Subramanian Swamy effect? FM Arun Jaitley mulling converting GSTN into a government owned entity, says report

Last Updated: Wed, Apr 11, 2018 11:48 hrs
Arun Jaitley (PTI image)

New Delhi: Finance Minister Arun Jaitley, who is undergoing dialysis this week, has asked finance secretary Hasmukh Adhia to examine if the Goods and Services Network (GSTN) can be converted into a government held company or a Public Sector Unit.

GSTN is the technology backbone that handles most of the IT infrastructure of the new indirect tax regime.

The government is now thinking of hiking its stake in the company as the portal has been fully operationalised with stability in tax collection and implementation of e-way bill, the Press Trust of India reported. A source further told the news agency that the government had kept its stake in GSTN at 49% and incorporated it as a private company to "allow adequate flexibility and freedom" to GSTN to "ensure timely implementation of the IT infrastructure" prior to the GST rollout.

Santosh Kumar Gangwar, the minister of state for Finance while answering a question posed by BJP MP Rajeev Chandrasekhar on number of assesses on GSTN, replied "Till 7:00 Pm on 1st March, 2017, 48,48,641 taxpayers had enrolled on GST portal ( )"

According to the person in the know, the government believes it should be a majority owner considering GSTN’s enhanced role now of collecting data too along with the GST tax.

BJP MP Subramanian Swamy too had batted for the conversion of GSTN into a 100% government owned entity to overcome data integrity issues. Swamy had raised concerns on multiple occassions about GSTN's shareholding pattern that gave powers to private stakeholders to access sensitive information. Over one crore businesses are registered on the GSTN portal, and most of them use the portal to file for their annual returns, post various analytical reports of their businesses.

GSTN was incorporated as a private limited company on 28 March 2013 under the UPA government. GSTN is registered as a Section 8 company (a not-for-profit company under Companies Act) that defines its nature of business as non-Government and as a private limited company. The stakeholders in the GSTN include the centre and states with a 49% stake while the remainder is held by financial institutions of the country.

Government of India holds a 24.5% stake, while the States of the Indian Union, including NCT of Delhi and Puducherry, and the Empowered Committee of State Finance Ministers (EC), together hold another 24.5%. The remainder or 51% equity is with non-Government financial institutions. HDFC, HDFC Bank, ICICI Bank, NSE Strategic Investment Company, LIC Housing Finance Ltd are among these institutions that hold stakes in the GSTN.

Swamy had in a letter written to the Prime Minister's office during 2016 prodded the PM to take a "close second look" and do a "thorough scrutiny", while questioning how a private entity such as ICICI bank or HDFC bank could have been allowed access to "sensitive" information without security clearance. Swamy also questioned why GSTN "appropriated" around Rs 4000 crores in expenses and fees for its preliminary exercises, but private companies had a stake in a Section 25 company, a not-for-profit organization.

Although LIC Housing Finance may be assumed to be an Indian government owned company, the company has private ownership with stakeholders such as Abu Dhabi Investment Authority, Bank of Muscat, Mawer International Equity Fund, and ICICI Prudential. "Thus a large amount of money will pass through these banks," Swamy claimed in his letter.

Though the fears of a data breach might be around, an assertion made on the GSTN website says that the design of the portal was based on role access. "The taxpayer can access his own data through identified applications like registration, return, view ledger etc. The tax official having jurisdiction, as per GST law, can access the data. Data can be accessed by audit authorities as per law. No other entity can have any access to data."

Here is a video of Subramanian Swamy posing a question in a Rajya Sabha proceeding.

Besides Swamy, members from the Rajya Sabha raised questions regarding GSTN and its security. A question posed to the Minister of Electronics and Information Technology on whether GST network was safe from Cyber attacks on July 2017 was answered as follows:

"The cyber security is part of GST system and a dedicated Security Operations Command Center (SOOC) is operational 24x7x365 as part of GST Network (GSTN). GSTN has been desined with various requisite security features including the following:

  • Core GST System is not exposed directly to internet and any interaction with GST system is only through Application Programming Interfaces (APIs);
  • Multi-layered security architecture;
  • Segregation via Virtual Local Area Network (VLANs) / Zoning, Segregation of Duties (SODs), least privilege access principles, IP filtering/blocking rogue IPs, Resiliency at each layer
  • Secure Coding practices ensuring security of GST software development throughout Software Development Life Cycle (SDLC);
  • Data Encryption (at rest and during transit) and Data sharding- Any data transfer from GST System is in encrypted format using AES256/SHA256; and,
  • Thorough Security testing i.e. Secure code scanning, static and dynamic Analysis of Open Source components, Full system Vulnerability Assessment and Penetration Testing of IT Infrastructure, Apps using licensed tools and customized scripts."

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