With Goods and Services Tax (GST) rates and procedures largely stabilising nine years after the indirect tax regime was introduced, the Centre has asked central and state tax officers to focus on expanding the taxpayer base, increasing cash tax collections and using intelligence-driven data analytics to identify evasion, sources said on Monday.
The government is also preparing to introduce voluntary electronic invoicing for business-to-consumer (B2C) transactions from April 1, 2027, with the GST Network (GSTN) expected to provide technological support to states for implementing the system.
The proposed measures are part of a broader shift towards a more facilitative approach to tax administration, with officials being encouraged to improve compliance through taxpayer outreach, technology and targeted scrutiny rather than intrusive enforcement.
Sources said the Centre wanted tax authorities to build greater trust among businesses while ensuring that revenue collections remained robust following the GST rate rationalisation undertaken last year.
๐๐ผ๐ฐ๐๐ ๐ผ๐ป ๐ฐ๐ฎ๐๐ต ๐ฐ๐ผ๐น๐น๐ฒ๐ฐ๐๐ถ๐ผ๐ป๐
Officials have been directed to strengthen cash tax collections and identify potential revenue leakages through more sophisticated analysis of taxpayer information.
"We have asked GST officers to increase cash tax collections and use deeper data analytics instead of being too intrusive. Although we have a good number of taxpayers registered under GST, there is scope to widen the base. We have asked states to widen the base," a source said.
India currently has approximately 1.68 crore taxpayers registered under GST, but officials believe there remains considerable scope to bring more businesses into the tax system.
Sources said state tax administrations had been advised to examine cases where businesses' output tax liabilities were consistently offset by input tax credit (ITC) claims, resulting in little or no cash payment of GST.
Such patterns would require closer analytical scrutiny to determine whether the credits were legitimate or indicated possible irregularities.
The objective, officials said, was to improve revenue realisation without unnecessarily burdening compliant businesses.
๐ฆ๐๐ฎ๐๐ฒ๐ ๐๐ผ ๐๐ถ๐ฑ๐ฒ๐ป ๐๐ฎ๐ ๐ฏ๐ฎ๐๐ฒ
Under the existing administrative arrangement, central and state GST authorities share responsibility for registered taxpayers according to their annual turnover.
State GST administrations handle 90% of taxpayers with annual turnover below Rs 1.5 crore, while the remaining 10% fall under central tax administration.
Taxpayers with turnover exceeding Rs 1.5 crore are divided equally between central and state authorities.
Given their larger share of smaller businesses, state tax departments have been asked to intensify efforts to identify potential taxpayers who remain outside the GST framework.
Officials have also been encouraged to strengthen outreach programmes and explain the advantages of formal registration and timely compliance.
"We need to strengthen our tech system and adopt a non-intrusive approach. We have to improve data analytics, find gaps and increase outreach to taxpayers to make them understand the benefits of compliance," a source said.
The approach draws parallels with the Income Tax Department's 'Nudge' campaign, which seeks to encourage voluntary compliance through information-based interventions rather than immediately resorting to enforcement proceedings.
๐๐ฎ๐ ๐ฒ-๐ถ๐ป๐๐ผ๐ถ๐ฐ๐ถ๐ป๐ด ๐ณ๐ฟ๐ผ๐บ ๐๐ฝ๐ฟ๐ถ๐น
A significant component of the proposed reforms is the introduction of voluntary B2C e-invoicing from April 1, 2027.
The GST Council, chaired by Union Finance Minister Nirmala Sitharaman and comprising representatives of state governments, had recommended a pilot project for B2C e-invoicing in September 2024.
Currently, businesses with annual aggregate turnover of Rs 5 crore or more are required to generate electronic invoices for business-to-business (B2B) transactions.
Extending the facility to B2C transactions would allow tax authorities to obtain more detailed information about the movement of goods and services through the supply chain, from suppliers to final consumers.
Sources said the GSTN would provide the necessary technological infrastructure to states, while businesses would be encouraged to adopt the system voluntarily.
"We are encouraging states to use the GSTN system for B2C e-invoicing. As regards the businesses, we will show them the benefits of B2C e-invoicing and the impact it will have on audit compliance," a source said.
The official added that the availability of detailed B2B and B2C transaction records could enable tax authorities to assess compliance more accurately and reduce unnecessary scrutiny of businesses maintaining transparent records.
๐๐๐ฟ๐ฏ๐ถ๐ป๐ด ๐บ๐ถ๐๐๐๐ฒ ๐ผ๐ณ ๐๐ฎ๐ ๐ฐ๐ฟ๐ฒ๐ฑ๐ถ๐๐
Officials believe B2C e-invoicing could also help detect irregularities involving the misuse of input tax credits and the misclassification of transactions.
Sources said there were instances in which transactions were routed or recorded in ways that enabled businesses to claim ITC benefits improperly.
Access to more granular transaction data would allow authorities to identify discrepancies between reported sales, purchases and credit claims.
The proposed system is expected to strengthen the government's ability to trace transactions throughout the supply chain and distinguish genuine business activity from potentially fraudulent arrangements.
"We need intelligence and analytics to act as deterrence. We want taxpayers to feel the benefits of compliance by acting as a facilitator," the source added.
๐ฃ๐ฟ๐ผ๐ฐ๐ฒ๐๐ ๐ฟ๐ฒ๐ณ๐ผ๐ฟ๐บ๐ ๐บ๐ฎ๐ ๐ฐ๐ผ๐บ๐ฒ ๐๐ผ๐ผ๐ป
Sources also indicated that certain procedural reforms approved at the 57th GST Council meeting could be implemented earlier because they require only amendments to the rules rather than changes to the GST law.
These include the proposed Rs 10,000 threshold for issuing tax notices, aimed at reducing unnecessary proceedings involving relatively small amounts.
The measures are intended to simplify administration and allow tax officers to devote greater attention to significant compliance risks and revenue leakages.
Officials said the next phase of GST administration would focus on improving the quality of enforcement rather than increasing its intensity.
The government wants tax authorities to use technology to identify potential violations while making compliance easier for businesses that maintain accurate records and fulfil their tax obligations.
With the GST framework entering its tenth year, the Centre's emphasis is shifting towards deeper taxpayer coverage, stronger cash collections and a more data-driven system of administration, while seeking to preserve the gains from earlier rate and procedural reforms.