GST enters AI era as digital tax system powers next phase of reform: Grant Thornton Bharat

The Goods and Services Tax (GST) regime is entering a new phase of technology-led transformation, with artificial intelligence, advanced analytics and integrated digital systems set to redefine tax compliance and administration, according to a report by Grant Thornton Bharat.

What began as a platform focused on registration and return filing has evolved into a comprehensive compliance ecosystem built around e-way bills, e-invoicing, analytics, the Invoice Management System (IMS), and AI-enabled scrutiny mechanisms. The report said this digital shift has improved transparency, reduced information asymmetry between taxpayers and authorities, and paved the way for a near real-time, exception-based tax administration model.

The increasing use of technology has created a data-rich environment for GST administration, where every e-invoice, e-way bill, tax return and payment contributes to a growing repository of transactional information. This has enabled authorities to move beyond manual scrutiny towards data-driven monitoring and enforcement.

According to the report, AI is already playing an active role in GST compliance through risk identification, fraud detection, invoice validation, and registration verification. Advanced analytics tools are helping authorities identify unusual filing behaviour, map potentially suspicious supplier-recipient networks and detect anomalies before audits are initiated.

The report noted that future GST administration is likely to rely increasingly on proactive compliance monitoring, predictive assessments and intelligent taxpayer support, allowing authorities to focus on higher-risk cases while reducing compliance burdens for businesses.

GST 3.0 roadmap focuses on integration and simplification

Grant Thornton Bharat’s GST 3.0 roadmap outlines a more integrated and intelligent tax framework aimed at improving ease of doing business and strengthening compliance outcomes.

Among the key proposals are bringing petroleum products and electricity under the GST framework to create a seamless input tax credit chain, reducing compliance complexity through auto-populated returns and real-time credit availability, and strengthening AI-led compliance systems through predictive audits and intelligent risk assessment.

The roadmap also envisages faster dispute resolution through faceless audits and end-to-end digital litigation, deeper integration across GST, direct tax and customs databases, and a rationalised rate structure aimed at reducing classification disputes and creating a unified taxpayer data ecosystem.

GST collections hit record highs

The report highlighted the strong growth trajectory of GST revenues since implementation. Collections rose from ₹7.41 lakh crore in FY18 to a record ₹23.11 lakh crore in FY26, reflecting increasing economic formalisation, stronger compliance and the impact of digital tax administration.

GST collections have increasingly tracked nominal GDP growth, indicating the emergence of a more mature and stable tax base. Earlier phases of stronger growth were largely driven by formalisation gains and digital compliance initiatives.

Revenue contribution remains concentrated among industrial and consumption-heavy states, with Maharashtra leading national GST collections, followed by Karnataka, Gujarat, Tamil Nadu, and Haryana.

Monthly GST collections remained above ₹1.70 lakh crore throughout FY26, underlining sustained economic activity and resilience despite moderating growth rates. Higher refund disbursements also reflect the government’s continued focus on supporting exports, improving liquidity and accelerating refund processing.

Sohrab Bararia, Partner, India Investment Advisory, Grant Thornton Bharat, said GST has evolved over the past nine years from a complex structural reform into a more stable and business-friendly framework.

He said that measures such as e-invoicing, improvements in return filing systems, a more stable GSTN platform, the Invoice Management System and the proposed hard-locking of GSTR-3B are shifting compliance towards a more system-driven approach while improving input tax credit controls. The operationalisation of GSTAT is also expected to accelerate dispute resolution.

Krishan Arora, Partner, Tax Planning & Optimisation and India Investment Roadmap Leader at Grant Thornton Bharat, said the consistency in GST collections, now approaching the ₹2 lakh crore monthly mark, reflects broader tax formalisation and resilient consumption.

He added that the next phase of reforms should focus on resolving structural issues facing businesses, including bringing petroleum under GST, improving refund mechanisms for sectors affected by inverted duty structures, enabling seamless credit flows, automating refunds, reducing interpretational disputes and providing greater policy certainty as GST enters its next decade.