After receiving criticism from some financial services and fintech startups for not being able to offer services under the Goods and Services Tax (GST) regime, the GST Network has devised a strategy to rope in such companies as well without compromising the security of the system.

GSTN, a not-for-profit entity, which is building the IT backbone for the revolutionary tax reform, plans to enable such companies to offer services too, however, they will not get direct access to the GSTN. Instead, their services will be routed through NSDL, the National Securities Depository. It has also been mandated for the other approved service providers to provide their back-end for any startup that wishes to provide GST services.

Startups, which had not qualified due to less turnover or limited experience, will now be able to offer services such as tax filing, return upload or download for end consumers through the front end, while the backend will be connected through NSDL or other service providers, a senior government official told.

“Tax payers can avail of the services through them. It will be mandatory for all service providers to pro vide back-end assistance,” added the official. GSTN’s main concern is that any unsecured application should not be connected to its network, a concern that will be addressed through this route.

Last month, GSTN had received over 300 applications from private firms who were seeking to become GST Suvidha Providers (GSPs). In order to give tax payers more choice to file their returns once the tax reform is rolled out from April 1, 2017, GSTN invited private companies to build “innovative” third-party interfaces.

“A total of 342 applications have been received out of which 95 claim to fulfill the criteria,” said the official. After they give a signed copy of their balance sheets, they will be called for a demo, which will be completed by November 25. “We are hopeful that the GSPs will be in place by December 1, 2016,” said the official.

The idea was to allow businesses to file taxes from various platforms such as mobile apps or portals instead of applying only through the GSTN portal. As per the criteria, financial company looking to become a GSP must have paid-up (raised) capital of at least Rs 5 crore and an average turnover of at Rs 10 crore during the past three least financial years.

Several startups were unable to qualify since they lacked the requisite experience or the turnover. Software think tank iSPIRT had told earlier that it was pushing to relax the GSP criteria to help startups. “iSPIRT is looking for an open policy that allows any startup or a small company to become a GSP. The real concern of GSTN should be the product that the GSP develops. To ascertain the application security and ICT infrastructure of GSPs, they can use third parties to verify that the technical criteria is met.”

GSTN had not barred startups from applying even in the first round. The entity had allowed even companies that don’t fit the criteria to apply and had said that they will be considered in the next phase of selecting GSPs.

Source: Times of India

Image Courtesy: Economic Times