Tech-Driven GST: An Unequal Distribution of Benefits

This article constitutes my analysis and understanding with respect to the distribution of benefits of technological advancement and whether the taxpayers and tax authorities are equally benefiting from it.

The integration of technology within the Goods and Services Tax (GST) framework has made the tax administration and dispute resolution mechanism in India more transparent and efficient. The Goods and Services Tax Network (GSTN) is a revolutionary step that has aimed to simplify the tax structure by enhancing the compliance rate amongst the taxpayers and, at the same time, curbing tax evasion to a great extent. E-invoicing, real-time data tracking, and automated compliance mechanisms are some of the other technological advancements within the GST framework.

But the question that arises here is whether the tech-driven GST compliance mechanisms are benefiting both the taxpayers and the tax authorities, or is it only the revenue department that is benefiting the most out of it.

As much as the tax authorities are using AI and other tech-driven systems in their administration, the taxpayers are also trying to keep themselves at par with the technological advancements. AI-powered virtual assistants have also been deployed to enhance the taxpayer services, which shows the growing recognition of AI’s potential to transform the compliance mechanism and the services offered to the taxpayers for tax administration. [1]

Although, many multinational enterprises have started using AI-driven platforms such as GST Robo, etc., which are helping them in reducing the burden of compliance, most of the taxpayers belonging to the small and medium-sized enterprises are still not able to keep up with this rapid advancement in technology and the integration of AI in the administration system. Thus, the question if tech-driven GST compliance mechanisms are benefiting only the tax authorities or there is an equitable distribution of benefits between the taxpayers and tax authorities will remain unanswered as long as there is digital divide in the country.

As many taxpayers are not able to benefit from the tech-driven compliance mechanisms, they are trying to find loopholes in the existing GST provisions in order to avoid the compliance mechanisms and avoid paying taxes. For instance, many taxpayers have tried to take advantage of the e-way bill system as it is not required “if goods are being transported by a non-motorised conveyance (Ex. Horse carts or manual carts)”[2], so the traders have started using horse carts or manual carts to transport goods across states in order to avoid complying with the e-way bill related provisions. [3]

At the same time, it is also important to consider the fact that a lot of economic offences have increased in the country because of the advancement of technology and rapid use of Artificial Intelligence.

The Hon’ble Supreme Court also stated a similar opinion in the case of Tarun Kumar v. Assistant Director, Directorate of Enforcement [2023] 156 taxmann.com 480/ [2024] 183 SCL 1/2023 SCC OnLine SC 1486.[4] The Hon’ble Supreme Court in this case held that:

“23. With the advancement of technology and Artificial Intelligence, the economic offences like money laundering have become a real threat to the functioning of the financial system of the country and have become a great challenge for the investigating agencies to detect and comprehend the intricate nature of transactions, as also the role of the persons involved therein. . . . . . . . . . . . . . .”

Therefore, while the intent of the legislature behind introducing various tech-based compliance mechanisms under GST was to create a fair and uniform tax system, the reality is that the equitable distribution of these benefits is largely absent, thereby making the GST regime more favorable to the tax authorities. Even minor errors are easily flagged by the automated systems, and the taxpayers are expected to rectify them within a short time frame, failing which they are imposed with huge amounts of penalties and interests. This has led to a situation wherein the tax authorities are able to easily monitor and penalize the taxpayers, however, the taxpayers do not receive any corresponding benefit in terms of reduced paperwork or simplified compliance mechanisms.

Furthermore, the entire appeal mechanism is carried out through the GST portal and even a minor error in e-invoicing or the absence of a minor detail in the e-way bills attracts huge penalties and interests, which increases the compliance costs and burden of the taxpayers, especially the small businesses. This shows how the GST portal might disproportionately benefit the tax authorities and leave the taxpayers at a disadvantage.

There are cases wherein the taxpayers are not able to obtain GST registration due to technical glitches, leading to unnecessary delays in complying with the procedures for filing returns and claiming Input Tax credit, and thereby attracting penalties. Similarly, there are instances where e-way bills could not be generated on time because of technical glitches on the portal. Therefore, even a minor issue in accessing the GST portal or a technical glitch in the portal can lead to instances wherein the judicial burden, as well as the burden on the taxpayers to continuously comply with the technicalities, increases.

Thus, it can be said that although technology is revolutionizing the GST framework, the limitation of access to the resources is creating a digital divide amongst the taxpayers, as a result of which all the taxpayers are not able to avail the advantages that comes with the technological advancements.

In order to substantiate this, we can look into the following case laws:

• R.G. Group v. Union of India, [2024] 165 taxmann.com 473 (TRIPURA)[5]: In this case, the petitioner was unable to extend the time of the e-way bill which was to be updated within the due date and time because of the disruption in the electric supply. As a result, the vehicle was intercepted and proceedings were initiated against the petitioner under Section 129 of the Goods and Services Tax Act, 2017.Although, the Petitioner requested the respondent to upload the EWB 03 Part A & B on the common portal, no response was given to the reply submitted by the petitioner. As a consequence, the petitioner approached the High Court of Tripura to set aside the proceedings against him. The High Court in this case dispose of the petition and directed the respondent to release the consignments kept on detention.
• Dynamic Rubbers (P.) Ltd. v. Deputy Commissioner (AE) CGST [2024] 168 taxmann.com 459 (Gujarat) [6]: In this case, the petitioner generated Part-A of the e-way bill but failed to generate Part-B due to technical glitches on the portal, as a result of this, the goods were intercepted, and a detention order was passed against the petitioner. The Court in this case, however, believed that it was a minor lapse on the part of the petitioner for not generating Part-B of the e-way bill, and for that, the petitioner directly to pay such a huge amount of penalty of Rs 11,08,150/-. The court then modified the penalty amount to Rs 25,000/- and held that “this would justify the contravention of Rule 138 of the Rules committed by the petitioner for not having Part-B of the e-way bill in the facts of the case.”

• Falguni Steels v. State of U.P [2024] 159 taxmann.com 100 (Allahabad)[7]: In this case, although the Assessee was not able to generate the e-way bill on time because of the technical glitches on the portal, the tax invoices that were issued contained all the relevant details such as the details of the vehicle which was transporting the goods. But a Show Cause Notice was issued under section 129(3) of the UPGST Act, 2017 against the petitioner and as a consequence of this, the petitioner also had to deposit the amount of INR 2,59,724/- as penalty and tax, after which the respondents released the goods that was kept on detention. However, the court stated that “as one e-Way Bill was generated before the detention and one subsequent to the detention, but before passing of the order under section 129(3) of the UPGST Act, 2017/CGST Act, 2017, under these circumstances, there does not appear to be any intention to evade the tax.” The court was further of the opinion that “the petitioner cannot be made to suffer due to mere technical mistakes that may have arisen, without there being any intention to evade tax.”
• Hilton Garden INN v. Commissioner of Kerala Goods & Services tax Department [2024] 158 taxmann.com 93 (Kerala)[8]: In this case, although the Assessee’s registration was erroneously cancelled without any notice and there were technical glitches on the common portal, the Assessee tried to restore the Registration through e-mails and applications but faced delays because of numerous reasons. The site remained unavailable for a very long time which led to further delay in filing of returns and payment of taxes by the Assessee, as a result of this, the Revenue Authority raised demand for interest on delayed tax payment. The Court held that the “Assessee’s hardships were caused by technical glitch and wrongful cancellation of Registration and therefore, the demand for interest on account of delayed payment was inequitable and liable to be set aside.”
• Mansingh Somabhai Chaudhari v. State of Gujarat [2024] 167 taxmann.com 504 (Gujarat) [9]: In this case, the Assessee’s original GST registration number was erroneously cancelled instead of another number due to technical glitches and as a result of which the Assessee was unable to file returns since 2018-19. The Court directed the Revenue Authorities to reactivate Assessee’s original GST registration number to allow filing of pending returns, and disposed of the petition accordingly.
• Ashok Kumar Meher v. Commissioner of Sales Tax & GST [2022] 141 taxmann.com 38 (Orissa)[10]: This case is another example wherein no valid reason was given for cancellation of registration and the Assessee was forced to obtain new registration to file returns. As a result of this, the Assessee was not able to claim Input Tax credit. The court in this case held that “ITC could not be denied on plea of technical difficulties or technical glitches and directed GSTN to either modify or make changes in portal to facilitate Assessee in filing of TRAN-1 to claim ITC or accept returns manually against old registration so that Assessee could avail ITC.”

 [1] CS Charu Vinayak, “Artificial Intelligence and Tax Compliance”, Chartered Secretary, April 2025.

[2] DVSR Anjaneyulu, “Cases when an e-way bill is not required”, ClearTax, 12 December, 2024 < https://cleartax.in/s/gst-eway-bill-exempted-goods > accessed 21 April 2025.

[3] FE Online, “GST Evasion: Indian Traders have found this ingenious tactic to dodge e-way bill system”, 11 June, 2018, < https://www.financialexpress.com/policy/economy-gst-evasion-indian-traders-have-found-this-ingenious-tactic-to-dodge-e-way-bill-system-1201686/ > accessed 21 April 2025.

[4] Tarun Kumar v. Assistant Director, Directorate of Enforcement [2023] 156 taxmann.com 480/[2024] 183 SCL 1/2023 SCC OnLine SC 1486

[5] R.G. Group v. Union of India, [2024] 165 taxmann.com 473 (TRIPURA).

[6] Dynamic Rubbers (P.) Ltd. v. Deputy Commissioner (AE) CGST [2024] 168 taxmann.com 459 (Gujarat).

[7] Falguni Steels v. State of U.P [2024] 159 taxmann.com 100 (Allahabad).

[8] Hilton Garden INN v. Commissioner of Kerala Goods & Services tax Department [2024] 158 taxmann.com 93 (Kerala).

[9] Mansingh Somabhai Chaudhari v. State of Gujarat [2024] 167 taxmann.com 504 (Gujarat).

[10] Ashok Kumar Meher v. Commissioner of Sales Tax & GST [2022] 141 taxmann.com 38 (Orissa).