Symphony of Blockchain, GST implementation in India

On July 01, 2017, Goods and Services Tax (GST) was implemented in India with the objective of making India, “One Nation, One Tax, One Market.”

Tax has always been a dynamic subject, and the sole objective of any Government is to enhance its revenue base to support socio-welfare measures. Various amendments and transitions of tax structure have occurred all across the world according to each government’s Geo-Political structure and each country’s economic conditions. VAT was first levied in 1960, but in 2018 more than 160 countries have rolled out their VAT models.

The aim of implementing VAT is to generate maximum revenue at each stage of sale or supply of goods and services. India being a federal country, and because of its Constitutional proviso, we have experienced Indirect Tax at two (2) levels. The first is monitored by Central Government and the second by the State Government. This created a lot of compliance issues and also the cascading structure made it costly to the consumers. GST was proposed as a solution to overcome the blocks and complications of Indirect Tax. In order to be cohesive in its efforts, GST subsumes all significant Indirect Taxes in the country.

From a statutory angle, the implementation of GST has been successful but the IT module under GSTN is not capable of handling such a huge transition. So now much discussion is going on at GST council meetings and regular amendments are being implemented. This is creating an extra load and pressure on the IT infrastructure.

The success of GST depends on a robust IT system and its proper data analysis. As implementation of GST is almost completing one year, so it seems that there are many mismatch issues related to the IT side of things.

Now, the question is, is the government strategically looking for a solution or just applying a trial and error method?

We all are aware of how difficult it is to handle this amount of big data with multiple field characteristics. All stakeholders including the government are facing challenges.

A new player is emerging with a promise to lead the world of technology in the next few decades. It is, of course called Blockchain Technology.

What is Blockchain? Moreover, how will it help with the implementation of GST?

Blockchain is a new type of database created in a crypto digital ledger which retains all historical information in digital blocks. Distributed ledgers are inherently difficult to attack than …, A complete and totally transparent audit trail is maintained throughout the chain.

It will not only help in monitoring of correctness and fast decision-making for refunds and other compliances but would also help assess transactions and their chain of sources inreal-time.

Tax invoices contain significant information. Using blockchain to derive and design tax invoices would mitigate major compliance issues like filing returns and claiming ITC (Input Tax Credit) etc.

At present, technological innovations like Artificial Intelligence, robotic process automation, machine learning and Internet of Things are developing rapidly, and indeed, bundling with blockchain would create a new and more viable approach to tax implementation. The blockchain has the potential to play a prominent role in the GST regime. 

(The writer is a finance expert and a former Jharkhand Finance Service officer. The views expressed in the article are his own.)