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Why opposition parties and media who make huge noise for silly issues, show silence on GSTN controversy?

The controversy over the share holding pattern of Goods and Services Tax Network (GSTN) may lead to risk of data security.

👤 Prime Point Srinivasan2017-07-10 16:16:24.0
Why opposition parties and media who make huge noise for silly issues, show silence on GSTN controversy?
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The Goods and Services Tax Network (GSTN) is the special purpose vehicle that was formed to create the information technology backbone to the GST that was rolled out on 1st July 2017. Unfortunately all the political parties and media have not debated the controversy over the formation of GSTN.

Goods and Service4s Tax Network (GSTN) is a company registered under Sec 8 of Companies Act as Non Government and not-for-profit organisation in 2013. The Company was set up by UPA Government.

Share holding pattern

The controversy is about the share holding pattern of GSTN.

In the GSTN, the government of India holds 24.5 % share. State governments, including NCT of Delhi and Puducherry, and the Empowered Committee of State Finance Ministers, together hold another 24.5%. Balance 51% equity is with non-government financial institutions.

HDFC (10%), HDFC Bank Ltd (10%), ICICI Bank (10%), NSE Strategic Investment Company (10%) and LIC Housing Finance Ltd (11%).

That means Central and State Governments will hold only 49% share in this company leaving 51% in the hands of Private Banks and financial institutions.

It is not known why UPA Government on the suggestions of Shri P Chidambaram agreed for this type of share holding pattern to handle such a massive and sensitive data of the nation. Even Modi Government did not bother to change this pattern.

Only Dr Subramanian Swamy raised this issue in public. Even after his raising this issue, nothing has happened. Even all the political parties and media who are making noise over silly matters, are showing silence over this matter.

Major objections raised :

1. Why Government should hold only 49% shares, leaving the major stake (51%) to private banks. Even National Payment Corporation Limited (NPCL) was formed to handle clearing and funds transfer with 6 public sector banks (60% share holding) and 4 private banks. Even when they dilute the shares, they have kept a limit of 51% of Public Sector Banks.

2. The Select Committee of Rajya Sabha in their report submitted on 22nd July 2015 recommended as follows:

Recommendation 3.43
The Committee feels GSTN shall play a crucial role in implementation of GST as it shall provide the IT infrastructure for implementation of GST. It noted that Non Government shareholding of GSTN is dominated by private banks. This is not desirable because of two reasons . Firstly, public sector banks have more than 70% share in total credit lending in the country. Secondly, GSTN's work is of strategic importance to the country and the firm would be a repository of a lot of sensitive data on business entities across the country. In light of above, the Committee strongly recommends that Government may take immediate steps to ensure Non Government financial institution shareholding be limited to public sector banks or public sector financial institutions.

3. Though GSTN in their site says that they have made sufficient provisions for 'strategic control by the Government', it may not be workable in the long run, since private banks have more than 51% share holding. Out of 14 Directors, Centre and State will have 7 Directors. Private Banks will nominate 3 Directors and 3 more will be nominated as Independent directors. Chairman will be nominated by State and Centre jointly.

4. The share holding patterns of HDFC and ICICI Bank are not transparent. More than 60 to 85% of their share holdings are in the hands of foreign investors. Also LIC Housing Finance Ltd has more than 60% of their share holdings in foreign hands. GSTN will deal with enormous data of India's tax and economy exclusively. Many companies will be listed in NSE. By making NSE Strategic Investment Company as a share holder, the Government has given room for insider trading.

5. Through GSTN, all the data will be collected. After six months or one year, GSTN will have huge data of Indian economy and tax details. GSTN is the owner of the data and not the Government. Since 51% of the share holdings are with financial institutions whose 'Big Boss' is not transparent, the data can be misused or compromised. Only after Dr Subramania Swamy taking up with Prime Minister, they have allowed CAG some limited access. It is also said that GSTN is out of the purview of RTI.

6. Nobody is able to understand as to what was the sanctity of reducing the Government's stake to 49%, instead of keeping at 51% or more, exposing to greater risks. Centre has given an initial grant of Rs.315 crores for all expenses. The total capital is only 10 crores. By investing only 5.1 crores, the private banks are going to have access for huge data of the nation, though the centre is spending money for all expenses. It is also reported that Centre has given Rs.600 crores to Infosys for development of GST software, without going through tender.

7. Modi Government should have reversed the UPA's plan (read P Chidambaram's plan) and included few organisations like RBI and SBI as share holders. The private banks should have been allotted minimum share holding. Even security clearance was given by Home Ministry just before the roll out, that only after Dr Subramanian Swamy threatened to go to court.

8. It is really surprising it has escaped the attention of Prime Minister Modi. It is also mysterious to observe that the opposition parties and media who used to cry at high decibel for frivolous issues are showing silence on this important issue.

Our suggestions:


1. Government of India should re-organise the share holding pattern by inducting RBI and SBI, who are playing major role in the tax collection management.

2. Members of Parliament should take up immediately with Prime Minister to ensure the safety of the tax data that may get generated now.

By K. Srinivasan, Editor in Chief, PreSense

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