Digitized ecosystem in tax

Posted by Beth Mueller and Jaskiran Bhatia on October 20, 2017

Interested in how a connected and digitized world is dramatically changing how taxing authorities ensure the proper collection of taxes? Take a look at changes in India to see how a digitized compliance ecosystem works.


In India, states and the Federal government have historically levied transaction taxes at various rates. The result has been a combination of complexity, double taxation and fiscal leakage as smaller businesses have stayed outside or only partially within the system. In response, India has enacted and is rolling out its new Goods and Services Tax (GST).

Learning from the experience of other systems around the globe, India’s GST creates a digitized compliance ecosystem based around a robust information and communications technology backbone – the GST Network (GSTN) – that makes all parties to a transaction interested in their counter-parties’ compliance: if a supplier fails to account for “output tax”, the customer will be denied a deduction or refund of the corresponding input tax. These mismatches will be identified by the GSTN running analytics on the uploaded data to highlight anomalies. A further output of this ongoing analytics exercise will be to risk rate taxpayers according to their compliance track record. Over time we might expect to see organizations with a poor risk rating losing out on contracts as risk ratings are adopted as a key criterion in the procurement process.

In striving for a positive risk rating, the new system presents Indian businesses with a number of challenges. Among the most obvious is converting sales and purchase data into a GST compliant format and integrating ERP packages with the GST. To help taxpayers become compliant the government has certified a number of GST Suvidha Providers (GSPs) to provide support of which Deloitte India is one of the first.

Given that the tax authorities are using analytics to police GST compliance, it makes sense for taxpayers to use analytical tools proactively and mitigate the risk of a poor risk rating, refund or deductibility problems. Tools have been created to help businesses become compliant, make the most of the opportunities offered by the introduction of GST and answer these questions:

  • Do I need to change my systems to be compliant?
  • How can I validate my data and identify mismatches before it is uploaded to the GSTN?
  • How will GST impact my financial KPIs?
  • What GST scenarios offer attractive financial and tax outcomes for my business?
  • What resources are available to upskill my people?

Analytics run on transaction level data can help taxpayers analyse how GST will change key financial KPIs, facilitate compliance, and perform data checks.  If you’d like to know more about GST in India you can read it here or contact me to talk about how Deloitte can help.

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