• Notification Date: 16-01-2024
• Notification No: N/A

Budget 2024: Modi Govt to Strengthen Tax Administration using Digital Initiatives

A steady transformation has been happening at India’s tax administration over the last 10 years, preparing India for its ‘Amrit Kaal’. This is best reflected through the broadening tax base and increasing collection. For direct taxes, the number of income tax returns filed (including revised returns) has increased by ~105% between FY 2013-14 and FY 2022-23 and the net direct tax collection is set to breach Rs 19 lakh crore in FY 2023-24 (~3 times the value in FY 2013-14). On the indirect tax front, over the last 6 years the number of entities registered to pay GST have doubled to 1.4 crore, while GST collections have been steadily improving with the highest collection for a month being recorded in April 2023 at INR 1.87 lakh crore.  

Digital Initiatives: Core of the Reforms  

While several legislative and administrative initiatives have spearheaded this dynamic transformation exercise, the aggressive use of digital technologies to improve transparency, simplify processes to boost efficiency and citizen experiences, cannot be understated. Pivoted on critical national digital infrastructures, including the improved income tax portal (TIN 2.0, pre-filling of ITRs, and updated returns, PAN-Aadhaar interoperability etc.),  

Goods and Services Tax Network (GSTN: GST Portal, E-way bill system, E-Invoice System, TINXSYS etc.) Indian Customs Electronic Gateway (ICEGATE 2.0) etc., the Government of India has rolled out several state-of-the-art digital services and communication channels to enable a tax administrative culture and ecosystem that is taxpayer centric.  

The success of the initiatives is a modern-day ode to the adage, “the numbers speak for themselves”. For instance, since its inception, more than 425 crore e-way bills have been generated by the E-Way bill system; close to 5 lakh GSTINs have been generating Invoice Reference Numbers (IRN) through the e-invoice system with the number of IRNs crossing 18 lakhs in May 2023. In case of direct taxes, the new income tax portal processed ~ 23% of ITRs for AY 2023-24 in a single day and the average processing time has been reduced to 10 days. 

Upcoming Initiatives 

It is beyond doubt that sustained efforts towards digitisation have created a mature digital ecosystem. Yet there is a need of further improvisation. 

To assess and define the digital maturity required for tax administration in the age of rapid digitisation, OECD has laid down a possible vision for the future state of tax administration as “Tax Administration 3.0”. It identifies six core building blocks with the potential to remove structural limitations of current systems and move into integrating taxation into natural/native systems used by taxpayers, thereby ensuring compliance by design, seamless citizen experience and removing single points of failures. In other words, the OECD prescription for the future of tax administration is to design systems for a “world of driverless cars, from the current world of human-driven cars”. 

A cursory mapping of the digital initiatives undertaken by the Government of India, to the six core building blocks prescribed by the OECD, indicates that most of the building blocks have generally already been laid down in India, other than distribution of tax laws in administrable formats to allow taxpayers to integrate tax rules with their own systems. Having most of the core building blocks, it is imperative to design and roll out digital systems and initiatives to move towards the future. While the transition will have multiple initiatives, there are two that have the potential to kick-start such a transformation roadmap.