Role of Technology in businesses

What started the tax transformation journey with GST and expended into direct taxes, there is a surge in tax department’s expedition digitization initiative.

Indirect tax obligations where a transaction-level real-time reporting framework has mandated that all taxpayers must submit data in a specified format. Clients who extract data from multiple sources must format it swiftly and real-time, as this, is a requirement for facilitating processes such as invoicing, input credit matching, and tax return filing.

In the case of direct tax filings, technology plays a major role because 90% of payments done by companies require some sort of tax deduction at source (TDS) ranging between 0.01% and 30%, and complexity has made it impossible to do it on Microsoft Excel. Furthermore, the task of filing income tax returns entails voluminous documentation, varying in size from 100 to over 500 pages, depending on the nature of the business.

The Indian tax department has also been ahead of the curve in digitisation in the last 7-8 years, with focus on making tax compliances more online, granular and real time. This includes a plethora of initiatives like e-filing, e-invoicing and faceless tax assessments.

Looking ahead, the involvement of technology will continue to escalate: a clear example of this is the upcoming implementation of the OECD-recommended Pillar 2 rules, which will necessitate a constituent entity to handle an extensive set of 250 data point requirements.
The data mining initiatives, bolstered by comprehensive coverage and mandatory detailed reporting, have emerged as vital contributors to the substantial growth observed in direct tax collections.

Hence, the demand for accuracy, adherence to strict timelines, and detailed documentation for each tax transaction has multiplied significantly.