MUMBAI: The Indian government ignored several warnings from
private companies that the complex technology required for a nationwide
goods and services tax (GST) to work smoothly was not ready for launch,
several people who worked on the project said.
Weeks
before the July 1 start of India’s biggest tax overhaul in decades, the
government declared itself ready and chided industry experts who said
more time was needed to prepare for the changes.
“It’s not a complicated process,” Finance Minister Arun Jaitley said on June 20.
However,
more than 10 tax and IT consultants who worked on the project said that
behind the scenes the government was ignoring warnings for more testing
of the complex system even as it was pushing through late changes.
While
the sources said Infosys, which built the GST technological network,
made “basic errors”, they said government officials have not accepted
any responsibility for the glitches in the GST roll out.
The
government is still making changes to tax rates, filing deadlines, and
other features, making it difficult to stabilise the system, they said,
declining to be identified for fear of losing future government
contracts.
“At that time, the powers in New Delhi were
mocking industry, saying ‘the government’s ready, but industry’s not’,”
said the director of a financial planning firm involved in developing
the GST network.
“Now people are laughingly asking, ‘so who was really not ready?’” he said.
The
finance ministry and GSTN, the government authority managing the GST
network, declined to comment on specific problems about the GST rollout
or specific warnings by industry that more time was needed for testing.
The
GST law was debated for decades, industry had enough time to prepare,
and glitches are being fixed, a finance ministry spokesman said.
Infosys
said in a statement that “several stakeholder concerns” had been raised
about the GST system and some of its best engineers were working to
resolve all issues.
Warnings
The GST system was designed to replace a slew of federal and
state levies, and Moody’s Investors Service has said the tax would
boost the economy by removing trade barriers between the country’s 29
states.
However, since launch, the system has been beset
by problems from a confusing tax structure with four main rates to
technical glitches that make it unstable.
The sources
said they had warned government officials in the run up to the launch
that a key part of the GST technology, allowing users to connect to the
GST network, was not working smoothly. There were other technical flaws
that resulted in incorrect tax assessments, they said.
One
technology officer involved in the GST rollout said his company had to
deal with a “revolving door” of government requests in the run up to the
launch.
The director of the financial planning firm said the government was “adamant” on introducing GST on July 1.
“Obviously, it led to chaos,” he said.
The
disruption wrought by GST has been blamed in part for a slide in Indian
economic growth to a three-year low in the April-June quarter. Growth
rebounded in the following quarter.
The opposition
Congress party is using the chaotic rollout of GST as a political stick
to beat Prime Minister Narendra Modi and his Bharatiya Janata Party
(BJP) in elections in Gujarat, Modi’s home state. They are set to be a
test of Modi’s political fortunes ahead of national elections due by
2019.
In one of the latest changes, the GST Council, a
political body that decides GST tax rates, cut the tax rate on a popular
Gujarati snack to 5 per cent from 12pc, which Praveen Rai, a political
analyst at the Centre for the Study of Developing Societies, said was
driven by BJP “fear of an electoral backlash in state elections.” A
person working for an audit firm said in one example, a test adopted by
GSTN did not reflect real-world conditions.
