House panel against private stakes in GSTN

The not-for-profit entity created to set up the information technology backbone for the proposed goods and services tax (GST) should be made a public sector company, says a recently report of the Rajya Sabha's select panel.

ICICI Bank, HDFC Bank, HDFC and NSE Strategic Investment Corporation hold at least 10 per cent stake each in the entity, called Goods And Services Tax Network or GST-N. LIC Housing Finance has 11 per cent holding. The rest 49 per cent is held by the Centre and state governments, along with the empowered committee of state finance ministers, each holding 24.5 per cent. The authorised capital of the company is Rs 10 crore. The recommendation has not gone down well with the government, as GSTN was not envisaged as a public sector company.

The Rajya Sabha select panel, headed by BJP member Bhupender Yadav, had said, "The committee strongly recommends that the government may take immediate steps to ensure non-government financial institution shareholding be limited to public sector banks or public sector financial institutions."

Non-government shareholding of GSTN was dominated by private banks, it said. This was not desirable because of two reasons - public sector banks have more than 70 per cent share in total credit lending in the country and GSTN's work was of strategic importance to the country, as it would be a repository of a lot of sensitive data on business entities, the panel added.

Reacting to the recommendation, a government official said a technology advisory group led by Nandan Nilekani had recommended that the stakes be held by non-information technology (IT), private sector entities to avoid conflict of interest. The holding companies should have nothing to do with IT service delivery, hardware, software and such work, it had said. "That's why non-government financial institutions were roped in by the finance ministry," the official said.

If public banks or institutions replaced the private bodies, the official said, GSTN would become a public sector undertaking (PSU). Then, rules and regulations governing a PSU, including the pay scale, would be applicable. "Not one engineer will join GSTN then. This is the logic (for private holdings), because of this, it should continue like a private entity," the official said. The institutions, the official said, do not determine how GSTN works and the board mainly consists of government nominees. "Only two out of five board members are from the private institutions and these are rotated. There should not be any conflict of interest as GSTN has nothing to give to them (the entities)."