Digitisation comes with massive advantages to businesses. Digitising invoices (e-invoicing) being the first of them. With digital tools businesses are able to do error-free compliance; significant benefits have also accrued to government and tax consultants.
Digital transformation in India
The process of digitisation picked up steam in India many years ago with the coming of digital payments. Since then India has observed significant digital transformation of businesses. The most revolutionary amongst them being the digitisation brought about by the indirect tax regime. The digitisation of tax compliances was first implemented with direct taxes. Later on, GST was brought about to digitise and unify the indirect tax system.
Digitisation comes with massive advantages to businesses. Digitising invoices (e-invoicing) being the first of them. With digital tools businesses are able to do error-free compliance; significant benefits have also accrued to government and tax consultants.
Necessity of digitisation in Indian tax system
Instead of fewer large companies that could aim to reach the global market; digitisation has opened up shores for many entrepreneurs. To stay ahead, these businesses need accurate data insights so they can aim for smooth tax compliance and meet their business objectives with it. Succinct and deep insights into ITC leakages and consequent working capital loss can help them make informed decisions about where the gaps lie and what actions should be taken to plug them.
For tax authorities, digitisation has given them capabilities to proactively identify leakages or any inconsistencies at the transactional level. Tax authorities now have massive amounts of data at their fingertips, which they can use to detect and curtail frauds.~
Indirect Taxes
The implementation of GST coupled with digitisation has brought a drastic change in the indirect tax regime. The system is now more efficient that is advantageous to both, government and the taxpayers. Let’s look at some of the major developments in the indirect tax system.
- Electronic filing of GST forms and returns
Businesses were forced to embrace technology with the introduction of the Goods and Services Tax (GST) law. The new regime replaced multiple indirect tax laws, including VAT and excise, that were mostly inclined towards the physical compliance process.
Submission of forms and returns were moved to online systems and regular reconciliation of sales and input tax credit became a necessity for the business. Businesses started adopting cloud-based compliance systems for easy, accurate and faster GST compliance.
- E-way bills for movement of goods
The advent of one e-way bill system common across the country has numerous benefits to offer businesses and transporters. These initiatives saved taxpayers from the hassles of long queues and never-ending paperwork. On the other hand, the government can conveniently track non-compliances better any day with processes going digital.
Thus, the digitisation of GST compliance posed a two-way benefit for both taxpayer and the government.
- e-Invoicing
Under the e-invoicing system, uploading the invoice on the common portal ultimately facilitates multipurpose reporting. On a real-time basis, all B2B invoices get transferred to the GST portal and e-way bill portal after authentication. e-Invoicing increases the speed of data transfer and auto-populates GSTR-1. It gives visibility of the process to the regulator and both the parties- suppliers and the recipients. This is just the beginning, e-invoicing can be the booster shot to bring invoice discounting to the smallest player in the most convenient manner.
The gradual digitisation of the direct tax system of India has come to the point where there is no need for the taxpayer to physically appear before tax authorities unless there is serious tax evasion. The taxpayer can do most of the compliances online, starting from the tax payments to return filing, communication of assessment-related information between the tax authorities and taxpayer, refunds, and many more. Let us see some major changes in the direct taxation.
Online filing of income tax returns (ITR) is already a reality, secure, and user-friendly. Businesses have perceived it as one of the major developments in the Indian taxation system.
e-Assessment has substantially reduced the compliance burden on the taxpayer. It has facilitated providing information to the tax officers in a quick and efficient manner. It helps to maintain a record of all assessment proceedings in an organised manner and eliminates the risk of loss and damage of files. It has reduced the chances of corruption.
- Pre-filling information
Government tax portals allow various taxpayers’ information to auto-populate while making tax compliances. The taxpayer’s data could be captured based on the details reported by various third-party agencies, for example, interest income from banks could be pre-populated via reporting of banks, capital gains information could be pre-populated via SEBI linkages, etc. The taxpayers can verify the details on the portal and, if necessary, modify them. The procedure automatically applies the taxation rules and fills in the relevant fields of the tax return form accordingly. This helps the taxpayer to comply easily and smoothly.
- e-Verification
The e-verification of return filing, requests, responses, etc., is required to complete the respective process. It is the process of authentication by the taxpayer. It is a major development in the digitalisation of tax compliances.
https://cfo.economictimes.indiatimes.com/news/impact-of-digitisation-in-the-indian-taxation-ecosystem/86806603
