By Smita Singh
Since its inception, GST has replaced a complex maze of indirect taxes with a dynamic approach leading to a regime of One Nation One Tax Data to streamline the processes, easing out of tax compliance. Through the six years of its introduction, the steady move towards a ‘Digital India’ has been pathbreaking.
Revenue collection in April 2023 marked a historic achievement as it reached an all-time high of INR 1.87 lakh crore. This mounting curve of GST revenue, along with the expanded usage of e-way bills, is proof of digital transformation having an impact on economic growth.
There is no doubt that the future of taxation in India requires automation and a seamless flow of data on a real-time basis. Currently, we can see that the legal system requires a seamless flow of data from taxpayers to the tax authorities. The entire process of digitization starts with an understanding of the legal requirements and a review of the existing process which eventually culminates into system implementation and continuous monitoring of the legal changes along with respective process improvements.
The change from manual reporting to electronic reporting of up-to-date transactional data in uniform format under the indirect tax regime has taken numerous steps to date and the progress is speeding up.
Due to the digital transformation of information uploaded on the government portals, the tax authorities now have increased visibility of data leading to faster detection of default and consequent action taken. The trend that has had a substantial impact on tax authorities’ approach to indirect tax administration is the shift from paper-based reporting to real-time digital reporting in its various forms such as E-invoicing.
E-invoicing is a revolutionary transformation in the Indian indirect tax landscape. Through e-invoicing, the tax authorities obtain invoice-related information on a real-time basis. For tax administrations, e-invoicing can assist in closing gaps, prevent in voluntary oversights, enhance risk management capabilities, and of course early detection of fraudulent transactions. It is changing the way tax administration and compliance are being conducted.
There is no doubt that businesses had to incur high implementation costs, but it cannot be denied that over a period of time, e-invoicing will lead to reduced business costs and accelerate broader digitalization of taxation-related processes in an organisation. Thus, while authorities have much better insight into the economic activity, nature of supplies, and logistics of businesses, the private sector with the help of digitisation is able to transform the data and automate financial services.
In view of the Government’s mantra of Ease of Doing Business, the indirect tax regime in India is also moving towards technological expansion with an aim to further accentuate the easing of the processes. The Government has through these six years has introduced many tax technology initiatives such as the E-Way Bill infrastructure for transportation of goods under GST, which has again helped in detection of fraudulent transaction without movement of goods.
Technology has made its way in all areas of indirect taxation such as matching of input tax credit; filing of returns, adopting technology-based assessments which uses business intelligence, for effective regulation. The adoption of technology in tax compliance has prompted businesses to ensure that even tax compliance of their suppliers, without which there is a substantial risk of disallowance of input credit, can lead to an increase in cash-flow.
On the Customs front, India has adopted the faceless assessment system since 2019, in processes such as clearance for home consumption to introduction of complete digital solutions for obtaining benefits in regulation e.g. adopting a digital platform to regulate the import of goods at Concessional Rate of Duty. Due to the digitalised processed, now Bill of Entry(s) are filed electronically and can be assessed by any officer, on the electronic portal. The supporting documents for import are also required to be uploaded electronically, making them available to the assessing officer easily. This has made the assessment and clearance system more efficient.
There is no doubt that the digitisation drive has its own teething problems, however, on the positive side the technological framework has reduced the duration of clearance at ports considerably, accentuating the supply chain.
In addition to employing technology for efficiency and compliance detection, the Government has implemented electronic processes to gather ‘business intelligence’ in order to assess fraud, the mist successful example being the fake invoicing drive wherein huge number of input tax credit frauds have been caught, and offenders arrested. Without this digital backbone, detection of such breachesat a largescale would have been impossible to detect, as manual audits were unable to capture the complexity of the transactions involved, and hence the loopholes were being used by the culprits for their gain.
In the indirect tax ecosystem, the implementation of digital governance has led to a seamless flow of documents, ease in business processes and has also led to development of various digital platforms. However, such platforms must be efficient to aid in easing the processes and reducing downtimes, as the lack of such efficient platforms would defeat the entire purpose of digitisation. Businesses must also put their best foot forward to embrace this digital change to bring on an evolving digitised tax regime.
(The author is Smita Singh, Partner, and Manpreet Kaur, Sr. Associate at S&A Law Offices, and the views expressed in this article are her own)
