Cabinet approves buyout of private stake in GST Network
27 September 2018
The union cabinet has approved an increase in government ownership in Goods and Services Tax Network (GSTN) to 100 per cent and a change in the existing structure with transitional plan whereby the government will hold 100 per cent in the GST backbone.
A cabinet meeting chaired by Prime Minister Narendra Modi on Wednesday approved the acquisition of the entire 51 per cent equity held by non-government institutions in GSTN equally by the centre and the state governments and allow GSTN board to initiate the process for acquisition of equity held by the private companies.
The restructured GSTN, with 100 per cent government ownership will have equity structure between the centre (50 per cent) and the States (50 per cent).
The cabinet also approved a change in the existing composition of the board of GSTN by inducting three directors from the centre and the states and three other independent directors to be nominated by the board of directors and one chairman and the CEO. Thus the total number of directors will be 11.
The GST Council, chaired by Jaitley and comprising state finance ministers, had in May agreed to a proposal to make GSTN a government company, with the centre owning 50 per cent stake and states together holding the remaining 50 per cent.
Currently, the centre and the states together hold 49 per cent stake in the company, which provides the IT backbone to the indirect tax regime. The remaining 51 per cent is held by five private financial institutions – HDFC, HDFC Bank, ICICI Bank, NSE Strategic Investment Co and LIC Housing Finance. The stake of the private companies will be acquired by the centre and the state governments.
GSTN was incorporated as a private limited company on 28 March 2013, under the previous UPA government. It is a not-for-profit entity.
There had been criticism about allowing private companies to hold a majority stake in GSTN and demands to change its structure. However, it was then felt that private sector participation in the company would provide it with flexibility in hiring and operational freedom. GST, which replaced multiple state and central taxes with a single levy, was rolled out across the nation on 1 July last year.
GSTN also faced widespread criticism after the portal crashed several times and businesses found it difficult to file returns. With the portal stabilising, the government said the time was right to change the ownership.