Balancing Compliance, Digital Transformation, and Ease of Doing Business: GST’s Technology-Driven Journey Over 8 Years

Eight years into the GST journey, one critical aspect that clearly stands out is that technology has entirely reshaped how tax compliance are carried out in India. From transforming compliance to enabling real-time e-invoicing, the GST regime has brought in greater transparency and automation in the business.

GSTN and NIC – the digital backbones for GST

As the Government’s technology backbone for GST compliances, the Goods and Services Tax Network (GSTN) has been at the forefront of revolutionizing the returns compliances. GSTN has not only automated the returns compliances but has also developed a robust and healthy ecosystem of GST Suvidha Providers (GSPs). These GSPs have developed innovative and robust solutions to help taxpayers be compliant, efficient and audit-ready.

Complementing GSTN’s efforts, National Informatics Center (NIC) built an extremely strong technology infrastructure for e-invoicing and e-way bills ensuring seamless, round-the-clock business operations across the country! Over the past 8 years, GSTN and NIC have been able to consistently and successfully enhance transparency, simplify procedures and minimize manual interventions. Insights from Deloitte’s flagship GST @ 8 Survey

Results of Deloitte India’s recently published GST @ 8 Survey reflect the positive impact brought in by technology and automation. A resounding 85% of the participants highlighted a positive outlook on the GST journey, citing digitalisation and proactive policy engagement as key drivers.

Businesses particularly appreciated the government for adoption of technology for compliances and reporting, resulting in the positive influence on business operations particularly through compliance digitisation. In particular, the participants in the Survey have given a thumbs up to some of the user- friendly features on the GSTN portal, such as:

 auto-population of the returns based on e-invoicing data

 easy retrieval of information from the GSTN portal and

 real-time updates on GST registrations status of the vendors and customers

Stabilised e-invoicing and e-way bill functionalities and introduction of IMS emerged as stand-out achievements.

Recent Developments: A Push Toward Full Automation

Some of the recent changes show the government’s commitment towards a fully automated GST compliance mechanism. For instance, implementing a three-year window for return filing, phased hard-locking of GSTR-3B, proposed reduction of e-invoicing eligibility threshold and proposed introduction of e-invoicing for B2C transactions are meant to make the process more structured, transparent and efficient.

Introduction of Invoice Management System (IMS) is one of the significant changes after introduction of e-invoicing in 2020. By enabling the taxpayer to view, review and take action on input tax credits in real-time, IMS is expected to reduce input tax credit mismatches resulting in reduction in tax and trade disputes. The pace at which GSTN has been developing major and complex changes (such as IMS, GSTR-3B locking, APIs for notices etc.) in the last few months is commendable.

Challenges remain!

Despite these advancements, challenges persist. In particular, businesses have flagged concerns around:

 IMS, especially in treatment of credit notes by the buyers and lack of timely reconciliation alerts, resulting in financial and efforts inefficiencies, impacting the ease of doing business

 Lack of clarity on hard-locking of GSTR-3B, resulting in nervousness amongst the taxpayers as it will reduce the flexibility in making legitimate adjustments to the liability and input tax credit

 System slowdowns during peak times on filing days

 Delays in refunds (especially re-credits on rejected applications), and

 Need for enhanced API support for smoother compliances

Besides this, MSMEs are still catching up on the technology front and for many of them compliance is perceived to be an irritant in their business operations, resulting in potential non-compliances. The Survey’s findings reflect that only 50 percent of MSMEs reported full satisfaction, mirroring last year’s trend of the weakest IT preparedness among business sizes.

The Way Forward: Intelligent, Easy and Balanced

A thoughtful implementation with certainty and refinements is necessary to further improve the efficiency in compliances, remove the ‘irritation’ factor and making it easy to do the business. GSTN can help simplify things further, automating refund processing, introducing a single return filing system, and offering more flexibility for errors attributable to counterparties, especially in IMS.

Businesses are also watching closely as GSTN begins using AI to detect discrepancies as this could be a game-changer to detect non-compliances early, without overwhelming the taxpayers. An AI-enabled indicator, showing the likelihood of a demand resulting in recovery could empower the tax officers to make more informed decisions, reducing unnecessary litigations.

GST’s journey so far has been transformative. With continued collaboration between the government, trade and technology ecosystem, the next phase of GST, popularly known as GST 2.0 can be even more impactful.

As GST moves into its 9 th year, the path ahead should focus on balance. While innovation and tech upgrades are important, making the system more accessible, especially for smaller businesses, is just as crucial. The goal should be clear: compliance that’s efficient, intelligent, and business-friendly for the large ones as well as for the vast base of MSMEs.