Artificial Intelligence and GST

AI and GST, a first and foremost question that arise in each and everyone’s mind are what GST is and what Artificial intelligence is. GST is a word that is heard or used by the common person to a professional. Each and everyone have a different way of looking into it. For a common person, it is a tax levied on every product, and for a professional, it is a value-added tax. Artificial intelligence is still an untouched topic for so many people. In simple terms, artificial intelligence means a system that does the work of humans in less time and is almost errorless.

Goods and service tax (GST) was introduced on 1st July 2017, and it is a destination-based tax levied on value addition. GST was introduced to remove cascading effect of various other indirect tax laws, which GST replaces.GST is evolving day by day, and changes and amendments are increasing the workload on entities and professionals.

Artificial intelligence (AI) is playing an important role in GST nowadays. AI is the combination of two words artificial and intelligent. As we all know, artificial means not real, and intelligence means the ability to implement after understanding and learning that particular topic.in other words, it means it can mimic or replicate the intelligence of a human. GST data contains a large number of data; for human beings, after a point of time, it is difficult to analyze what Artificial intelligence can do very easily.

Artificial intelligence is working as a helping hand in finding inconsistency between data,i.e., the input tax credit available and claimed in GSTR 3B. Generally, the entity has to claim INPUT TAX CREDIT as per invoices shown in GSTR -2A/2B, and they have to match that invoices with the purchase register, and then they have to claim INPUT TAX CREDIT. Sometimes erroneously, they claim INPUT TAX CREDIT for which invoices are not showing in the portal.

Therefore, they have to reverse the credit, and the entity has to pay interest and penalty. For smaller entities, it can be done by humans. Still, for larger entities, it is difficult to do by humans, and that too without error. Artificial intelligence came into the picture because with the help of artificial intelligence, time and errors are reduced, and it can achieve results fast. Using artificial intelligence helps the entity to save interest because it helps them to calculate the actual tax that needs to pay at the end of the month.

Artificial intelligence-driven systems should be able to scan invoices and give the option to edit if there is any error while uploading documents or due to any other mismatches. The system should be able to show differences (if any), and all notifications, rules, and regulations should be able to update from time to time. Suppose every entity uses an artificial intelligence-driven system. In that case, it will reduce the discrepancy in the early stage and have fewer chances of mismatch in auto-populated data. It will reduce the possibility of taking the wrong credit.

Many frauds are happening, such as creating fake purchase invoices and claiming Input tax credits. Therefore, the government uses many technology-driven systems to identify and stop suspicious supply chains. For example, advanced data analytics, machine learning, and artificial intelligence tools like business analysis and fraud analytics are being used.

GST returns have various types, and each contains various data, like sales invoices in GSTR 1, purchase invoices in GSTR 2A/2B, and payment of tax in GSTR 3B. All these returns are filed faceless, and it is happening because of artificial intelligence. Even in the annual reconciliation of GST (GSTR9c), it is a system that helps to analyze and find a mismatch in data. Before automation, it was all manual, and the work burden and pressure were very high; human beings do not have all the necessary qualifications they can fulfill all requirements; information can be an exchange, and knowledge can be exchanged, but it is a very time-consuming process as they have first to learn and then implement. Still, if this knowledge and learning can transfer to a machine /computer, it makes the process very easy and fast. Artificial intelligence-driven systems can give data with 100% accuracy. Human efficiency can use elsewhere, where they can focus on major tasks that will add value to the organization. For example, before using Artificial intelligence, each GST return was filed manually by humans. Still, after implementing Artificial intelligence, all invoices were uploaded into the system with one or two clicks. It took hardly 10-15 minutes to complete the whole process, whereas if done manually, it would take much extra time per return.

E-invoicing has also been introduced, and the limit of e-invoices has been reduced to 10 Cr. It means businesses having turnover of more than 10 Cr in any preceding financial years from 2017-18 to 2021-22 have to generate e-invoices. The entire process of E-invoice is paperless, and invoices and other specific documents verified by the GSTN portal for accuracy-invoice have a QR code and unique invoice reference number, which help the system to stop duplicate entries in the system.

Artificial intelligence is helping the government to increase the collection of tax amounts. The government is making strict rules and regulations for ceasing tax evasion, and taxpayers pay a tax legally, and it is all because of Artificial intelligence. They are using different machine learning tools to use artificial intelligence for detecting monetary and high-value transactions. Artificial intelligence is different from machine learning and robotic process automation. Artificial intelligence is used not only in India by government authorities but in other countries as well for finding tax fraud.

Artificial intelligence is becoming more important day by day. As per union minister Jitendra Singh, almost 3 million government officials will be trained to learn new techniques that help them to improve their work methodology so the best outcome can be achieved. Jitendra Singh said technology usage would benefit the government, such as machine learning and artificial intelligence, for detecting fraud in tax regimes (income tax and GST) and blockchain for securing records. The government is taking necessary steps to increase the use of artificial intelligence in the tax regime so that the economy gets to benefit from taxes received and the smooth system can implement. Such steps include directions to officials for participating in sessions where they discuss how to use artificial intelligence and data analytics for the identification of different cases of fraud.

India is becoming a technology-driven country gradually.in every sector, technology is being introduced for the betterment of that particular sector. As finance minister Nirmala Sita Raman said in the budget speech for 2023-2024 that for making AI work for India and making AI in India, there would be the setup of three centers for the excellence of artificial intelligence. Refer to budget speech https://www.indiabudget.gov.in/doc/budget_speech.pdf
In the manual system, there is a chance of human intervention that makes the system complex, and finding fraud becomes difficult, but in the automated system, it is relatively reduced. For example, a human files a return and manually enters all data; there is a chance that he may forget any invoice or change the value of an invoice while entering data. In that case, it can reduce in an automated system because, in that case, data will directly take from accounts, and there is less chance of any malfunctioning. Nowadays, professionals are moving toward a technology-driven system that is reliable as it is automated. Artificial intelligence-driven systems take less time to process compared to humans processing any data.

Artificial intelligence is making things easy and fast for professionals. Still, it can only partially replace professionals because, in the end, for interpreting the law and making people understand it, it is necessary to understand and explain it to people who may be difficult in the case of artificial intelligence. We cannot say that human is perfect in every aspect because the person has their limitation, but if human work with artificial intelligence in proper proportion, they can make a better workflow in the organization in which human expertise and system automation can work combined, and it helps the organization to achieve its goal.

The artificial intelligence-based system may be used by almost everyone using the GST portal. i.e., the chatbot, GST.which is the best example of artificial intelligence. Artificial intelligence is still a topic of fear which might be wrong; if we use technology and automation efficiently, it can be very helpful and increase the effectiveness and efficiency of work. Artificial intelligence tools not only help professionals and the government with tax collection and a smooth system but will help a taxpayer by giving education and making easy compliance with tax filing.

Artificial intelligence systems can be customized per a particular organization’s need, and customized AI systems help the organization by giving accurate data on time. Therefore investment in customized AI systems is worth it for business growth.