Three key issues that need to be sorted out before GSTR2 kicks in

The implementation challenge timeline was unexpected for manufacturers

It was well known that the implementation of GSTN is not going to be smooth — it has not been smooth anywhere in the world. Consumption tax like GST has been levied across the world, since the fifties and has not been easy anywhere. This includes developed nations like France (introduced in 1954), Japan (introduced in 1989), Canada (introduced in 1991), Singapore (introduced in 1994) and Australia (introduced in 2000). The Canadian province British Columbia took to GST and two years later reverted to its old system due to implementation challenges.

Across the board there is support for an uniform tax system and everybody was aware that it would be challenging. So, what is so disturbingly different? We found that it is the schedule of implementation that is unrealistic and makes it so infinitely difficult.

Ghanshyam Tiwari, a manufacturer of aluminum pivots, pins and accessories and a supplier to the auto industry said, “We all know that eating bitter gourd is good for health. But the timeline is impossible. It is like entering a bitter gourd eating competition.”

He added that he makes around 1,200 parts for the auto industry against orders from OEMs and large traders in nine states and each of his clients have a different understanding of the system. They tell me to bill as per their interpretation of the law and I have now over a dozen billing variations. I have three times the number of accountants that I employed previously and none of them can be spared for starting work on GSTR-2 which is due to kick in next week. “God alone knows what will happen next.” the manufacturer adds.

Is the timeline given to software developer Infosys realistic?

Prakash Kumar, the head of GSTN, says that they had resolved 12 of the 45 separate issues given to them till date. The government has given Infosys an October deadline to solve the issues listed. Though Infosys is not saying so officially, this appears to be a bit too ambitious considering the number of operational changes it involves.

An engineer working on the GSTN software, speaking on anonymity, says the biggest problem is when some of the changes are made at the backend, the system blips and cannot be used. Also, when some changes are made in the core software to add new provisions it at times affects other existing parameters. The system is so huge that any offline software testing system cannot be created. So, we have to do the changes and get the feedback when people use the system and change again if necessary.

Number of servers need to be doubled and the $200 million project cost needs revision

The number of servers need to be doubled to serve the number of taxpayers and entries that the GSTN network envisages. The current server network is already struggling even before all the tax payers have logged in. Also with the logging in of GSTR 2, the load on the servers will be very high and may be unsustainable.

A system crash is the last thing that is needed for the reputation of GSTN and the network designer Infosys. The contract is very small in terms of revenue for the IT company that logged $2200 million profits last year. But it is immense both for India as well as Infosys in terms of reputation value. It would be great if proactive preventive measures are taken for augmentation of the contract value and addition of servers before such an event happens.