The transition from a multi-tax ‘manual’ environment to a technology-driven, uniform and single GST framework has been an ambitious policy shift. Now that both businesses and governments have embraced technology, it has brought with it various advantages. The tax authorities are now privy to voluminous, relevant data at their fingertips, which can be used to detect potential tax avoidance. Simultaneously, technology has enabled businesses to get deep insights into input tax credit leakages, automate compliances, data analytics and weed out working capital adversities. This in turn aided informed decision-making about gaps and initiation of corrective measures to mitigate financial loss. Many businesses, which hopped onto the digital bandwagon are now using cutting-edge digital technologies provided by ‘SaaS’ platforms to detect cash flow leakages and optimise taxes.
It is imperative to note that the Government’s ultimate objective is to integrate the entire tax system through linkages between the indirect and direct tax administrations along with other regulatory frameworks, by aggressively using digital technology. This would eventually help in tracking revenue leakage, plan effective audits and initiate well-informed policy decisions backed by real-time and relevant data to augment revenue. CBDT and CBIC have agreed on information exchange protocols on an automatic and regular basis, and taxpayers mustn’t strive just to keep pace with this reform process but stay ahead.
The adoption of technology-enabled solutions by the Government has helped consolidate the highly fragmented tax set up within the country. The adoption of paperless compliances and integration of tax knowledge and cutting-edge technology has simplified and structured the tax administration and governance. Intending to track and trace potentially suspicious business transactions and to dissuade non-compliances, the Government has initiated E-invoicing and E-waybill mandates.
With the introduction of faceless tax assessments, the data must speak for itself. Well-structured and organised data reporting and updated technology tools, without which, the companies cannot navigate well with the needs of the hour. Optimising the use of digital resources alone can aid the process of claiming eligible tax credits, weed out manual errors and increase the capacity to handle a high volume of data, meaningfully and accurately.
With a large pool of data created over the last few years, experience data management is the biggest challenge, as many tax administrations attempt to transform into data-driven organisations. Having access to the right data will enable tax administrations to draw the right conclusions and build valuable solutions. The GST data analytics wing has swung into action to unearth unscrupulous elements engaging in malpractices and data analytics has become a great enabler for detecting GST frauds. The Department of Revenue has identified numerous cases of fraudulent GST refund claims and incorrect input tax credit availment, putting data analytics to good use, and has tasked the GST data analytics wing to scrutinise all past and pending refund claims, returns and declarations filed nation-wide.
Increasingly tax authorities across jurisdictions, are leaning towards ‘Advanced analytics’, which is proving to be an extremely valuable tool in improving the tax administration’s effectiveness. Advanced analytics is the practice of using statistical techniques to draw inferences about cause and effect and make predictions. Both inferences and predictions are everyday tasks within the tax administration. Whether selecting an audit case, determining the next step for the tax recovery process, taxpayer communication or analysing root causes, the tax officials are constantly making predictions and concluding the likely impact of their actions, using Advanced analytics techniques.
It has become a business imperative now for companies to invest in technologies to create a sustainable and well-thought-out tax administration blueprint, which is scalable and future-proof so that they can keep pace with evolving needs.
(The writer is Partner – Technology Products and Solutions, BDO Digital)