Government tweaks procurement, payment procedure for GST IT infrastructure

Goods and Services Tax Network (GSTN), the national information utility (NIU) building the information technology (IT) infrastructure for the rollout of uniform indirect across the country, is setting a new trend in the way services will be procured and managed by the government in future.

It is breaking away from the traditional procurement procedure adopted by government departments where the system is first built by those who have been awarded IT projects and the payment is made in installments over a period of 3-5 years.

Navin Kumar, chairman of GSTN, told dna this process has been tweaked a bit for putting up the IT backbone for implementation of goods and services tax (GST) to generate interest among managed service providers (MSPs) in the government project.

"They (MSPs) told us that for the pre-operative expenses we should pay them as and when the work was done. So, we informed the government of this and everybody agreed. We have structured the payment norms in accordance to the feedback we got from them," he said.

The NDA government is aggressively pushing the Constitution Amendment Bill for GST to be passed by the Rajya Sabha in the monsoon session of the parliament. The Bill has already been cleared in the lower house and is presently being reviewed by a Rajya Sabha panel. If everything falls in place as planned then the government will roll out the GST, which will unify all indirect taxes into one, by April 1, 2016.

Kumar said GSTN was on track for meeting this deadline and had already received tenders from all major Indian MSPs – TCS, Infosys, Wipro, HCL, Tech Mahindra and others – in response to the RFP floated recently. The last date for submission of financial and technical bids for the project is June 29.

He said RFP had been prepared after taking extensive feedback from IT services firms and engaging consultancy firm PricewaterhouseCoopers (PwC).

According to Kumar, during GSTN's initial interaction with the IT firms, there was hesitance on their part to participate in the project as invariably government orders were plagued by payment delays, and many times were even held up.

The government has addressed this issue by agreeing to pay up the cost of system installation as the work progressed and after the project was operational, it would pay on quarterly basis for the MSP's services.

The GSTN chief said the central and the state governments will fund the initial cost of hardware installation and software development as the NIU's revenues would start flowing in only after the project was operational.

"We told the government we did not have money now and that we will have money only after the project began. So, how do you we do (fund) this? The government said they would fund it by 50% and the state government would chip in too as the system was actually for them (states)," said Kumar.

The new service procurement practice adopted by GSTN is similar to the way IT services are bought by private companies and could be emulated by other information utilities. The IT ministry was already working on formulating new rules for service procurement and payment.

"There is a realisation in the government too that these rules need to be modified," said Kumar.