The final hurdle in introducing a General Sales Tax regime in the upcoming Budget was cleared last month with the law ministry okaying an agreement to transfer dealers’ database from the government’s Central Board of Excise & Customs (CBEC) to private entity GST Network.
The CBEC was objecting to handing over taxpayers’ information to GST Network (GSTN) as it could invite lawsuits on violation of data privacy. The Board also said it did not have the legal authority to transfer the data to any entity.
“The transfer is taking place of records in the possession of CBEC obtained in a fiduciary capacity. These records relate to database of state dealers… As of now, there is no legal authority for CBEC to transfer this data to any other entity specially a private entity (like GSTN),” the CBEC chairman had said at a June 3 meeting.
On June 9, the Department of Revenue wrote, “This has become a major stumbling block and is likely to severely hinder the implementation of GST.” It added that the CBEC was under the government, which was owner of both the equipment and data with CBEC.
The GST pilot transfer from the CBEC to GSTN, approved on March 31 this year, is critical for developing prototype modules for registration, returns and payments.
“As the success of the pilot will affect the entire GST scheme, it is imperative that we implement it without delay,” wrote the revenue secretary.
With time running out on framing a legislation to overcome this clash, the preferred option to avoid future litigation on data privacy was to insert “appropriate clauses” in the Asset Purchase Agreement between the CBEC and GSTN.
The department of legal affairs on June 20 conveyed that it approved the agreement, provided the signatories to the agreement were “duly authorised” by their competent authorities.
GST — a comprehensive value-added-tax on goods and services — would make the country a common market, making it easier to do business. GST would be destination-based consumption tax with an inbuilt mechanism to transfer credits to avoid the cascading effect of inter-state taxes. It therefore needs a robust IT-based settlement mechanism among the states and the Centre.
GSTN is a private limited company (with government share restricted to 49 per cent) that would provide the IT infrastructure and service backbone to capture process and exchange information among stakeholders, including taxpayers, states, the Centre, banks and RBI.