AI in GST: Role, Benefits, ITC Management & Future of GST Automation in India

Artificial intelligence, or AI, is transforming several business processes and finance is not left behind. One of them is tax compliance. Artificial intelligence in GST has made great strides, automating tedious data preparation and filing. Ultimately, businesses can focus on compliance strategy and other crucial objectives. In this article, learn how different Artificial intelligence tools and agents can be used in managing GST workflows. 

Key Takeaways

1. AI systems can help automate GST filings, reducing manual errors and saving resources. ​
2. A proactive approach is followed by AI systems by detecting data errors on a real-time basis where human intervention is tedious.
3. An AI system can reduce the risk of availing ineligible ITC.
4. Fraud and suspicious transactions can be detected quickly by the GST department. ​

Role of AI in the GST

AI has transformed GST handling by automating various processes. For example, AI can be trained to identify similar/closest matches while doing GSTR-2B vs Purchase Register reconciliation. AI can also help in the correct selection of HSN/SAC required for invoices.

AI in GST Return Filing

AI can be used to automate GST return preparation; it can verify data directly from invoices, debit and credit notes (invalid GSTINs, duplicate vendors, missing HSN codes, blank POS fields) for identifying and correcting errors before return preparation. With the huge amount of data required for return preparation, AI can easily run through various spreadsheets and databases and produce an easy-to-understand summary for the business before filing GST returns.

AI in e-Invoicing & Real-Time Data Validation

As e-Invoice is now mandatory for businesses having an aggregate turnover above Rs 5 Crore, it increases compliance for most of the businesses. AI can be used to validate invoices in real time and generate valid e-invoices by ensuring all mandatory fields are correct. AI can also match invoices with generated e-invoices, reducing duplication.

AI in Input Tax Credit (ITC) Management

Availing the eligible Input Tax Credit (ITC) has been one of the crucial compliances under GST. Any lapse in such compliance may lead to unnecessary interest and penalties along with the tax amount. With the use of AI, a business can verify whether such purchases are non-compliant with GST requirements. AI can also help in the quick reconciliation of purchase invoices in books with GSTR 2B, helping the business in detecting missing or mismatched invoices.

AI for GST Compliance Monitoring

Given the frequent updates to GST laws, AI can assist in keeping an eye on all of these changes and delivering only the most important updates to businesses. This will help the business to toggle their system in compliance with the latest requirements and avoid last-minute hassle and penalties.  

AI in GST Audit & Assessment

Not only businesses but also the GST department can rely on AI to analyse bulk taxpayers' data obtained through GST return filing and e-way bills. AI can help identify risky taxpayers who may be involved in round-tripping or any other non-compliance and provide a proper audit trail to understand the transaction of such entities. As information is obtained immediately, the GST department can quickly initiate proceedings against such taxpayers.

AI for GST Data Analytics & Insights

AI can help provide various insights, such as forecasting future GST inflows for the department and providing abnormal patterns observed in the sale or purchase of a taxpayer. This data-driven approach can help the GST department to evaluate vendor risk profiling and prepare meaningful dashboards for analysis.

Benefits of Using AI in GST Compliance

1. Reduced human intervention: With the use of AI at every stage, there is a notable reduction in human errors. Also, AI can be used to detect errors in data available before its adoption.
2. Quick GSTR Filings: As data is validated quickly with the use of AI, a business can quickly file its returns without the need for manual intervention specifically required at the time of reconciliations.
3. Prompt ITC Reconciliation: Ineligible ITC can be detected quickly, reducing the risk of availing ineligible ITC and potential interest and penalties.
4. Up-to-date with the latest laws: A quick update on the latest GST laws provided by AI can provide a business with a head start, despite rushing at the last moment. 

Challenges & Limitations of AI in GST

1. Every great feature comes with a cost: integrating AI with existing systems will require high setup fees along with yearly costs required for maintenance of such AI systems. 
2. Due to its sensitivity, business data should always be protected; therefore, secure cloud hosting solutions are crucial for data protection.
3. AI always tends to rely on data available online; an AI platform needs to be properly trained to extract and understand data from reliable sources.
4. Implementation of AI may require training of personnel as well, not only in the finance department but also in the IT department of the business.

Impact of AI in GST Automation in India

AI automation in GST compliances has shifted a business approach from reactive to proactive. A company didn't wait until the end of the month to identify mistakes because the AI can do so in real time. This results in improving ITC accuracy and improving fraud detection both for business and the GST department. 

Future of GST Automation in India

AI in GST automation will continue to advance over time, with smarter AI platforms and seamless API connectivity to various official government websites leading to increased use of AI in GST compliance.