About 90 lakh tax payers in the country are going to be part of the country’s largest indirect tax network. Building the world's biggest and most ambitious Goods and Services Tax Network, which is going to roll out in June 2017, is the task of GSTN chairman Navin Kumar, a retired IAS officer of the 1975 batch. After serving the government for many decades, he undertook in May 2013 the Himalayan task of setting up an IT network and tax company for the benefit of the country. Born in 1952, Kumar did his post graduation in Physics with first class academic credentials. He joined the civil service in 1975 at the age of 23 and was assigned to the Bihar cadre. Kumar served as secretary in the ministry of urban development and was also chairman of Delhi Metro Rail Corporation as well as other metro rail companies operating in Bangalore, Chennai and Kolkata. Subsequently, he was appointed chief secretary of Bihar, the post from which he retired in 2012. In an interview, Kumar spoke about the GSTN journey. Excerpts

Q. Can you take us through the various steps you have taken in building this network and where we stand today in terms of GSTN’s preparedness?

A: In May 2013, when I joined, I was the first person. I met the Finance Minister and the Revenue Secretary and asked them what they expect from me, since GST law was nowhere in sight and there was no time schedule for GST. They advised me then that these things are not certain, but what is certain is that GST is going to come and we have to get prepared for it. They suggested to first get into organisation building, setting up an office, devising the organisational structure, see what kind of people were needed and try to get them on board. So, that is how we started in 2013. Then, I took two retired officers who helped me. We were only three of us working till January 2014. After that we hired a company secretary but recruitment takes time and then we selected the HR and CEO. The CEO joined in October 2014. But in the meantime, we appointed E&Y as our consultants for doing a study on the kind of organisational structure a company of our nature should possess. They studied IT and ITeS companies. We had very specific and peculiar requirements. We were not only supposed to be an IT company, but also a company with a strong knowledge in the tax domain because GST required both and there was no company in the country like that. Then we had a broadly four-layered organisational structure which was suggested by E&Y ~ IT, taxation, security and support.

Q. Why has GSTN started enrolling taxpayers when the law is yet to be passed?

A: The law says that all the existing taxpayers of VAT, central excise, service tax and all other taxes that are being subsumed don’t have to register themselves again. They will be given provisional registration certificate. This will enable them to carry on with their businesses and file returns. Within six months, they will have to provide some information after which their registration will be confirmed. But without waiting for roll-out date we have started enrollment process in advance. This will help in giving enrolled applicants provisional certificates as soon as the system becomes operational. This would help the authorities issue final registration certificates in time.

Q. We are not very far from the scheduled date of June 2017. Where do you stand in terms of training of officers?

A: We have prepared a plan to train tax officers in the IT system. Our strategy is that we will first train about 3,000 master trainers. These are tax officers from States and Central government and once they are trained, they will go back to their respective states and train other officers. This will begin from 9 February and by mid-March it will be completed. The master trainers will undergo training for three days. Each batch has 50 people and there are six batches running simultaneously. We are providing slots for the state training groups to come to the system and work. There would be around 60,000 officers who will get trained by mid March.

Q. Can you share some details on the process of putting in place the hardware and software, in terms of both timelines and cost?

A: In May 2014, when the new government came to power, in the very first month it was decided to introduce GST in April 2016. Since, GST was their priority, at that time we appointed PwC for defining the scope of our work for the GST project and to write an RFP. In December 2014, we had our first interaction with the IT industry to come on board and work with us and we were stunned with their response, because the IT industry point blank told us that they are not interested in our work. They said the problem is they don’t have any faith in government projects, because they do the work and don’t get paid. They gave several examples. After addressing their concerns, which was a major challenge, in May 2015 we went ahead with the RFP and invited bids that were open till June. Around 21 companies bought the papers. Then, the IT industry felt that this was a responsive organisation as we understand their concerns and are trying to address them. All five big IT companies submitted their bids. A select technical panel was constituted and finally Infosys was selected on the basis of evaluation. The cost of the project was Rs 1,378 crore and capital cost was around Rs 600 crore. The issue was whether we should go ahead with hardware costing Rs 450 crore and software of Rs 125 crore. After several discussions with the government, since the GST law was nowhere in place, we still gave the green signal to Infosys to prepare the software with the rough draft of GST and any changes that can be incorporated in the second version.

Q. GSTN would be the custodian of a huge amount of sensitive financial information. How do you think data security concerns will be addressed?

A: Security is very important and we have been working on it from day one. What we have planned is that we are going to have security at eight levels. Then we are going to have a round-the-clock security operation and monitoring centre and will also have a third party security audit. There will be a security operation centre that Infosys will run but we will have another one in New Delhi. The best standard of information security is ISO:27001 and we are going to certify our systems as we are using the best security software and hardware systems currently available in the world.

Q. How robust is your system capacity?

A: We have done the sizing of the system. If there are 80 lakh tax payers and each of them uploads about 400 invoices per month, around 320 crore invoices will come. We also have to factor in redundancy of multiple times. Hence, we will have enough storage.

Q. Since you are a not-for-profit organisation, what financial model is GSTN working on?

Originally, when we drafted our revenue model, we suggested that we should be allowed to borrow from the banks for funding the capital cost and that we should be allowed to charge a user fee from all the users, including the government and tax payers. We proposed charges ranging from Rs 50 to Rs 500 per month. But when this proposal went to the empowered committee, the states didn’t agree. The states asked why the tax payer should be charged for paying returns, hence it was not acceptable. The states promised us grants but we rejected it. In the end it was decided that the capital part will be funded by the government and when the operation starts, user fee will be charged but the government will pay on behalf of the tax payers. I said this will not work, because collecting money from thirty governments will not be easy. I have my liabilities cut out and how will I manage if they don’t send money on time. Then they said they will pay user charge as a year’s advance. But later, the Central government felt that the earlier model of GSTN to borrow from banks is more practical. The government will provide guarantee. Regarding the user charge, they will pay six months fee in advance and if there is any delay in payment, GSTN can take a working capital loan and the interest will be borne by the government.