The Future of GST: Trends, Challenges, and Opportunities

Even after 7 years of successful implementation, GST is constantly evolving, and the future of GST remains dynamic. Tax compliance has become much easier under the GST regime as businesses can perform every compliance task through a single window of the online GST portal. Zero manual intervention has reduced the chances of corruption and harassment by unscrupulous tax officials. But it has its own set of complexities. GST compliance requires businesses to achieve a high level of technology adoption and a tech learning curve. For small traders and manufacturers, it can be burdensome.

In this article, we will explore the journey of GST so far, highlight the role of technology, and discuss the future aspect of GST.

Evolution of GST

The government introduced Goods and Services Tax (GST) in 2017 to make it the only indirect tax for the whole nation, i.e. "One Nation, One Tax". This simplified and unified tax structure was designed to waive off the cascading effect of paying multiple taxes. GST has continuously evolved in response to the needs of various stakeholders including business, government, and the general public.

From increasing the threshold for obtaining registration to constantly changing the tax rates as and when needed, the government has introduced significant transformations to the framework. These reforms underline the future scope of GST in India and reflect the government's commitment to improving the tax ecosystem.

Here is the list of key reforms which were brought to the GST law:

Role of Technology in the Future of GST

Though GST was meant to be a simple tax. However, with frequent changes introduced in the law, it has become difficult for businesses to comprehend its provisions. Countries that have successfully implemented GST follow fewer tax slabs, whereas in India, the GST structure currently follows five tax slabs, including 0% or nil tax. Merging of tax slabs has been in discussion since 2021, when the GoM on rate rationalisation was formed. Initially, it will provide relief to the taxpayers, but eventually could give rise to complications in billing and newer instances of inverted tax structure.

Moreover, the government has adopted technology like Artificial Intelligence (AI), Machine Learning (ML), and data analytics. Since 2022, it has been used to scrutinise tax filings, detect tax evasion, and improve revenue collections. A study by Team Clear reveals that AI is fueling automated tracking and tax alerts, so much so that 80% of the notices received by businesses today are system-triggered. 

With the increasing volume of reporting requirements, data reconciliation, and audit processes, it becomes challenging for businesses to constantly adapt. Traditional processes of working in silos with manual data entry only add to complexity, confusion, and data inconsistencies across regulations. All this leads to an unnecessary compliance burden, which calls for adoption of automation and technology like Robotic Process Automation (RPA). This will help businesses automate repetitive tasks like data entry and report generation, ensuring consistency and speeding up processes.

Future of GST in the Indian Economy

The future impact of GST on the Indian economy is significant. The GST reform is still very much a work in progress, with the government actively planning to expand the taxpayer base by bringing in more businesses and rationalising existing tax slabs and rates. The government's future plan for GST includes stringent reforms to prevent tax evasion, such as:

1. Implementing hard locking of auto-filled values in GSTR-3B returns: On 17 October 2024, the government issued an advisory on the GST portal regarding restricting the editing of auto-populated liability in GSTR-3B from the January 2025 tax period. Though it was not enforced owing to the traders' requests, it will soon be implemented, making it indispensable for businesses to adopt a proactive approach. 
2. Mandatory E-Way Bill Blocking and E-Invoice Integration: In 2024, the provision to block the generation of e-way bills, without an e-invoice for the corresponding transaction, was introduced. While this provision was temporarily withdrawn, it signals a clear direction towards stricter compliance in the future.
3. Emerging technologies in tax compliance: The authorities are already using technologies like AI and ML to ensure tax compliance. This marks the beginning of a tech-enabled GST future. Businesses, especially CFOs, must leverage technology and prepare for the future benefits of GST in India.