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Q. GSTN and CAG: Comment on recent controversy about CAG audit if GSTN.
Feb 13, 2017 Related to : GS Paper-3

Ans :

Introduction-

Goods and Services Tax Network (GSTN), a private limited company set up in 2013 for providing IT infrastructure to all stakeholders for the implementation of the Goods and Services Tax. It is the nodal body in which all producers and suppliers of goods and services will file their tax payments, once GST is implemented and the body also reconcile input tax credit claims with tax receipts. It is non-government, private company, where the government holds only a minority stake of 49% in GSTN, but the company would process more than half the nation’s tax receipts.

Issue-

Recently GSTN has rejected a request from the Comptroller and Auditor General (CAG) to appoint an auditor as well as to conduct a supplementary audit as is being done, at present, for all government companies. GSTN is opposing the idea of CAG audit.

Analysis-

  • The objective of setting up GSTN as a private company was to make it fleet of foot and efficient, with the operational freedom to keep functional an information network to which billions of tax payment receipts and input tax credit claims would be uploaded and which must process these filings at top speed to find reconciliation or spot tax liability. 
  • To build multiple rounds of redundancy, and to maintain and upgrade its server capacity and speed, GSTN needs to be free from the time-consuming and suboptimal rules and procedures of government procurement and recruitment.

Solution-

  • Being the principal shareholder, the government has the opportunity to appoint the kind of directors to the GSTN board who would ensure good corporate governance and expenditure control, aided by the normal audit process. 
  • There is no reason for the CAG to audit the internal working of GSTN and raise objections that might be procedural rather than substantive in nature but could still serve to raise needless controversy over GSTN’s functional integrity.
  • The solution to this budding controversy is GSTN’s own finances should be audited like a private company’s while the CAG must audit the tax collection work.

Conclusion-

GSTN being nodal agency for tax payments in the GST regime there is every reason for the CAG to be involved. In fact, the scrutiny and audit of tax filings of a sample from the total filings is an integral part of the GST process, meaning that this part of GSTN’s work is open to scrutiny by revenue officials. Hence a balanced solution must taken in this regard.


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