New Delhi, February 18, 2017

Central and state governments have paid several hundreds of crores to GSTN to provide IT infrastructure and network for rollout of the GST

GST Network Pvt Ltd (GSTN), which will provide the information technology and network backbone for the upcoming Goods and service Tax (GST), has been summoned for alleged service tax avoidance.

The Service Tax Department has issued summons to Prakash Kumar, the chief executive of GSTN, to appear before it by February 22, 2017. The department has asked the company to pay tax on those services it has rendered to the central government.

The service tax summons addressed to CEO of GSTN, accessed by DNA, said that “You may be asked and to produce documents and records as mentioned in the scheduled below for examination” and if “(you) fail to comply with this summon without lawful excuse, you will be liable to be punished under the law.”

Kumar, however , denied receiving any such notice from the Service Tax Department. “I would like to say clearly that I have not received any summons regarding this issue,” he told DNA.

Central and state governments have paid several hundreds of crores to GSTN to provide IT infrastructure and network for rollout of the GST, widely considered the Narendra Modi government’s most far-reaching tax reform.

Finance ministry sources said GSTN had received Rs 350 crore from the central government.

Services provided by the government are exempt from the tax, but those provided by a company to the government are not as it is not in the negative list.

“Any consideration received by one person to another is taxable, and in this case, consideration was received from developing GST Network for Government. The service provided by GSTN to Government is neither under Negative List of Services nor exempted under any exemption. Hence service tax is applicable on consideration received by GSTN for providing taxable service of developing GSTN for Government to Government,” said RS Sharma, an expert on service tax.

GSTN is a private limited company in which central and state governments hold 49 per cent equity while the rest is held by the state-owned Life Insurance Corporation of India, private banks ICICI and HDFC, and NSE Strategic Investment Corporation Ltd.

In July 2020, the empowered committee of state finance ministers set up an empowered group on IT infrastructure for GST that was headed by Nandan Nilekani. In March 2013, the government set up the Goods and Service Tax Network (GSTN) to provide a reliable, efficient and robust IT backbone for the smooth functioning of the GST.

Sumit Dutt Majumder, former Chairman, CBEC said "Service Tax authority is within its right to summon any person for giving evidence in respect of an investigation where it feels that a taxable service which is neither specifically exempted nor finds place in the Negative List has been provided to any Service Receiver, and where no Service Tax has been paid by the Service Provider, within the specified period."

Two years ago, GSTN awarded Rs 14 billion in contracts to Infosys to build and maintain the technology network for implementation of the GST system across the country for a period of five years. GSTN is also working to shift from the existing indirect tax system to the GST.

[Daily News and Analysis]