In a letter to the union finance secretary Hashmukh Adhia, Mr EAS Sarma, the highly regarded former union secretary in the finance ministry has questioned the possible conflict of interest among members of the GSTN board. He says, “some Directors nominated to GSTN’s Board having links with companies with questionable antecedents, involving companies with dubious track record to detect tax evasion, companies with dubious background being selected as Suvidha providers and so on”.
GSTN (Goods and Services Tax Network), it may be recalled was set up as a private company, held by private equity holders. Mr EAS Sarma had earlier written to the government (on 30-6-2017, 1-7-2017, 23-9-2017, 3-10-2017 & 6-10-2017) pointing to “the lack of due diligence on the part of your Ministry while structuring GSTN” as a private company.
In a hard hitting letter Mr Sarma says:
“(a)fter the revelations about unauthorised information mining by foreign agencies like Cambridge Analytica, your Ministry seem to have belatedly decided to restructure GSTN into a 100% government owned SPV. While it is a welcome move, how does Finance Ministry ensure data protection? Has Finance Ministry interacted with the IT Ministry to make sure that the latter has woken up to the reality of data hacking going on extensively without its knowledge? Has IT Ministry learnt lessons from the European and the other global regulators who are rushing into enacting stringent laws to protect data security and privacy of individual citizens?
One finds these days the Union Minister for IT, in the wake of the Cambridge Analytica developments, demanding apologies from everyone else other than his own Ministry, who were passive witnesses to data theft going on for months since the first revelations about Cambridge Analytica surfaced more than a year ago. Has that Ministry come up with a law on the lines of the European legislation (see enclosed reports)?
The NDA government is quite good at bringing in Ordinances at a pinch and even introducing all kinds of statutory amendments through the backdoor of the Finance Acts. How is it that it has dithered on bringing in an ordinance on data protection?
I find that 7.28 million returns have been filed by GST dealers till date. How is Finance Ministry certain that the information relating to the same has not been stolen or hacked? If such information leakage has occurred, who should own the responsibility?
I am afraid that your Ministry as well as IT Ministry will have to provide answers to all these questions urgently.
I get the feeling that the NDA government has not displayed adequate sensitivity to the need to protect the sanctity of GST information in particular and to protect the citizens’ information in general.”
On 3-10-2017, Mr Sarma had questioned GSTN’s dealings with Larsen and Toubro. Here is what he had to say in that letter, which was also addressed to Mr Adhia:
“I understand that CBDT has chosen L&T Infotech for this project which will cost $100 million for the government. I m not sure whether CBDT has exercised due diligence in selecting this company.
The L&T Group to which this company belongs has a large number of subsidiaries and JVs in several countries including the tax havens. I have enclosed here an official document of L&T available from the public domain that lists a large number of such foreign subsidiaries and JVs located in UAE, Oman, Kuwait, Qatar, Saudi Arabia and several other countries. One of the subsidiaries located in UAE is Larsen & Toubro International FZE. A company with a similar name seems to appear in Panama papers, as evident from the enclosed news report. CBDT is supposed to assist the apex court-appointed SIT in investigating the names that appeared in the Panama papers. Is it not ironical that a company which is closely linked to a Panama firm should be entrusted with the task of tracking tax evaders?
I hope you will get this examined urgently, as otherwise the credibility of the scheme itself will get eroded.”
On 6th October 2017, in an email to Mr Nripendra Mishra he had provided the following information on L&T Infotech with a warning to the government about dealing with it:
“I further enclose for your information some news reports which refer to a bribery scandal in UAE associated with the parent L&T company of which L&T Infotech is a subsidiary.
This partly explains the fact that another subsidiary of L&T, as I had pointed out earlier, figures among the Indian companies having Panama links.
I am surprised that CBDT should choose L&T Infotech as an agency to “track tax invaders”, knowing well that the agency itself is not beyond doubt.
Such decisions bring a bad name to the government and erode the credibility of its efforts to take action against tax evaders, however genuine they are”.
Before that, Mr Sarma had provided details about PriceWaterhouse and asked why it was selected as one of the Suvidha providers despite its controversial antecedents. He said,
“I find that Price Water House Coopers (PwC) is among the companies considered. You must be aware of the track record of PwC globally and in India”
You are aware that PwC figured prominently in the scams surrounding Satyam, Global Trust Bank and DSQ Software in India. In the case of World Bank’s involvement in the privatisation of Delhi Jail Board, Shri Arvind Kejriwal, the present CM of Delhi showed how there was a questionable nexus between PwC and the World Bank by securing information under the RTI Act.
In addition, PwC’s global track record has equally been questionable. The company figured in scandals surrounding North Rock, J P Morgan, Tesco, M F Global, Tyco and so on. PwC found a mention in Luxembourg Leaks and was investigated by the regulatory authorities in UK and elsewhere.
As the enclosed Wikipedia pages (see highlighted portions) show, PwC was also involved in helping companies to adopt tax avoidance approaches that had come up for scrutiny before the regulators of the respective countries.
Is it prudent for GSTN to provide accreditation to such a company in dealing with such a large number of tax payers and appropriating their tax details?”.
Mr Sarma’s first letter was addressed to Finance Minister Arun Jaitely, right at the launch of GSTN, in which he had said:
“On a further verification, I find that two Directors of GSTN are also Directors of subsidiaries of foreign companies.
Bhavesh C Zaveri is perhaps a Director of Swift India Domestic Services Pvt Ltd which is a subsidiary of a foreign company as shown in the attached document relating to that company. Similarly, Anand Sinha appears to be a Director of KKR Arc India Pvt Ltd. which is a subsidiary of another foreign company as evident from the document attached. Of course, your Ministry will have to verify the factual position by consulting the Ministry of Corporate Affairs.
Apparently, when your Ministry constituted GSTN and decided on its Board of Directors, it not only failed to consider the desirability of allowing non-government entities to hold the majority share in GSTN but also failed to exercise due diligence on the background of each Director.”