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gst: track and trace: technology powers GST administration and compliance

The digitization process gained momentum in 2015 with the launch of “Digital India” – a flagship program of Prime Minister Narendra Modi with a vision to transform the country into a digital society and knowledge economy. Since then, India has witnessed significant growth in digital transformation along with an emphasis on e-governance for the delivery of various sovereign services, digitally. Continuing on the path, another revolutionary transformation was introduced in the form of the reforming indirect tax – the Goods and Services Tax (GST), in July 2017.

Moving from a multi-tax “manual” environment to a single, uniform, technology-driven GST framework was an ambitious policy shift. Now that businesses and governments have embraced the technology, it has brought various benefits. Tax authorities now have voluminous and relevant data at their fingertips, which can be used to detect possible tax avoidance. Simultaneously, technology has enabled companies to gain insight into input tax credit leaks, automate compliances, data analysis, and eliminate working capital issues. This then helped to make informed decisions about deficiencies and initiate corrective actions to mitigate financial losses. Many companies, which have jumped on the digital bandwagon, are now using advanced digital technologies provided by “SaaS” platforms to detect cash leaks and optimize taxes.

It is imperative to note that the government’s ultimate goal is to integrate the entire tax system through linkages between indirect and direct tax administrations as well as other regulatory frameworks, aggressively using digital technology. This would eventually help track revenue leakages, plan effective audits, and initiate well-informed policy decisions backed by real-time and relevant data to increase revenue. CBDT and CBIC have agreed protocols for exchanging information on an automatic and regular basis, and taxpayers should not just strive to keep pace with this reform process, but to stay one step ahead.

The adoption of technological solutions by the government has helped to consolidate the very fragmented taxation system in place in the country. The adoption of paperless compliance and the integration of tax knowledge and advanced technologies have simplified and structured tax administration and governance. In an effort to track and trace potentially suspicious business transactions and deter non-compliance, the government has launched e-invoicing and e-consignment note mandates.

With the introduction of anonymous tax assessments, the data must speak for itself. Well-structured and organized data reports and updated technology tools, without which businesses cannot navigate well with the needs of the times. Optimizing the use of digital resources alone can ease the process of applying for eligible tax credits, eliminate manual errors, and increase the ability to process a high volume of data, meaningfully and accurately.

With a large data pool created over the past few years, experience data management is the biggest challenge as many tax administrations attempt to transform into data-driven organizations. Access to the right data will allow tax administrations to draw the right conclusions and develop useful solutions. The GST data analysis wing sprang into action to unearth unscrupulous elements engaging in malfeasance and data analysis became an excellent catalyst for detecting GST fraud. The Ministry of Revenue identified numerous instances of fraudulent GST refund claims and incorrect use of input tax credit, put data analysis to good use, and tasked the GST data to review all past and pending refund applications, returns and returns filed in the country. wide.

Increasingly, tax authorities in all jurisdictions are turning to “advanced analytics”, which is proving to be an extremely valuable tool for improving the efficiency of tax administration. Advanced analysis involves using statistical techniques to draw conclusions about cause and effect and make predictions. Deductions and forecasts are daily tasks within the tax administration. Whether selecting an audit case, determining the next step in the tax collection process, communicating with taxpayers, or analyzing root causes, tax officials are constantly making predictions and concluding the likely impact of their actions, using advanced analytical techniques.

It has now become imperative for businesses to invest in technology to create a sustainable and well-thought-out tax administration model that is scalable and future-proof so that they can keep up with changing needs.

(Writer is Partner – Technology Products and Solutions, BDO Digital)

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