The Analytics Company which wins the bid will be responsible for design and development of the fraud analytics system. To avoid any conflict of interests, Infosys will refrain from bidding for the project. Reportedly, the GSTN was designed and implemented by Infosys. In 2015, Infosys had won the Rs 1,380 crore deal for developing and running GSTN’s backend software and hardware.
The development of one of its kind Fraud Detection System in the nation’s History would take more than a year. Amidst the various phases and challenges in the development process, a major challenge would be to leverage the existing data related to GST registration, return filing and e-way bill. Further, it must perfectly subsume information from other external sources such as the financial intelligence unit (FIU), the central board of direct taxes (CBDT), banks and state tax departments. As per the RFP shared by GSTN, Interested bidders must fulfil the below eligibility requirements:
- Interested bidder must have a turnover of at least Rs 300 crore.
- The bidder must have posted a profit on YOY basis during the past three financial years
- The Bidder must have a proven track record and experience in implementing advanced analytics systems.
- Appointed would be valid for a period of 6 years.
The selected bidder or the Analytics Company will be responsible for fulfilling the following roles and responsibilities:
Establish Taxpayer’s Identity: As stated in the RFP, “Based on the information available within GSTN as well as relevant third party information, it is expected to reliably establish the identity/360 degree view of the taxpayer and key members of its management.”
Establish Taxpayer’s Risk Profile: Taxpayers would be marked on the basis of their risk profiles. Risk Profile is a common term used in Analytics. In this context, it will reflect the individual taxpayer or the company’s probability of defaulting on taxes in the past present and future. The assumptions would solely be made on the basis of data shared with the company. This data will include:
- List of all purchasers and sellers which are part of the GST return forms
- History of the owner of the company as well as the rapid change of promoters, among others
- The taxpayer deals with sensitive or evasion prone commodities,
Generate Data Insights: Make suggestions to prevent revenue leakages as well as forecast revenue growth and other econometric analysis. The suggestions would be taken into account during policy formation.
Close Loopholes: Identify loopholes and make suggestions for possible changes in laws, rules/ procedures to easily detect discrepancies in return filing as well as related fraudulent activities.
Evidence Gathering: Identify material/ pieces of evidence, which may be shared with tax authorities for prosecution of fraudulent taxpayers.
Terms and Conditions:
Keeping in mind the herculean data that GSTN will handle on a daily basis in upcoming years, the GSTN has mandated that the Bidder will be responsible for developing the infrastructure required for handling such high volume data transaction. The primary initial infrastructure requirements, in the beginning, will include:
- Set Up of a Data Storage Facility (Physical or Cloud-Based).
- Setting up advanced complex hardware for solving computational complexities.
The GSTN in its bid document says, “In the near future, GSTN is likely to experience an ‘explosion’ in the amount of data in its transactional systems. The figure of data is likely to have a quantum jump when the system such as e-way bill data, external agency data like CBDT, information from banks, the ministry of corporate affairs, the shops and establishments-department, other government and non-government agencies that will be integrated with the GST fraud analytics system.”
Privacy and Data Security
Making India A Digital Economy has been at the forefront of the present Central Government. The GST and Demonetisation were primarily introduced to achieve this goal. However, using third party services to run fraud analytics algorithms on the quantum of data from GSTN and other verticals of different Government agencies is bound to raise eyebrows and security concerns. To address these concerns, the GSTN has taken a few decisions and we are sure that in near future more updates would be shared about further measures taken in this regard. As of now, the measures taken as of now to ensure no fraudulence on the part of the fraud analytics firm include:
- The eligible bidder would have to ensure a separate section within their office premises for undertaking the fraud analytics project.
- GSTN may also place one or two of its employee there for monitoring.
- As mentioned in the RFP,”GSTN may, in case required, provide desktops and laptops for day-to-day operations for carrying out fraud analytics.”
- People involved in the project would be barred from carrying carry any storage device such as USB sticks in and out of the GSTN premises.
In the recently concluded, 27th meeting of the GST Council, a joint resolution was passed by the council to bring GSTN under complete state ownership i.e GSTN would now be a wholly owned government company. Reportedly, Private entities (LIC Housing Finance holds 11 percent; HDFC, HDFC Bank, ICICI Bank and NSE Strategic Investment Company hold 10 percent each) account to 51 percent stake in GSTN whereas the Government’s stake only sums up to 49 percent. Although, it is now common practice to use services of an analytics firm what we can learn from the mistakes of others is that security and integrity still remains an issue.
While network or data security can always be updated but integrity can never be upgraded or imposed. The recent controversy of Facebook and Cambridge Analytica is still fresh in public memory and will permanently be etched as a culture-defining moment in History of Human Civilization. The Government should ensure the setup of an Information Watchdog Unit to avoid such incidents that tarnish the very fabric of societies.
