, held in September 2019, a decision was taken to put in place an effective mechanism to check fly-by-night operators taking advantage of easy registration process under GST. Aadhaar Authentication of promoters and authorized signatories of the taxpayers who desire registration under GST, was one of the measures discussed and agreed.
It was also decided to implement it in a phased manner starting with certain types of taxpayers. In case the applicant declines to provide Aadhaar number and consent to use the same, facility of auto-approval of registration will be ceased and a physical verification process will be made mandatory to confirm their identity using other documents.
If a taxpayer gives his consent, he/she will be asked to enter Aadhaar details at the time of filing registration and the OTP received from UIDAI for verification of his Aadhaar. The applications having successful Aadhaar authentication will be treated normal and deemed approval/ expeditious approval process will be undertaken.
In case Aadhaar authentication fails, the application gets into compulsory field inspection and verification of identity of the applicants using other documents as per list approved by the Government. The required changes have been made in the application.
DQ: Have the migration and transition issues been resolved? What are the ones remaining to be addressed?
Prakash Kumar: The process was closed long back after government gave multiple extensions. There is nothing pending on this front.
DQ: How are you dealing with supply code for PoS outside India, or deploying a feature that would allow assigning registration application to same jurisdictional officer after past rejection?
Prakash Kumar: The PoS outside India comes under “exports” category and supplier furnishes details of such supplies in table 6A of the GSTR-1 with shipping bill number only without capturing PoS /Country code. These details are with ICEGATE portal as they capture the same in the shipping bill. These get validated when data from Table 6A is sent to ICEGATE for processing of Refund where tax was paid on exports.
For export without payment of IGST, result of validation of export claim is returned by ICES System to GST which is used by the officer while processing the application.
When a new application for registration is received, the system shows details of all applications/registrations on that PAN on which a new application is made to the tax officer. This data is shown for the entire country and helps the officer to know what all registrations have been generated or in the process of generation. In case of cancelled registrations, the reason for cancellation is also shown to the tax officer to take necessary action.
The applications rejected at the ARN stage (application stage) are also shown to the tax authorities with its reason for rejection. This way, the tax officer looking at the new application gets full picture of all other applications filed earlier, whether approved or rejected or in the process of approval.
DQ: Have the issues of linkage of e-invoice with GSTR-1 (sales return) and transition to return filing model been resolved?
Prakash Kumar: The objective of e-invoice reporting to the Invoice Registration Portal (IRP) is three-fold. One is to get details of invoice reported to tax department even before the goods or services are supplied. The second is to improve the processing of invoices by businesses to cut down cost and error as everyone will be using standard e-invoice format.
The third objective is to auto-draft GSTR1 with B2B invoices reported to IRP. This will not only reduce errors but will ensure that most part of GSTR1 is ready by 1st of next month for the previous month.
Also, the buyers will be able to see the data in their GSTR2A in near real time basis, thus eliminating any chance of non-reporting by supplier and thus full ITC to the buyer. This will not only take away the pain of preparation of GSTR1 from the head of taxpayer (as seller) but will also eliminate errors.
The development is underway and likely to be in place by October 2020 when the e-invoice becomes operational.
DQ: Are there any unresolved ITC-related technical bugs? What are you doing about those?
Prakash Kumar: There was no ITC related bug in the GST system. This impression emanates from the way people interpret data appearing in GSTR2A. GSTR2A is not a return which is filed. It is created on-the-fly based on GSTR1 of suppliers who have reported supplies to the buyer.
It is a dynamic document, which gets created on demand and shows that status as at that moment based on data in GSTR1 of respective suppliers. GSTR2A contains invoices either filed by supplier in his GSTR1 or saved in GSTR1. The status of invoice whether saved or filed is indicated in GSTR2A. On the other hand, ITC gets confirmed only for those B2B invoices which are present in the filed GSTR1.
The ITC claimed in GSTR3B should ideally match with what gets reflected in GSTR2A in respect of filed GSTR1 except ITC of IGST paid on import which is not reflected in GSTR2A. However, many taxpayers blindly take saved invoices also while claiming ITC in GSTR3B, which gets caught when ITC is matched by Analytics Models. Also, impact of amendment of Invoice made by the supplier has to be taken into account and only the amended value needs to be taken.
There is another restriction on claim of ITC. In case GSTR1 is filed after 30Th Sept of the next FY, then the ITC of the said invoices does not flow to Table 8A of Annual Return. Many taxpayers get aggrieved by this and they blame the system or point to a bug in the same.
We have worked on GSTR2A and GSTR-9 to improve them to show the status of filing of returns and to show whether ITC will flow to Table 8A of GSTR9 or not. The updated GSTR2A is going to show the following:
i) Status of filing of GSTR1 by the buyer in respect of each invoice showing date of filing.
ii) Status of filing of GSTR3B to show whether required tax has been paid.
Similarly, changes have been made in the downloadable file of Annual Return where status of invoice whether ITC contained in the same will flow to Table -8A of Annual Return is going to be shown. In case, it is not eligible, reason will be written against each such invoice.
These have been developed and are undergoing User Acceptance Test at GSTN and are likely to be rolled out soon. These two will eliminate lot of grievances and tickets which get issued on this topic and also the impression that there is a bug in ITC system.
DQ: Are you able to resolve the issue of and lack of scalability of server?
Prakash Kumar: Keeping in view the huge increase in number of active taxpayers on GST System (from 64.5 lakhs in beginning of July 2017 to 1.22 crores in January 2020) and the last minute rush to file returns, we have upgraded the capacity of GST System in terms of underlying infra to handle 3.0 lakh concurrent users which used to be 1.5 lakhs before this augmentation. This can be further augmented upto 5 lakh concurrent users in future, if required.
DQ: Have the transition issues for taxpayers in J&K been resolved?
Prakash Kumar: The GSTIN of a taxpayer has State/UT Code embedded in it. Any bifurcation of a State or amalgamation of two States/UTs has direct impact of multiple modules starting from registration. In case of bifurcation, those belonging to new territory like Ladakh have to be given new GSTIN.
However, the system has to maintain their old GSTIN till next four years. For the older period, they will have many left out businesses like filing of return, refund, audit etc. While doing this work, each and every module has to be examined to see the impact of bifurcation. The entire process takes time, which has been completed for J&K and Ladakh.
DQ: What are the new features / enhancements likely in 2021, and beyond?
Prakash Kumar: We have been making enhancements in the system and adding new features based on changes made in the law/process and feedback from the users from time to time. Some of the enhancements made in last six months are given below:
* Re-architecture of GSTR 1 processing code to reduce overheads to reduce the time taken to prepare summary
* Queue segregation to process large payloads from identified taxpayers
* Removal of unnecessary validations.
* Optimizing code to reduce frequent connections to core GST applications.
* Tuning of database
* SMS-based NIL Return filing for GSTR3B (to benefit 22 lakhs taxpayers)
* SMS-based NIL return filing for GSTR1
* Optimizing Social Media platforms for two-way communication with taxpayers.
* Making Helpdesk multilingual (in 12 Indian languages)
* Introduction of the Chatbot GITA
* Improvements in GSTR2A to show date of filing of GSTR1 by supplier against each invoice as well as status of filing of GSTR3B by supplier.
* Status of amendment made to invoices showing the same in period when it was filed and the period in which it was amended, in GSTR2A.
* Providing detail of invoices considered for computation in table 8A of GSTR-9 (yearly download of 2A showing what will go to Table 8A of GSTR-9 and what will not with reasons)
* Flow of IGST paid on import from ICES to GST System and showing the same on the dashboard of taxpayer along with Bill of Entry data.
* Delinking of credit/debit notes with invoices in GSTR-1
* Flow of liability from GSTR1 to GSTR3B to reduce error on part of taxpayers. It will be editable to start with.
* Flow of ITC from GSTR2A/ICEGATE data into GSTR3B. It will be editable to start with.
* Matching Tool for comparison of GSTR-2A and purchase register of the taxpayer to find out invoices not uploaded by the supplier and difference in invoice details, if uploaded by supplier incorrectly.
* Communication of channel between buyer and supplier to enable the buyer to communicate missing invoices (Invoices not uploaded by Supplier)
* Improvement of Comparison Table of liability and ITC after incorporation of ITC on IGST paid on imports
* Compilation of common errors and way around on a separate page on GST portal
* Showing status of application after every stage of processing, starting with Refund and Registration applications.