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GST@8 – The Indian Tax Odyssey Part III: The Compliance Paradox – Technology, Tax Terror & the Trust Deficit
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....ST@8 – The Indian Tax Odyssey Part III: The Compliance Paradox – Technology, Tax Terror & the Trust Deficit<br>By: - Navjot Singh<br>Goods and Services Tax - GST<br>Dated:- 10-7-2025<br>India's GST was born out of a vision for minimal interface, maximum transparency, and self-policing through technology. Yet, as we enter its ninth year, compliance under GST is increasingly perceived ....
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....as burdensome, adversarial, and enforcement-heavy-especially for small and medium taxpayers. This final piece in the series explores the compliance paradox that GST now grapples with: a sophisticated tax technology ecosystem coexisting with deep-seated mistrust, excessive proceduralism, and growing taxpayer anxiety. I. The Tech Revolution - Foundation of Compliance Feature Benefit (I....
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....ntended) GSTN Portal Unified filing and registration architecture E-Way Bill System Nationwide traceability of movement of goods E-Invoicing (Rule 48) Real-time reporting and fraud control GSTR-2B & 2A Auto-populated ITC data for recipient matching AIS/BOE linkage with Customs Harmonisation between GST and import tax data In theory, these tools reduce manual effort and increase tr....
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....ust through data integration. II. On-Ground Realities - From Self-Assessment to Systemic Scrutiny Original Promise Current Scenario Self-assessment with minimal human interface Frequent summons, notices under Section 70, audit under Section 65/ 66 Seamless ITC based on valid tax invoices Disallowance due to vendor non-compliance (Section 16(2)(c)), Rule 36(4), Rule 86A One nation, one....
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.... tax Multiple interpretations, parallel State-Centre scrutiny Technology-driven trust Rule-based credit blocking, mismatch notices, rising litigation The balance is shifting from facilitation to suspicion. III. Mismatches, Credit Denials & Section 16(2)(c) - The Silent Crisis Input Tax Credit (ITC), the very soul of GST, has become a litigation minefield: * Vendor Default = Purchaser....
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.... Liability Even where the buyer has paid tax and holds valid invoice, ITC is denied if the supplier defaults in GSTR-1/3B filings. * Rule 36(4) Restricted ITC to matched credits, later increased to 105%, then rescinded-but created years of confusion. * Rule 86A Gave officers discretionary power to block credit without adjudication-widely used, rarely reasoned. * Section 75(12....
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....) Interpretation Treated GSTR-1 vs. 3B differences as tax unpaid, triggering demand directly without SCN in some cases. These provisions have created a Kafkaesque environment for taxpayers-even bona fide ones. IV. Procedural Rigidity vs. Business Reality Provision/Process Challenge Faced Filing GSTR-9/9C Overly complex for MSMEs, late fees punitive Refund of unutilised ITC Subject to Cir....
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....culars, mismatches, restrictions (e.g. on capital goods) Adjudication timelines Delays, retrospective actions, absence of binding precedents Input Service Distributor (ISD) compliance Complexity in cross-charging between branches under common PAN Revocation of cancellation Arbitrary cancellation of GSTIN for technical lapses, even when tax paid GST law increasingly relies on procedura....
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....l compliance over substantive justice. V. Enforcement Culture - A New Tax Terror? Since 2020, the tone of compliance has noticeably hardened: * Arrests under Section 132 (even in cases of alleged fake billing without recovery proceedings) * DRC-01A coercion, often without SCN safeguards * Denial of registration under Rule 9 without clear grounds * Frequent inspections and ....
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....surveillance, especially in sectors like manpower, metals, and transport In effect, GST enforcement is moving away from compliance nudging to deterrence-based policing. VI. Judicial Interventions - Relief Amid Rigidity Court Decision Gujarat HC (2020) - Rule 86A Arbitrary credit blocking violative of natural justice Delhi HC (2022) - Bharti Airtel Allowed rectifica....
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....tion of GSTR-3B to claim missed ITC SC (2021) - Radha Krishan Industries Laid down conditions for provisional attachment under Section 83 Madras HC (2022) - Sundaram Finance Quashed cancellation of registration for procedural lapses But litigation is neither scalable nor sustainable as the primary dispute resolution mode. VII. Building Trust - What Compliance Needs in GST 2.0 Refo....
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....rm Area Recommendations ITC Restrictions De-link Section 16(2)(c) from supplier default for genuine buyers Audit & Assessment Introduce clear audit SOPs, risk-based scrutiny selection Notices & Recovery Ensure speaking orders, time-bound SCNs, pre-SCN consultation as mandatory Rule 86A Introduce checks & review boards for credit blocking Tech Infrastructure Improve portal uptime, seamle....
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....ss GSTR updates, and multilingual support Small Traders Exempt GSTR-9/9C or provide simplified returns for turnover < ?5 Cr VIII. Final Thoughts - Compliance is Not the Enemy GST is a behavioural tax. If businesses are treated like suspects by default, even the best-designed tax fails in purpose. We must remember: Compliance is a journey, not an imposition. Trust and clarity are as essential....
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.... as technology and enforcement. GST@8 has seen impressive strides in digitalisation-but the next leap must be in compliance empathy, dispute prevention, and legal certainty. By Navjot Singh, Chartered Accountant | Indirect Tax & Trade Policy Professional This concludes our 3-part series on GST@8. If you've found this journey informative or have perspectives to share-from ....
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....the trenches or from policy corridors-I invite you to join the conversation.<br> Scholarly articles for knowledge sharing by authors, experts, professionals ....