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Evolving Landscape of GST in India: Trends, Hurdles, and Prospects

India's Goods and Services Tax (GST) system continues to evolve, streamlining compliance through digital platforms while addressing new complexities. This article explores the progression of GST, highlighting key reforms like e-invoicing and the introduction of GSTR-2B, and discusses how technology, including AI and ML, is transforming tax scrutiny and compliance efforts. It also examines the significant future impact of GST on the Indian economy, focusing on initiatives to expand the taxpayer base, rationalize rates, and prevent evasion through stricter digital measures.

📖 5 min read read🏷️ Future of GST

The Goods and Services Tax (GST) framework in India continues to be dynamic, consistently evolving even into its eighth year. The implementation of GST has significantly streamlined tax compliance, allowing businesses to manage all their compliance tasks through a unified online GST portal. Eliminating manual interference has curtailed opportunities for corruption and unwarranted harassment from tax officials. However, the system presents its own set of complexities. Adhering to GST compliance demands substantial technology adoption and a steep learning curve for businesses, which can be particularly burdensome for small traders and manufacturers. This article delves into the historical progression of GST, examines the pivotal role of technology, and discusses its future outlook.

The Progression of Goods and Services Tax

The Indian government rolled out the Goods and Services Tax (GST) in 2017 with the vision of establishing a single indirect tax system for the entire nation, encapsulated by the principle of "One Nation, One Tax." This simplified, unified tax structure was designed to eliminate the cascading effect of multiple taxes. GST has consistently adapted to address the evolving requirements of various stakeholders, including businesses, the government, and the general public. Key transformations to the framework have been introduced, ranging from increasing the registration threshold to adjusting tax rates as needed. These reforms underscore the potential growth of GST in India and reflect the government's ongoing commitment to enhancing the tax ecosystem.

Here is an overview of significant reforms implemented under the GST law:

S.No.Reform TypeImplementation DateDescription
1Introduction of e-way bill1st February 2018Registered individuals must generate an e-way bill for goods movement exceeding Rs.50,000.
2Automated ITC visibility with GSTR-2A1st February 2019GSTR-2A provided buyers with a consolidated view of invoices uploaded by suppliers in GSTR-1. ITC claims were verified against GSTR-2A data, though not yet mandatory. Taxpayers manually reconciled discrepancies between GSTR-3B and GSTR-2A.
3Automated Return Scrutiny SystemMay 2023 (for FY 2019-20 onwards)This system uses data analytics and risk parameters to identify anomalies in GST returns, allowing central tax officers to conduct non-intrusive verification.
4Launch of GSTR-2BAugust 2020GSTR-2B, a static monthly statement for ITC claims, offered clear guidance on ITC eligibility, reducing errors but necessitating more frequent reconciliation.
5E-invoicing Mandate1st October 2020Businesses above a specified threshold must electronically authenticate invoices via the Invoice Registration Portal (IRP), facilitating real-time data sharing and automatic population of GSTR-1 and GSTR-2B for ITC validation.
6QRMP Scheme1st January 2021An optional scheme enabling small businesses to file GSTR-3B quarterly.
7Restriction on Provisional ITC1st January 2022Rules limited provisional ITC claims to 105% (later 100%) of ITC reflected in GSTR-2B, ending the practice of provisional ITC claims and encouraging timely invoice uploads by suppliers.
8AI in Tax Scrutiny2022 onwardsThe government began leveraging Artificial Intelligence (AI) to scrutinize tax filings, identify discrepancies, and ensure compliance, using AI/ML to detect suspicious activities like fake invoices or mismatched Input Tax Credit (ITC) claims.
9Invoice Management System14th October 2024IMS is a GST portal communication feature that connects suppliers and recipients through invoice reporting and a central dashboard, aiming to significantly improve ITC claim processing.
10Hard-locking of auto-filled sales value in GSTR-3B17th October 2024This amendment makes the auto-populated sales liability field in GSTR-3B non-editable, requiring corrections to outward supply details via GSTR-1A before GSTR-3B filing.
11GST 2.0 reforms/rate restructuringAnnounced on 3rd September 2025; Implemented from 22nd September 2025 (Notified by the CBIC on 17th September 2025)Recommendations from the 56th GST Council meeting resulted in the removal of 12% and 28% tax brackets, reclassifying over 200 items into 5% merit or 18% standard slabs, and introducing a new 40% slab without cess for sin goods. This requires finance teams to recalibrate pricing, sales forecasts, and compliance processes.

Technology's Influence on GST's Future

Despite initial intentions for a simple tax system, frequent legislative changes have made GST provisions challenging for businesses to grasp. After extensive discussions, India shifted to a two-tier GST rate structure in 2025—5% and 18%—alongside a 40% slab for sin goods. While this offers immediate relief to consumers, businesses might need to reconfigure their billing and Enterprise Resource Planning (ERP) systems to address new instances of inverted tax structures. Furthermore, the government has adopted technologies like Artificial Intelligence (AI), Machine Learning (ML), and data analytics. Since 2022, these tools have been utilized to scrutinize tax filings, detect tax evasion, and boost revenue collection. Automated tracking and tax alerts, driven by AI, now account for a significant portion of system-triggered notices received by businesses.

The growing demands for reporting, data reconciliation, and audit processes make it difficult for businesses to constantly adapt. Manual data entry and isolated operational processes contribute to complexity, confusion, and data inconsistencies across regulations. This leads to an excessive compliance burden, highlighting the need for automation and technologies such as Robotic Process Automation (RPA). RPA can help businesses automate repetitive tasks like data entry and report generation, ensuring consistency and accelerating processes.

The Future Impact of GST on the Indian Economy

GST is poised to have a substantial long-term impact on the Indian economy. The GST reform is an ongoing process, with the government actively planning to expand the taxpayer base and rationalize existing tax slabs and rates. The government's future GST agenda includes stringent reforms designed to prevent tax evasion, such as:

  1. Implementing hard locking of auto-filled ITC values in GSTR-3B returns: On 17 October 2024, the government advised on the GST portal about restricting the editing of auto-populated liability in GSTR-3B from the January 2025 tax period. The implementation of auto-locking pre-filled ITC values in GSTR-3B returns is still pending but expected soon, making a proactive approach by businesses essential. The GST 2.0 reforms also indicated a move towards a pre-filled GST return system.
  2. Mandatory e-way bill blocking and e-invoice integration: In 2024, a provision was introduced to block e-way bill generation for transactions lacking a corresponding e-invoice. Although this provision was temporarily suspended, it signals a future direction toward stricter compliance.
  3. Emerging technologies in tax compliance: Authorities are already deploying AI and ML to ensure tax compliance. This signifies the onset of a technologically advanced GST future. Businesses, particularly CFOs, must embrace technology to prepare for the future benefits of GST in India.

In the long run, the impact of GST on the Indian economy is expected to include:

  • A simplified tax structure
  • Increased tax compliance
  • Enhanced ease of doing business
  • Greater formalization of the economy

Further Reading

Frequently Asked Questions

What are the primary objectives of the GST system in India?
The main goals of the GST system in India are to simplify the indirect tax structure, eliminate the cascading effect of taxes, promote a unified national market, and enhance overall tax compliance and transparency.
How does technology support GST compliance?
Technology, including AI, Machine Learning, and Robotic Process Automation (RPA), plays a crucial role in supporting GST compliance by automating tasks like data entry, facilitating real-time invoice sharing, improving data reconciliation, detecting discrepancies, and issuing automated tax alerts, thereby increasing efficiency and reducing errors.
What are the key challenges faced by businesses under the current GST regime?
Businesses often face challenges such as adapting to frequent policy changes, managing complex rate structures, achieving high levels of technology adoption, ensuring accurate data reconciliation, and navigating the learning curve associated with digital compliance processes, especially for smaller entities.
How do GST reforms aim to curb tax evasion?
GST reforms combat tax evasion through measures like hard-locking auto-filled ITC values in GSTR-3B, mandatory e-way bill blocking linked to e-invoices, and employing advanced AI and ML algorithms to scrutinize tax filings, identify suspicious patterns, and detect fraudulent activities like fake invoices or mismatched claims.
What can taxpayers expect from the future evolution of GST in India?
Taxpayers can anticipate a continued focus on technological integration, with more advanced AI and automation enhancing compliance and scrutiny. Future reforms are likely to further streamline the tax structure, expand the taxpayer base, and introduce more stringent provisions to ensure transparency and prevent evasion, aiming for a more efficient and formalized economy.
Is the GST system considered successful in India?
Overall, GST has largely succeeded in unifying India's indirect tax system, boosting compliance, and formalizing economic activities. However, ongoing challenges include rate complexity, frequent policy adjustments, and compliance costs for MSMEs. Its long-term positive impact requires continuous reforms.
Are GST rates expected to change or be rationalized in the future?
Yes, the GST Council consistently reviews rates for simplification, with a Group of Ministers specifically established for rate rationalization. As of September 2025, a two-tier structure with 5% and 18% standard rates, plus a 40% slab for specific goods, has been implemented, indicating an ongoing effort toward rate adjustments.

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