Tuesday, May 3, 2011

Indian Finance Ministry Approved TAGUP Report

Finance Ministry of India has been suggesting many far reaching tax reforms mechanism in India. The Ministry constituted the Technical Advisory Group for Unique Projects (TAGUP) vide their O.M. dated 1st June 2010. Nandan Nilekani, now Chairman of UIDAI and TAGUP has recently handed over the TAGUP Report to the Finance Minister.

An effective tax administration and financial governance system calls for creation of IT projects which are reliable, secure and efficient. There are five projects of the Government in the recent years which have come to involve complex system development as listed below-

(a) The Tax Information Network (TIN)
(b) The New Pension Scheme (NPS)
(c) The National Treasury Management Agency (NTMA)
(d) The Expenditure Information Network (EIN)
(e) The Goods and Services Tax (GST)

In a major step towards technology reforms, the Finance Ministry has approved setting up two special purpose vehicles, called National Information Utilities (NIU), for handling information technology (IT) aspects of the Goods and Services Tax (GST), and the Tax Information Network (TIN).

While the government will focus on policy formulation and enforcement, the focus of NIUs will be on implementation of IT systems. While GST is a proposed indirect tax reform that will allow both the Centre and states to tax a common pool of goods and services, TIN is a repository of nationwide tax-related information which helps file online returns etc. This is a good step in the right direction says Praveen Dalal, managing partner of New Delhi based ICT law firm Perry4Law and leading techno legal expert of India.

TAGUP had suggested adoption of NIUs in five areas — GST, TIN, Expenditure Information Network (EIN), National Treasury Management Agency (NTMA), and the New Pension System (NPS) — to strengthen the IT backbone. According to TAGUP recommendations, NIUs should be a government-private initiative with the government having a stake of at least 26 per cent and private players at least 51 per cent. An individual private entity, however, should not hold more than 25 per cent stake. This share holding composition is not desirable and the Government must hold the majority shareholding, suggests Dalal.

Meanwhile, Finance Minister Pranab Mukherjee approved the TAGUP report. The finance ministry has also set up a high-level coordination committee (HLCC), headed by Finance Secretary Sushma Nath, to decide the structure of NIUs. These could be similar to National Securities Depository Ltd, National Payments Corporation of India, and Centre for Railway Information Systems. The HLCC will also comprise revenue secretary, economic affairs secretary, financial services secretary, member (budget & computerisation), member (legislation & computerisation), controller general of accounts, and director general (systems), as its members. Joint secretary in revenue department will be the member secretary. Former member of the Central Board of Direct Taxes, S S Khan, will be appointed as consultant to the group to expedite the implementation of the TAGUP recommendations.

Finance Ministry must ensure that these projects are techno legal in nature where techno legal experts can share their expertise. By making it a closed group project, these projects cannot succeed. The expertise of as much specialists as possible must be sought by the finance ministry.