'How can GSTN be a threat?'

A day after the issue of "shady" shareholding pattern of GST Network (GSTN), the non-government company that is designing information technology (IT) system for the proposed goods and services tax (GST), was raised in the Parliament, its chairman Navin Kumar told DNA Money that all its private entities "have been registered in India under Indian laws".

On Wednesday, "national security" concerns were raised in the Rajya Sabha over the equity structure of GSTN, which will be the IT backbone for the GST.

"Let's talk about the security concerns because of the equity structure of the company, 51% of the stake is with private companies like ICICI Bank, HDFC, HDFC Bank, LIC Housing Finance and NSE Strategic Investment Corporation. These Indian companies are duly registered in India under Indian laws. So, I do not understand what is the problem there," Kumar said in an interview.

He said there were some indirect foreign holdings in these private banks and financial institutions, which were also within the permissible limit and as prescribed by the government.

The GSTN chief also wondered how a company, which had representation from both central and state governments, could pose a security threat.

According to him, the GSTN board has six directors nominated by the central and state governments, three by private companies and three independent directors.

The non-government company, which was set up in March 2013 to provide IT infrastructure and services to central and state government, taxpayers and others for GST, has central government as a stakeholder with a 24.5% share and a similar share is with the empowered committee of state finance ministers. The rest is 51% is with private companies.

"In our (GSTN) case, the founding directors were additional secretaries of the department of revenue, finance secretary of Gujarat government, members of Central Board of Excise and Customs (CBEC) and member secretaries of the empowered committee of state finance ministers. These are all founding members of this company," he said.

One of the reasons for questioning the shareholding of GSTN is that it is structured in a way that the national auditing firm Comptroller and Auditor General (CAG) cannot audit it nor does it come under the RTI Act.

Kumar said GSTN had fallen out of the CAG purview because it has stopped receiving government grants after the first three years of its existence. Though, he said that the RTI would continue to apply to the IT systems company for the GST.

GSTN had received Rs 120 crore as grant from the government, of which it spent only around Rs 65 crore and returned the remaining grant to the government.

Already, there is a suggestion by a Select Committee of the House headed by Bhupinder Yadav for restructuring GSTN's non-governmental shareholding to limit it to state-owned banks or public sector financial institutions.

Kumar said it was the prerogative of the government if it wanted to do so. He, however, said that one of the reasons it was set up as a private company was to "avoid red tape"

"It (GSTN) was made a private company to avoid red tape so that all the government rules do not apply to us and we can take the decisions quickly," he said.